A landmark event has occurred on the European gas market: the Austrian energy company OMV, which until recently had the reputation of the most loyal client of the Russian Gazprom in the region, officially severed contact with it, which was supposed to last until 2040.

Ukrainian Energy has examined the prerequisites for such a decision, as well as how it could affect the gas map of Europe, where Russia has become an undesirable partner.

A timely moment

At the end of the working day on Wednesday, December 11, OMV officially informed the market that it was terminating its long-term cooperation with Gazprom and would no longer export gas under the agreement concluded in 2006.

“This decision takes effect immediately,” the message states. It was due to “numerous fundamental violations of contractual obligations” by the Russian monopolist.

As reported by Ukrainian Energy, Gazprom refused to supply gas to OMV from November 16 due to disagreements in the interpretation of the decision of the International Chamber of Commerce (ICC) and the conditions for its implementation.

The dispute concerned gas supplies from Russia via Ukraine to Germany, which were suspended in September 2022. On November 14, the ICC arbitrators concluded that Gazprom had violated its contractual obligations and therefore had to pay OMV 230 million euros in damages. However, Moscow did not recognize this decision. In response, OMV credited the debt to Gazprom as an advance payment for gas that was supposed to arrive in December. However, the Austrian company did not wait for the deliveries to its address.

OMV saw this development of events as an opportune moment to withdraw from the agreement with Gazprom, which had lost its reputation as a reliable partner. In addition, the Austrian company admitted that the termination of relations, rather than the continuation of cooperation with Gazprom, “significantly reduces potential risks” and prevents new losses. “The contract’s supply volumes with a margin potential of one million euros per year have been fully diversified with alternative gas sources over the past three years,” OMV said in a statement.

OMV CEO Alfred Stern added that the company’s key priority is “always to be a reliable supplier for customers in all markets and in all countries where we operate.”

To meet this goal, OMV is developing its own gas production in fields in Norway and Austria, purchasing gas from third-party producers, and also relying on long-term agreements in the liquefied natural gas market. “OMV is able to fulfill all its contracts with customers from alternative gas sources,” the corporate statement emphasizes.

OMV has previously been under intense pressure to end its business with Russia. But the Austrian company has been delaying this, citing long-term gas contracts that include a “take or pay” clause (i.e., the obligation to pay for gas supplies even when consumers do not need them).

In order to bring the break with Gazprom closer, Austria’s Ministry for Climate Protection, the Environment, Energy, Mobility, Innovation and Technology set up a special “gas independence commission” in July 2024 to review the OMV-Gazprom contract.

Its head, Leonor Gewessler, acknowledged at the time that “dependence on Russian gas is a major threat to energy supplies.” “We must draw two conclusions from this fact: move towards independence and learn from the mistakes of the past,” she said.

But only after Moscow “unilaterally” decided to stop supplying gas to OMV did the company’s management have “legitimate grounds to break off relations with Gazprom.” This is according to Walter Boltz, former CEO of E-Control, who joined the government’s gas independence commission.

Gazprom is not needed

“Russia wanted to use energy as a weapon against us, but it didn’t work. Our energy supply is secure because we are well prepared. Austria is protected from blackmail,” said Austrian Chancellor Karl Nehammer, who was the first high-ranking official in the republic to react on social media to the termination of the long-term agreement between OMV and Gazprom.

For the country’s Minister for the Environment, Climate and Energy, Leonor Gewessler, this event was “a necessary step towards energy independence.”

But overall, as Walter Boltz points out, it will change “really very little” for gas supplies to Austria. The grounds for such statements are not only in the diversification of sources of blue fuel imports. OMV has also been able to create significant gas reserves in underground storage facilities - they are currently 85% full. In addition, Russian gas continues to enter the Austrian market from various European traders, although OMV, a company subordinate to the country’s government, has ceased to be a direct client of Gazprom.

