Exclusive: Russia’s Gazprom tells European buyers gas supply shutdown beyond its control

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.

Russia’s state gas monopoly said in a letter dated July 14 that it was retroactively declaring force majeure on supplies from June 14. maintenance scheduled to end on Thursday. Read more

The letter added to fears in Europe that Moscow could not restart the pipeline at the end of the maintenance period in retaliation for sanctions imposed on Russia over the war in Ukraine, deepening an energy crisis that risks tipping the region in recession.

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Known as the “fortuitous event” clause, force majeure is standard in commercial contracts and defines extreme circumstances that release a party from its legal obligations. The statement does not necessarily mean that Gazprom will stop deliveries, but rather that it should not be held liable if it fails to meet the terms of the contract.

Gazprom (GAZP.MM) did not respond to a request for comment.

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

A trade source, asking not to be identified due to the sensitivity of the issue, said the force majeure related to supplies through Nord Stream 1.

“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.

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.

TURBINE DELAY

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/

Gazprom cut Nord Stream 1 capacity by 40% on June 14, the date Gazprom stated in the letter to buyers would be the start of force majeure.

Gazprom blamed the sanctions for the reduction, citing the delay in returning a gas turbine from servicing to Canada by equipment supplier Siemens Energy (ENR1n.DE).

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

It will take another five to seven days for the turbine to reach Russia, according to the report, provided there are no problems with logistics and customs. 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.

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

“Gazprom’s motives are uncertain, but the statement will not have a significant impact on the current landscape,” said Zongqiang Luo, gas analyst at consultancy Rystad Energy.

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.

“Russia continues to use natural gas as a political and economic weapon,” White House spokeswoman Karine Jean-Pierre said, adding that the Biden administration continues to work to reduce dependence on natural gas. Europe to Russian fossil fuels. markets, raised prices for consumers and threatened global energy security.

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

According to the Russian Finance Ministry, the federal budget received 6.4 trillion rubles ($114.29 billion) from oil and gas sales in the first half of the year. This compares 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 July 19, and if foreign creditors are not paid by then, the company will technically be in default.

($1 = 56.0000 rubles)

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Reporting by Julia Payne in London Additional reporting by Christoph Steitz in Frankfurt, Bozorg Sharafedin in London and Jeff Mason in Washington Writing by Nina Chestney in London Editing by David Gaffen, Barbara Lewis and Matthew Lewis

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