No gas for Europe: Russia’s Gazprom declares ‘force majeure’ on supplies to continent

Russian gas 'could' be used to 'derail European Unity' says expert

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The “force majeure” clause, known as an “act of God” clause, is invoked to lift a business from contractual obligations because of factors beyond its control. In a letter dated July 14, Moscow-backed Gazprom said it could not fulfil its supply commitments because of “extraordinary” circumstances.

The legal force of the letter, seen by Reuters on Monday, is to shield the Russian state gas monopoly from compensation payments for disrupted supplies.

The declaration of “force majeure” is effective from June 14, exonerating Gazprom from any punishment for delivery shortfalls since then.

Uniper, Germany’s biggest importer of Russian gas, was among the customers who said it had received a letter, and that it had formally rejected the claim as unjustified.

It did not share the letter. However, a trading source who asked not to be identified said the document concerned supplies through the Nord Stream 1 pipeline, a major supply route to Germany and beyond.

Nord Stream 1 was brought out of action last Monday for routine maintenance.

It is due to get back to operation on Thursday but Berlin is concerned Moscow may not resume the flow of energy as scheduled.

Germany’s Vice-Chancellor and Economics Minister Robert Habeck said he fears Gazprom may say “some little technical detail” is the reason not to restart gas deliveries through the pipeline after the works are completed.

While Russian gas supplies have been declining via major routes for some months, including via Ukraine and Belarus, Berlin’s suspicions of Moscow’s intentions grew after Gazprom last month reduced the gas flow through Nord Stream 1 by 60 percent.

The energy giant cited technical problems involving a gas turbine powering a compressor station that partner Siemens Energy sent to Canada for overhaul.

That turbine could not be returned because of sanctions imposed after Russia’s invasion of Ukraine.

Ottawa said last weekend it would allow a time-limited and revocable permit for Siemens Canada to allow the machine’s return, citing the “very significant hardship” that the German economy would suffer without a sufficient gas supply.

Still, Gazprom refused to complete the repairs and get the gas back flowing.

One of Gazprom’s European customers, Austrian oil and gas group OMV, said on Monday it expected gas deliveries from Russia through the Nord Stream 1 pipeline to resume as planned.

The European Union, which has imposed sanctions on Moscow, aims to stop using Russian fossil fuels by 2027 but wants supplies to continue for now as it develops alternative sources.

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Putin 'continues to use energy as a weapon' says Von der Leyen

For Moscow and Gazprom, the energy flows are a vital revenue stream when Western sanctions over Russia’s invasion of Ukraine have strained Russian finances.

According to the Russian finance ministry, the federal budget received 6.4trillion roubles (£96billion) from oil and gas sales in the first half of the year. Moscow’s plane for the whole of 2022 is 9.5trillion roubles (£135billion).

The grace period for payments on two of Gazprom’s international bonds expires on 19 July, and if foreign creditors are not paid by then the company will technically be in default.

The EU on Monday signed a new gas deal with Azerbaijan as part of efforts to secure future supplies amid growing fears about a complete Russian cutoff.

The European Commission said in a statement Friday ahead of the trip: “Amid Russia’s continued weaponisation of its energy supplies, diversification of our energy imports is a top priority for the EU.”

The commission’s energy chief, Kadri Simson, finalised an agreement through which Azerbaijan will deliver at least 20 billion cubic metres to the bloc annually by 2027.

Azerbaijan, which borders Georgia, Turkey, Armenia, Russia, Iran and the Caspian Sea, was already on track to increase its deliveries to the region.

The former Soviet republic started exporting natural gas to Europe via the Trans Adriatic Pipeline at the end of 2020.

At the time, it said it planned to send 10 billion m3 of gas to Europe per year – mostly to Italy, but also to Greece and Bulgaria.

Now, according to the EU Commission, gas supply from the southwest Asian country will increase from 8.1 billion m3 in 2021 to an expected 12 billion m3 this year.

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