Ukrainian context

At the same time, such a development acquires special symbolism for Ukraine, where discussions are underway regarding the prospects for the transit of Russian gas after the current contract between the state holding Naftogaz of Ukraine and Gazprom on transportation services expires on December 31 of this year.

Serhiy Makogon, former head of the Gas Transmission System Operator of Ukraine, considers OMV’s refusal to cooperate with Gazprom “a good sign,” since the number of supporters of continuing to transport Russian gas to the EU via the Ukrainian route “has become significantly smaller.” “In fact, only Slovakia and Hungary continue to insist on continuing the transit, and put pressure on both Brussels and Kyiv,” the expert noted. Therefore, he predicts, we should expect unexpected events at the end of December.

One of the potential risks is related to playing the “humanitarian catastrophe” card in Transnistria, a separatist region of Moldova that exists thanks to the support of the Kremlin. According to Serhiy Makogon, threats of an intensification of the frozen conflict create conditions for pressure on Ukraine and the EU to find a solution to continue the transit of Russian gas from next year.

Earlier, the International Energy Agency in its report on energy security drew attention to the fact that the suspension of Russian gas transit through Ukraine raises the issue of providing Transnistria with blue fuel. The Moldovan State District Power Plant is located here, which uses gas for generation. And the rest of Moldova, which is striving for full integration with the EU, depends on its electricity.

However, among representatives of the authorities in Ukraine and the EU, the prevailing opinion is that business with Gazprom should be stopped.

European priorities

The new head of the European Commission's Energy Directorate, Dan Jorgensen, calls his "top priority" the development of a plan that will allow for a final end to imports of Russian hydrocarbons and nuclear fuel. He believes that the European Union is failing in its long-term campaign to refuse to import gas and oil from Russia, so there is a need for new measures, tougher and more effective, to finally sever all energy ties with the Kremlin.

In particular, Dan Jorgensen pointed to the growing purchases of Russian liquefied natural gas (LNG) by EU countries, which is why for him this is “a matter of particular concern”.

“The fact that we have managed to reduce our energy dependence on Russia is actually a great achievement. However, it is obvious to everyone that changes are needed, because now everything has gone in the wrong direction. We need new, high-quality tools and means to solve the remaining problems,” the European Commissioner said in his first interview after taking office for Politico.

He said that he would present his work by mid-March, and the document would focus “primarily on gas”.

The European Commission’s REPowerEU plan, approved in response to Russia’s aggression against Ukraine, envisages a gradual phasing out of Russian energy imports by 2027. If in 2021, before the large-scale invasion, the bloc's countries purchased more than 45% of their gas from Moscow, then in 2023 this share decreased to 15%. But current data from the Kpler information platform indicate that by the end of 2024, imports of Russian LNG to the EU could increase by 10% compared to last year's value.

In her first telephone conversation with newly elected US President Donald Trump, European Commission President Ursula von der Leyen proposed increasing imports of American LNG to replace Russian LNG. She acknowledged that purchasing blue fuel from Moscow is a problem not only in terms of security, but also in terms of rising costs. She called the "unconditional advantage" of LNG from the US its significantly lower price. Therefore, developing cooperation with American suppliers will be an advantage for European consumers.

Dan Jorgensen also calls increasing imports of American LNG a priority in working with the Donald Trump administration. “We must remember that we could not reduce our dependence on Russia without energy from the United States. America has truly been our friend, and I hope that it will remain so,” the European official said.

The EU’s incentive to increase gas cooperation with the United States is also the expectation that Russian gas supplies via pipelines through Ukraine will stop, he admits.

“We are preparing for a situation when the transit agreement will end, and this is another reason why it is important for us to have a roadmap for the final abandonment of Russian gas in the near future,” said Dan Jorgensen, confirming that Europe is “ready to live” without Russian gas in general, and even without the volumes that are transported through Ukraine (according to the results of 2023 - 14 billion cubic meters).

Svitlana Dolinchuk, specially for “Ukrainian Energy”