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, certainly one of its principal importers, has rejected the concept.

Majority state-owned Gazprom mentioned Monday that attributable to unforeseeable circumstances it’s not ready 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 celebration from fulfilling its contractual duties, in principle absolving them from penalties.

“It’s true that we now have obtained a letter from Gazprom Export by which the corporate claims drive majeure retroactively for previous and present shortfalls in fuel deliveries. We think about this as unjustified and have formally rejected the drive majeure declare,” Lucas Wintgens, spokesperson for Uniper, instructed 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 obtainable for remark when contacted by CNBC Tuesday.

Officers in Germany and elsewhere in Europe have grow to be more and more involved about the potential of 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 shall 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, nevertheless 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 america and Azerbaijan, as an example, because it seeks new suppliers of fossil fuels.

“That is clearly uncharted territory and unprecedented on this kind,” Andreas Schroeder, head of vitality analytics at analysis firm ICIS, instructed 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 scale back the value they pay.”

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

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