Half-century gas customer ends relations with Russia

Ngọc Vân |

Austrian company OMV terminates gas contract with Russia's Gazprom after a dispute over supply.

Austria's OMV said on December 11 that it had terminated a long-term gas purchase contract with Gazprom after the Russian company stopped deliveries last month amid rising political tensions over the conflict in Ukraine.

The decision marks the formal end of a 50-year contract, which was stalled when Gazprom stopped supplying gas to OMV. The move comes after OMV won an arbitration case over another contract and said it would cover the 230 million euro ($241 million) damages by not paying the invoices in the main contract with Gazprom.

"OMV today announced the termination of its long-term gas supply contract with Gazprom Export, citing serious breaches of many terms in the contract by Gazprom Export. This termination is effective immediately," OMV said in a statement, referring to Gazprom's suspension of supplies.

The contract was originally scheduled to last until 2040.

OMV was one of the few major customers in Europe to continue buying gas from Gazprom after most countries cut off gas ties with Russia since the outbreak of the Ukrainian conflict in 2022. Before the conflict, Russia was Europe's largest gas supplier.

Although OMV and Gazprom have terminated their contracts, Russian gas continues to flow into Austria via pipelines through Ukraine and Slovakia, but in significantly reduced volumes. This has sparked criticism of Austria's dependence on Russian gas, despite Austria having prepared contingency plans and storing large reserves of gas to ensure supply.

Austrian Prime Minister Karl Nehammer affirmed on social network X (formerly Twitter) that: "Gazprom did not comply with the contract, and that is the reason why OMV terminated the contract immediately".

He also emphasized: "Our energy supply is guaranteed because we are well prepared. Austria will not let Russia threaten by using gas as a weapon".

The termination of this contract is not only an economic decision but also has great political significance. OMV, with a 31.5% stake held by the Austrian government, has faced pressure from both at home and abroad to reduce its dependence on energy supplies from Russia.

While the decision shows Austria's tough stance on Russia's alleged "energy weaponization" moves, it also poses many challenges in maintaining energy security as winter approaches.

The situation further highlights Russia's role in global energy supply, as well as European countries' efforts to reduce dependence on Russia by switching to other sources of supply, including liquefied natural gas (LNG) from the US and other countries.

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