Gazprom Halts Gas Supplies to Italy in Latest Energy Battle

(Bloomberg) --

Russia’s state-controlled Gazprom PJSC suspended natural gas deliveries to Italy in an apparent scuffle over regulation in Austria, escalating the energy crisis in Europe. 

The cutoff appeared to target just Italy, which gets Gazprom’s supplies from a pipeline that passes through Austria. Higher volumes of Russian gas were allocated to Vienna-based OMV AG than recently, said Andreas Rinofner, a spokesman for OMV, which imports Russian gas to Austria. 

Although Italy has been weaning itself off Russian gas, Saturday’s development highlights how vulnerable European countries are to Russian President Vladimir Putin’s repeated moves to choke off energy to the continent. The standoff intensified this week after massive leaks erupted in a key pipeline to Europe that some nations blamed on sabotage.

Gazprom released a statement saying it had suspended the supplies to Italy because the Austrian operator had refused to confirm “transport nominations” after regulatory changes implemented in Austria in late September. 

Austria’s Energy Ministry said Gazprom had failed to sign off on contractual changes that reflect technical rule adjustments typically made at the start of each gas year. Gazprom, like other market participants, had known of the changes for months, Austrian regulator E-Control said in a tweet.

Disputes over contractual clauses and regulation have accompanied the meltdown in economic ties between Russia and countries to its west, as Putin continues his war against Ukraine. Earlier this year, Russia’s demand for gas deliveries to be paid in ruble contributed to soaring prices.

Gazprom said it is working to resolve the issue with Italian buyers. Eni SpA confirmed the cutoff and said it was reaching out to Gazprom. Austria’s government also said it was working on the matter at a technical level.

A spokeswoman for pipeline operator Trans Austria Gasleitung GmbH didn’t respond to an email and calls seeking comment.

Alternative Supplies

Italy once relied on Russia for about 40% of its gas imports, but has been aggressively cutting that dependence since the invasion in February. Italy has now sourced sufficient alternative supplies of gas from North Africa to make up for any shortfalls this winter if Russia were to cut off supplies, people familiar with the matter have told Bloomberg. A boost of expected deliveries from Algeria and Egypt will be able to cover the remaining supplies that Italy was still getting from Russia, they said.

The cutoff of Italian gas comes days after underwater eruptions crippled the key Nord Stream gas pipelines connecting Russia with Europe. US President Joe Biden yesterday echoed the assessment of Western European leaders that the pipelines were sabotaged and added that Russian statements about the incident shouldn’t be trusted. 

In response, Norway’s armed forces stepped up patrols of the country’s energy facilities and Germany, France and the UK offered to help protect oil and gas installations in the North Sea. NATO is also using its naval and air capabilities to monitor the Baltic and North Seas.

READ: All Eyes Turn to Ukraine Gas Link as Russia Squeezes Europe

With Nord Stream out of commission, there is now just one major pipeline bringing natural gas straight to Europe. And that route, which passes through Ukraine, is looking increasingly vulnerable. That pipeline has already had part of its supply knocked out by the war, and could turn out to be the next to close as the conflict drags on.

Gazprom Saturday also reduced the daily gas flow levels to Moldova through the Ukraine and blamed the reduction on Ukraine. 

(Adds comment from Austrian energy ministry, background from fifth paragraph.)

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