Russia nears gas shutdown in Europe as Germany rejects claims it can’t fulfil contracts

LONDON — Russia’s vitality large is threatening to ship much less fuel to Europe — however Germany, one in every of its most important importers, has rejected the thought.

Majority state-owned Gazprom stated Monday that attributable to unforeseeable circumstances it isn’t able to adjust to fuel contracts with Europe.

Germany’s vitality agency Uniper confirmed to CNBC that Gazprom had claimed “drive majeure” on its provides. Power majeure, a authorized time period, happens when unforeseeable circumstances stop one get together from fulfilling its contractual duties, in concept absolving them from penalties.

“It’s true that we now have obtained a letter from Gazprom Export through which the corporate claims drive majeure retroactively for previous and present shortfalls in fuel deliveries. We contemplate this as unjustified and have formally rejected the drive majeure declare,” Lucas Wintgens, spokesperson for Uniper, advised CNBC’s Annette Weisbach.

RWE, one other German vitality firm, confirmed to CNBC that it had additionally obtained a drive majeure discover from Gazprom.

Gazprom was not instantly out there for remark when contacted by CNBC Tuesday.

Officers in Germany and elsewhere in Europe have turn out to be more and more involved about the potential for a whole shutdown in fuel provides from Russia. These fears intensified after Nord Stream 1 — a key fuel pipeline from Russia to Germany — was closed earlier this month for upkeep work, with some doubting that flows might be totally restored after works are concluded on July 21.

European nations obtained about 40% of their fuel imports from Russia earlier than it invaded Ukraine. European officers have been scrambling to finish this dependency, however it’s a pricey course of and laborious to attain in a single day.

The European Fee, the manager arm of the EU, has introduced new fuel offers with the US and Azerbaijan, as an example, because it seeks new suppliers of fossil fuels.

“That is clearly uncharted territory and unprecedented on this type,” Andreas Schroeder, head of vitality analytics at analysis firm ICIS, advised CNBC’s Squawk Field Europe Tuesday.

“While the European Union has managed in decreasing the volumes of imports of hydrocarbons in Russia, they did not handle to cut back the worth they pay.”

European fuel costs have soared because of decrease flows from Russia. However these larger costs imply that Russia can ship much less fuel to Europe and make the identical — or much more — cash than earlier than. Schroeder known as this the “offsetting impact.”

The front-month fuel value on the Dutch TTF hub, a European benchmark for pure fuel buying and selling, was round 1% larger at 159 euros ($1.02) per megawatt-hour Tuesday morning. Costs are up extra 600% over the past 12 months.