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| Austria continues to import gas from Russia despite Western sanctions. (Source: TASS) |
On February 12, Austrian Energy Minister Leonore Gewessler announced plans to force domestic energy companies to gradually wean themselves off Russian gas and seek options to end the country's long-term gas contract with Moscow early.
Austria's contract with Gazprom will run until 2040.
Despite the conflict, Gazprom continues to supply gas to OMV's Baumgarten gas hub via gas pipelines running across Ukraine.
“Our dependence on Russian natural gas threatens our prosperity, security and future,” Leonore Gewessler said in a statement. “The country’s dependence on Moscow is a ‘clear market failure’ and the state must now step in.”
The European Union (EU) wants to phase out imports of Russian fossil fuels by 2027. However, Austria remains one of the bloc's most dependent countries on Moscow's gas.
Austria was the first Central European country to sign a gas contract with the Soviet Union in 1968 and for decades has relied heavily on gas from Russia.
In 2022, Austrian Chancellor Karl Nehammer warned that an immediate cutoff of Russian gas would lead to economic ruin and mass unemployment.
Meanwhile, Austrian Energy Minister Leonore Gewessler also admitted that the country cannot ban gas imports from Moscow because "Austria depends 80% on Russian gas."
Before Russia’s special military operation in Ukraine began, 80% of Austria’s oil and gas came from Russia. As of May 2023, Austria still imports around 50% of its gas from Russia. And by December 2023, the country’s gas dependence on Russia had risen to 98%, the highest level since February 2022.
Austria has faced wider criticism for maintaining close trade ties with Russia.
In December 2023, Vienna threatened to cancel Brussels' 12th package of sanctions. Austria's objection was due to Ukraine's inclusion of Austria's Raiffeisen Bank International on its list of "international war sponsors".
Under Minister Gewessler's new proposal, Austrian gas companies will have to demonstrate that they are gradually increasing the share of non-Russian gas flows.
The government will also commission an independent study to assess the costs of terminating a long-term contract between Russian gas export giant Gazprom and Austria's partly state-owned energy company OMV.
Florian Stangl, an Austrian energy lawyer at NHP Rechtsanwälte, sees the issue as being that terminating a long-term contract could trigger a contract settlement fee worth more than €1 billion.
“The only way to avoid this is to pass a law banning imports of Russian gas, which could lead to Gazprom suing OMV,” he said.
| “Austria has enough gas to meet its domestic needs in 2025, even without Russian supplies. However, long-term gas price stability can only be achieved through new gas pipelines,” said Walter Boltz, a former Austrian regulator who is now a senior energy advisor at Baker & Mckenzie LLP. |
In the same vein, an OMV spokesman informed that in order to terminate the long-term contract with Gazprom, it is necessary to first create a policy framework for eliminating Moscow's gas.
“If necessary, OMV can supply its customers in Austria with 100% non-Russian gas,” an OMV spokesperson stressed.
On the business side, Bloomberg revealed that Gas Connect Austria GmbH - the company that owns and operates Austria's east-west domestic gas pipeline network - has begun increasing capacity to Germany.
The WAG LOOP 1 pipeline system can supply 27 terawatt hours of gas – about a third of annual demand. However, the pipeline will not be ready until 2027.
Walter Boltz, a former Austrian regulator and now a senior energy advisor for Baker & McKenzie LLP, said Austria has enough gas to meet its domestic needs in 2025, even without Russian supplies. However, long-term gas price stability can only be achieved through new gas pipelines.
"The risk in 2025 and 2026 is not that there will be no gas, but prices could be quite high. Vienna needs to avoid another price crisis," he stressed.
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