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

A screen with Gazprom’s logo is shown at the St. Petersburg International Economic Forum (SPIEF) on June 17, 2022 in St. Petersburg, Russia. REUTERS/Anton Vaganov/

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LONDON, July 18 (Reuters) – Russia’s Gazprom has told customers in Europe it can’t guarantee gas supplies due to “extraordinary” circumstances, according to a letter seen by Reuters, boosting economic engagement with the West. Moscow’s invasion of Ukraine.

A letter from the Russian state gas monopoly, dated July 14, said it would be forced into supply starting June 14.

Known as an ‘act of God’ clause, force majeure is standard in commercial contracts and spells out extreme circumstances that excuse a party from its legal obligations.

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Gazprom Inc (GAZP.MM) There was no immediate comment.

Uniber, Germany’s biggest importer of Russian gas, was one of the customers who said they had received a letter and formally rejected the claim as unreasonable.

RWE (RWEG.DE)Germany’s biggest power producer and another Russian gas importer said it had received a force majeure notice.

“Please understand that we cannot comment on its details or our legal opinion,” the company said.

A trade source, who asked not to be identified due to the sensitivity of the issue, said the force majeure involved supplies via the Nord Stream 1 pipeline, a key supply route to Germany and beyond.

The flow through the pipeline is at zero as the link is undergoing annual maintenance which started on July 11 and ends on Thursday. read more

Europe fears that Moscow could keep the pipeline unscathed in retaliation for sanctions imposed on Russia over the Ukraine war, exacerbating an energy crisis.

Turbine delay

Already on June 14, Gazprom reduced the pipeline’s capacity to 40%, citing delays in a turbine maintained by equipment supplier Siemens Energy in Canada. (ENR1n.DE).

Canada airlifted a turbine for the Nord Stream gas pipeline to Germany on July 17 after repairs were completed, the Kommersant newspaper reported on Monday. read more

If there are no problems with logistics and customs, it will take another five to seven days for the turbine to reach Russia, the report said.

Germany’s economy ministry said on Monday it could not provide details on the location of the turbine.

But the ministry’s spokesperson said it was a replacement part that had only been in use since September, meaning its absence could not be the real reason for the drop in gas flow before maintenance.

“This looks like the first indication that gas supplies via NS1 will not resume after the 10-day maintenance,” said Hans van Cleef, senior energy economist at ABN Amro.

“Depending on what the unusual circumstances are, in order to declare strength, whether these issues are technical or political, this will mark the next stage of escalation between Russia and Europe/Germany,” he added.

Austrian oil and gas group OMV (OMVV.VI)However, gas supplies from Russia via the Nord Stream 1 pipeline are expected to resume as planned after the outage on Monday. read more

Russian gas supplies have been dwindling for months through key routes through Ukraine and Belarus, as well as through Nord Stream 1 under the Baltic Sea.

The European Union, which has imposed economic sanctions on Moscow, aims to end its use of Russian fossil fuels by 2027, but wants supplies to continue for now as it develops alternative sources.

For Moscow and Gazprom, energy flows are a key revenue stream as Western sanctions over Russia’s invasion of Ukraine, which the Kremlin says is a “special military operation,” have strained Russian finances.

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

A grace period for payments on Gazprom’s two international bonds expires on July 19, and if foreign creditors are not paid by then, the company will technically be in default.

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Report by Julia Payne; Additional reporting by Christoph Steitz in Frankfurt, Bozorg Sharafedin in London, Nina Chestney in London; Editing by David Goodman, Edmund Blair and Barbara Lewis

Our Standards: Thomson Reuters Trust Principles.

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