EXCLUSIVE Russia’s Gazprom tells Europe gas stoppage beyond its control

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

LONDON, July 18 (Reuters) – Russian Gazprom has told customers in Europe that they can not guarantee gas supplies due to “extraordinary” circumstances, according to a letter seen by Reuters, and increases the estimate in an economic battle with the West over Moscow’s invasion of Ukraine.

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

Known as a “God’s act” clause, force majeure is standard in business contracts and elaborates on extreme circumstances that excuse a party from its legal obligations.

Gazprom’s (GAZP.MM) had no immediate comment on force majeure.

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

It did not share the letter, but a trade source who asked not to be identified due to the sensitivity of the problem said that force majeure concerned supplies through the Nord Stream 1 pipeline, an important supply route to Germany and beyond.

The currents through the pipeline are zero as the connection undergoes annual maintenance which started on 11 July and is intended to end on Thursday. read more

Europe fears that Moscow could hold the pipeline in the moths in retaliation for sanctions imposed on Russia over the war in Ukraine, and intensify an energy crisis that risks plunging the region into recession.

TURBINE DELAY

As early as June 14, Gazprom had cut the pipeline’s capacity to 40%, citing the delay in a turbine maintained in Canada by equipment supplier Siemens Energy (ENR1n.DE).

Canada sent the turbine for the Nord Stream gas pipeline to Germany by plane on July 17 after the repair work was completed, the newspaper Kommersant reported on Monday, quoting people familiar with the situation. read more

Assuming there are no problems with logistics and customs, it will take another five to seven days before the turbine reaches Russia, the report states.

The German Ministry of Economy said on Monday that it could not provide details on where the turbine is located.

But a spokesman for the ministry said that it was a spare part that was intended to be used only from September, which means that the absence can not be the real reason for the decrease in gas flow before maintenance.

– This sounds like a first hint that the gas supply via NS1 may not be resumed after 10 days of maintenance has been completed, says Hans van Cleef, senior energy economist at ABN Amro.

“Depending on what ‘extraordinary’ circumstances are in mind to declare force majeure, and whether these issues are technical or more political, it could mean the next step in the escalation between Russia and Europe / Germany,” he added.

However, the Austrian oil and gas group OMV (OMVV.VI) said on Monday that they expect gas deliveries from Russia through the Nord Stream 1 pipeline to continue as planned after the power outage. read more

Russian gas supplies have been declining via major routes for a few months, including via Ukraine and Belarus as well as through 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 until further notice while developing alternative sources.

For Moscow and for Gazprom, energy flows are an important source of revenue when Western sanctions against Russia’s invasion of Ukraine, which the Kremlin calls a “special military operation,” have strained the Russian economy.

According to the Russian Ministry of Finance, the federal budget received 6.4 trillion rubles (115.32 billion dollars) from sales of oil and gas in the first half. This compares with planned 9.5 trillion rubles for the whole of 2022.

The deferral 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.

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

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