On November 16, Russia’s state-run gas giant Gazprom took a significant step in its ongoing energy dispute with Europe, halting its natural gas supplies to Austria. The decision comes after Austria’s energy company, OMV, was awarded damages in an arbitration case over unfulfilled gas deliveries from Gazprom, prompting Vienna to announce the termination of gas flows. This marks a continued shift in Russia’s energy relations with Europe, as the war in Ukraine has significantly disrupted gas exports, with many European nations seeking to reduce their dependence on Russian energy sources.
Energy Disruption in Europe
Before the outbreak of the Ukraine war, Russia was Europe’s largest supplier of natural gas. However, the geopolitical landscape has changed drastically since then. With Russia’s energy exports facing sanctions and widespread rejection from European nations, the country has lost most of its customers. Additionally, the sabotage of the Nord Stream pipeline in 2022 further exacerbated the situation. As a result, one of the last remaining major pipelines transporting Russian gas to Europe, the Soviet-era Urengoy-Pomary-Uzhgorod pipeline, is set to shut down at the end of this year.
This pipeline currently transports gas from northern Siberia through Ukraine, and supplies countries such as Slovakia, the Czech Republic, and Austria. However, the Ukrainian government has refused to extend the five-year transit agreement that enables the pipeline’s operation. With this looming shutdown, Russia’s natural gas supply to Europe faces further constraints, and countries are scrambling to find alternative energy sources.
The Halt in Gas Supply to OMV
Austria, one of the last European countries still receiving significant Russian gas, was informed on Friday that its gas supply would be cut off starting Saturday. This follows an arbitration decision in favor of OMV, Austria’s largest energy supplier, regarding Gazprom’s failure to meet contractual gas delivery obligations to OMV’s German unit. Austria’s energy regulator, E-Control, confirmed that Gazprom ceased deliveries to OMV at 6 a.m. local time on Saturday, although gas supplies to Austrian customers remained stable at that time.
OMV has been actively seeking to recover the 230 million euros in damages awarded to it in the arbitration. The company plans to offset this claim against future invoices for gas deliveries to Austria, essentially reducing payments for gas supplied via Ukraine.
Russia’s Continued Gas Shipments to Europe
Even with the suspension of gas deliveries to Austria, Gazprom has maintained a consistent flow of gas to Europe through Ukraine, delivering 42.4 million cubic meters, which is equivalent to the previous day’s volume. Gas flows into Slovakia from Ukraine have remained stable, though the volume of gas transported from Slovakia to Austria has been reduced by approximately 16% compared to average levels seen earlier in the month.
OMV, which typically accounts for around 40% of Russian gas flows via Ukraine (around 17 million cubic meters per day), has been a key player in the energy flow between Russia and Austria. However, with the suspension of Russian gas deliveries, Austria is facing the prospect of increased energy insecurity in the months ahead.
The Bigger Picture: Russia’s Declining Gas Exports to Europe
The recent decision to cut off supplies to Austria is part of a broader trend in Russia’s declining gas market share in Europe. At its peak, Russia provided 35% of Europe’s natural gas. However, due to the ongoing conflict in Ukraine, the closure of the Nord Stream pipeline, and the reduction in demand from European countries, Russia’s market share has been rapidly shrinking. In its place, countries such as Norway, the United States, and Qatar have emerged as alternative energy suppliers to Europe.
The Yamal-Europe pipeline, which previously delivered Russian gas via Belarus, has also been closed due to disputes, further limiting Russia’s ability to send gas to Europe. Moreover, the sabotage of the Nord Stream pipelines in the Baltic Sea in 2022 remains a controversial topic, with the United States and the United Kingdom denying involvement in the explosions, while Ukrainian officials have also been implicated, though they deny the accusations.
The Impact on Austria and Other European Nations
The latest supply cuts to Austria signal a further shift in Europe’s energy landscape. Without Austria in the mix, Russia’s gas will now primarily flow to two remaining European countries—Hungary and Slovakia. Hungary, which receives its Russian gas through a pipeline that runs mostly through Turkey, is one of the few European nations still heavily reliant on Russian energy.
In 2023, Russia shipped around 15 billion cubic meters of gas via Ukraine, meeting roughly 8% of Europe’s peak gas demand in 2018-2019. The transit route from Ukraine has been crucial for meeting gas demand in Austria and its eastern neighbors, including Hungary and Slovakia. According to the International Energy Agency, the Ukraine transit route accounted for approximately 65% of Austria’s gas needs and those of its neighbors.
A Turning Point for Europe’s Energy Future
The decision by Russia to cut gas supplies to Austria marks a significant turning point in Europe’s energy crisis. With the closing of major Russian gas routes and a continued shift towards alternative suppliers, Austria and other European countries will need to accelerate their efforts to diversify energy sources. While the current situation remains stable for Austrian consumers, the long-term outlook may involve a greater reliance on renewable energy, as well as more robust energy partnerships with nations outside of Russia. The coming months will be crucial as Europe grapples with the fallout from this ongoing energy standoff.