Uniper Ruling Casts Doubt on Russian Gas Supply to Europe

(Bloomberg) -- Uniper SE was awarded more than €13 billion ($14 billion) in damages for Russian gas volumes not supplied by Gazprom PJSC since mid-2022, raising uncertainty in the market over remaining flows to Europe.

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The German utility said an international arbitration ruling on June 7 allowed it to terminate Russian supply contracts, some of which ran until the middle of the next decade. Germany no longer gets any gas from Gazprom but European prices still jumped on the news, with traders fearing possible ramifications for exports from Russia to elsewhere in the region.

Repercussions could be felt in places like Austria, which still imports around 80% of its gas from Gazprom. Austrian energy company OMV AG warned last month that flows from Russia could be disrupted. In a worst case scenario, if Gazprom doesn’t pay the damages and the ruling by the Stockholm-based tribunal is enforced strictly, OMV may be forced to redirect payments to Uniper.

“Attempts at enforcement could lead to supply problems for remaining importers of Russian gas”, said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.

OMV has said it can maintain supplies to Austria with non-Russian gas if the Gazprom deliveries are halted.

Uniper was nationalized during the energy crisis in one of the largest corporate bailouts in German history. After Russia stopped supplying gas through the Nord Stream pipeline and fuel prices soared, the utility was forced to pay hundreds of millions of euros every day for alternative supplies and was only able to do so with state support.

Ending the supply contracts is a key milestone to prepare Uniper for its return to the stock market. The decision may also lead to other rulings across Europe, with Italy’s Eni SpA engaged in similar arbitration proceedings. It’s unclear, however, whether Gazprom will pay the damages.

“This shows once again how uncertain the energy supply from Russia is,” Austria’s Climate and Energy Minister Leonore Gewessler said via her spokesperson. A representative for OMV declined to comment.

A Uniper spokesperson said the firm will review its options. Eni wasn’t immediately available for comment. Gazprom didn’t respond when approached for comment.

Uniper was one of Gazprom’s oldest European trading partners with a history dating back to the 1970s. The utility hasn’t received any gas volumes from Russia since the end of August 2022, and sued Gazprom the same year.

“Any amounts would flow to the German federal government,” Michael Lewis, chief executive officer of Uniper said, referring to the damages. “It is not yet clear whether significant amounts are to be expected.”

--With assistance from Petra Sorge and Marton Eder.

(Updates with Austria comment in 8th paragraph.)

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