Exclusive: Russia’s Gazprom tells Europe to shut down gas beyond its control

A view shows a screen with Gazprom’s logo at the Saint Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia June 17, 2022. REUTERS/Anton Vaganov/

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LONDON, July 18 (Reuters) – Russia’s Gazprom has told customers in Europe it cannot guarantee gas supplies due to “extraordinary” circumstances, according to a letter seen by Reuters, upping the ante in an economic exchange with the West on Moscow’s invasion of Ukraine.

Dated July 14, the letter from the Russian state gas monopoly said it was declaring force majeure on supplies from June 14.

Known as the “force majeure” clause, force majeure is standard in commercial contracts and sets out extreme circumstances that exempt a party from its legal obligations.

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Gazprom (GAZP.MM) had no immediate comment.

Uniper, Germany’s largest importer of Russian gas, was among customers who said they had received a letter and officially dismissed the claim as unjustified.

RWE (RWEG.DE), Germany’s largest power producer and another importer of Russian gas, also said it had received a force majeure notice.

“Please understand that we cannot comment on its details or our legal opinion,” the company said.

A trade source, asking not to be identified due to the sensitivity of the issue, said the force majeure related to supplies through the Nord Stream 1 gas pipeline, a major supply route to Germany and beyond.

Flows through the pipeline are nil as the link is undergoing annual maintenance which began July 11 and is scheduled to end Thursday. Read more

Europe fears Moscow is keeping the pipeline mothballed in retaliation for sanctions imposed on Russia over the war in Ukraine, deepening an energy crisis that risks tipping the region into recession.

TURBINE DELAY

Already on June 14, Gazprom had reduced the capacity of the gas pipeline to 40%, citing the delay in maintenance of a turbine in Canada by equipment manufacturer Siemens Energy (ENR1n.DE).

Canada airlifted the Nord Stream gas pipeline turbine to Germany on July 17 after repair work was completed, the Kommersant newspaper reported on Monday, citing people familiar with the situation. Read more

If there are no logistics and customs issues, it will take another five to seven days for the turbine to reach Russia, according to the report.

Germany’s economy ministry said on Monday it could not provide details on the location of the turbine.

But a ministry spokesperson said it was a spare part that was only due to be used from September, meaning its absence could not be the real reason for the drop in prices. gas flow before maintenance.

“This looks like a first hint that gas supply through NS1 may not resume after the 10-day maintenance is over,” said Hans van Cleef, senior energy economist at ABN Amro.

“Depending on the ‘extraordinary’ circumstances in mind for declaring force majeure, and whether those issues are technical or more political, it could mean the next stage of escalation between Russia and Europe/Germany” , he added.

Austrian oil and gas group OMV (OMVV.VI), however, said on Monday it expected gas deliveries from Russia via the Nord Stream 1 pipeline to resume as planned after the outage. Read more

In recent months, Russian gas supplies have been decreasing via major routes, notably via Ukraine and Belarus as well as via Nord Stream 1 under the Baltic Sea.

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.

For Moscow and Gazprom, energy flows are a vital source of income when Western sanctions against Russia’s invasion of Ukraine, which the Kremlin calls a “special military operation”, strained Russian finances.

According to the Russian Finance Ministry, the federal budget received 6.4 trillion rubles ($115.32 billion) from oil and gas sales in the first half of the year. This is compared to the 9.5 trillion rubles projected for the whole of 2022.

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

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Reporting by Julia Payne; additional reporting by Christoph Steitz in Frankfurt, Bozorg Sharafedin in London, writing by Nina Chestney in London; Editing by David Goodman, Edmund Blair and Barbara Lewis

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