Russia Close To Shutting Down Gas To Europe With Germany Rejecting Claims About It Being Unable To Fulfil Contracts

Russia’s energy behemoth has threatened to deliver less gas to Europe, but Germany, one of the country’s largest importers, has rejected the proposal. The majority of the company is owned by the government. Gazprom announced on Monday that it is unable to meet gas commitments in Europe owing to unanticipated circumstances.

Uniper, a German energy company, confirmed to CNBC that Gazprom had claimed “force majeure” on its deliveries. Force majeure is a legal word that describes when unanticipated circumstances prevent one party from completing its contractual obligations, hence exempting them from penalties.

“It is true that we have received a letter from Gazprom Export in which the company claims force majeure retroactively for past and current shortfalls in gas deliveries. We consider this as unjustified and have formally rejected the force majeure claim,” Lucas Wintgens, spokesperson for Uniper, told CNBC’s Annette Weisbach.

RWE, another German energy company, confirmed to CNBC that it, too, had received a Gazprom notice of force majeure.

When CNBC contacted Gazprom on Tuesday, the company did not respond quickly.

Officials in Germany and other parts of Europe have grown more concerned about the likelihood of a complete cutoff of Russian gas supplies. These concerns were heightened after Nord Stream 1, a crucial gas pipeline between Russia and Germany, was blocked earlier this month for maintenance, with some questioning that flows would be fully restored once the work was completed on July 21.

Before Russia attacked Ukraine, European countries got over 40% of their gas supplies from Russia. European politicians have been scrambling to reduce this reliance, but it is a costly process that will take time.

The European Commission, the EU’s executive arm, has announced new gas arrangements with the United States and Azerbaijan, for example, as it seeks new fossil fuel sources.

“This is clearly uncharted territory and unprecedented in this form,” Andreas Schroeder, head of energy analytics at research company ICIS, told CNBC’s “Squawk Box Europe” on Tuesday.

“Whilst the European Union has managed in reducing the volumes of imports of hydrocarbons in Russia, they didn’t manage to reduce the price they pay.”

As a result of fewer Russian flows, European gas prices have risen. However, the higher prices mean that Russia can export less gas to Europe while still making the same — or perhaps more — money. Schroeder referred to this as the “offsetting impact.”

The front-month gas price at the Dutch TTF hub, a European standard for natural gas trading, was around 1 per cent higher Tuesday morning, at 159 euros ($163) per megawatt-hour. Prices have increased by more than 600 per cent in the last year.

(Adapted from

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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