The longstanding gas supply agreement between Austria’s OMV and Russia’s Gazprom has come to an abrupt end, triggered by OMV’s seizure of Russian gas to satisfy an arbitration award. This marks a significant shift in Austria’s energy landscape, as it was one of the few remaining European buyers of Russian gas.
Key Highlights:
Arbitration Award Seizure: On November 13, OMV announced it had won a €230 million ($239 million) arbitration case against Gazprom due to irregular gas supplies. To enforce this award, OMV seized €230 million worth of gas deliveries for October.
Suspension of Gas Supplies: Following the seizure, Gazprom suspended gas supplies to OMV just three days later. This incident is notable as it is the first instance of a European Union customer failing to pay for Gazprom’s gas.
Historical Context: OMV has been purchasing Soviet and Russian gas since 1968. The recent events indicate a strategic pivot by the Austrian firm to exit Russian gas purchases, despite contracts with Gazprom extending until 2040.
Market Impact: The cessation of supplies is a blow to Gazprom’s influence in Central Europe, where Austria had remained heavily reliant on Russian gas even as other EU nations diversified their energy sources post-2022.
Gas Pricing and Supply Dynamics: OMV had benefitted from lower prices, paying $300-$400 per 1,000 cubic meters of Russian gas, while spot prices soared above $1,000 during peak supply cuts in 2022. Despite Gazprom cutting off direct supplies, Austria continues to receive Russian gas via Slovakia, where Gazprom has increased sales.
Political Context: Austria’s government, which owns 31.5% of OMV, has maintained a politically neutral stance but supports sanctions against Russia. Recent tensions have emerged, particularly with the Freedom Party’s rise, complicating the country’s political landscape.
Future Relations: Gazprom has not commented on future dealings with OMV, while OMV has indicated it does not expect any changes in the current situation. The Austrian energy minister stated that it is up to OMV to decide on exiting contracts with Gazprom.