Gazprom Faces Growing Legal Claims from European Companies Amid Gas Supply Cuts

The Rising Tide of Legal Claims Against Gazprom

In a dramatic shift that could set a dangerous precedent for Gazprom, Austria’s OMV has halted payments for Russian gas supplies. This move has sparked a series of claims from European energy companies who are seeking compensation for gas deliveries halted by Gazprom in 2022. With multiple arbitration cases already pending, and more on the horizon, Gazprom's financial position could be under serious strain, with mounting legal challenges from major players in Europe.

The Austrian utility OMV stopped paying for gas coming from Russia via Ukraine, prompting Gazprom to immediately suspend its deliveries. OMV’s action could inspire other companies—especially those who have been affected by Gazprom's failure to honor contracts—to follow suit. But what could the consequences be for Gazprom, and why is this situation unfolding at such a critical time for Europe's energy security?

The Growing Pressure on Gazprom: What This Means for European Energy Companies

The situation is heating up as several energy giants like Eni (Italy), RWE (Germany), and others are now seeking compensation from Gazprom for the gas that was never delivered after Russian supplies were cut off in 2022. As these cases move through the international arbitration courts, the financial strain on Gazprom could intensify.

Energy lawyer Agnieszka Ason highlights the potential consequences: “Several cases are pending, with more expected in the coming months. If more damages are awarded to European importers—and at least some of those awards are enforceable—it will put significant pressure on Gazprom’s financial situation.”

Legal Cases Against Gazprom: The Floodgates May Open

At the heart of the dispute is the question of how companies should be compensated when Gazprom fails to deliver on agreed-upon gas supplies. In the wake of Russia’s actions in Ukraine, many European countries were left scrambling to replace Russian gas supplies. Italy’s Eni, Germany’s RWE, and other European firms claim they are owed damages for the increased costs incurred when they were forced to find alternative sources for natural gas.

In some cases, these firms are now relying on international arbitration to settle their disputes with the Russian giant. The big question is whether they’ll receive compensation or whether Gazprom will refuse to pay.

As the arbitration proceedings continue, more claims are expected to be filed, and the financial implications for Gazprom could be devastating, especially considering the current geopolitical environment.

OMV’s Payment Halt: A Key Moment in the Gas Dispute

In a significant move, OMV AG, Austria’s state-owned energy utility, stopped paying for gas coming from Gazprom through Ukraine. This action, taken in 2022, prompted Gazprom to cut off supplies immediately. OMV had stopped making payments because of its growing concerns over Russia’s geopolitical actions and its commitment to European energy security.

The Austrian utility’s decision was a risky one, as halting payments meant that Gazprom would immediately retaliate by suspending gas deliveries. For many companies, this presents a dilemma—stop payments, but be ready to find alternative supplies. OMV, for instance, pivoted quickly, securing alternative sources of gas to keep operations running. But for other companies, especially those reliant on Russian gas, finding alternatives is not as simple.

European Firms Seek Compensation: Uniper’s $13 Billion Victory

One of the most high-profile victories for a European energy firm in the dispute with Gazprom came from Uniper SE, a German energy company that won €13 billion in damages for unpaid gas volumes. After Gazprom stopped deliveries in mid-2022, Uniper was forced to seek alternatives at significant costs.

The company’s victory in international arbitration allowed it to terminate its contracts with Gazprom, some of which had been set to run until the mid-2030s. Uniper was able to offset part of its damages with unpaid bills, but it remains unclear whether the company will be able to recover the full amount.

More Claims on the Horizon: Italy’s Eni and Others Prepare to Act

The legal fallout from Gazprom’s gas supply cutbacks in 2022 doesn’t stop with Uniper. Eni, one of Italy’s largest energy companies and long-time Gazprom customer, is preparing its own arbitration case, seeking compensation for reduced gas deliveries from Russia. Italy once sourced about 40% of its natural gas from Russia, but that number has dwindled since the onset of the war in Ukraine. As Eni tries to secure compensation, its case could serve as a bellwether for others across Europe.

Even companies like RWE, Innogy Energie, and CEZ (Czech Republic) have initiated arbitration proceedings. While some have declined to comment on ongoing litigation, it’s clear that the legal pressure on Gazprom is mounting, with more companies likely to join the ranks of those seeking damages.

Gazprom’s Response: A Financial Strain in the Making

Gazprom has remained tight-lipped about the growing wave of legal actions against it. The company didn’t respond to requests for comment on the OMV payment halt or the pending arbitrations. What’s clear, however, is that the mounting legal claims and the loss of business in Europe could pose a serious challenge to Gazprom, especially as its assets in Europe shrink due to nationalization efforts, such as the seizure of Gazprom Germania in 2022.

As arbitration awards are granted on a first-come, first-served basis, companies that win cases could gain an upper hand in securing compensation. However, it remains uncertain whether Gazprom will be able or willing to pay, given its shrinking market share and increasing sanctions from Western countries.

The Stakes for Europe’s Energy Security

The ongoing gas disputes come at a crucial time for Europe. As winter approaches, energy security is a top concern, with gas reserves rapidly depleting. The Ukraine-Russia transit deal, which currently allows Russian gas to flow through Ukraine to Europe, is set to expire at the end of this year. The possibility of further gas cuts raises the specter of energy shortages in European countries that have already been struggling with rising costs and a cost-of-living crisis.

For some nations, particularly those in Central and Eastern Europe, alternatives like liquefied natural gas (LNG) can provide a temporary solution, but these alternatives come at a higher price.

What Lies Ahead for Gazprom and Europe’s Energy Future?

The outcome of pending arbitration cases against Gazprom will likely shape the future of energy relations between Europe and Russia. As European countries strive to diversify their energy sources, the loss of Russian gas is a significant blow, and the pressure on Gazprom is only increasing. European companies, from Eni to Uniper, are looking for justice and compensation for breached contracts and unmet gas deliveries, and many are ready to take action.

While Gazprom is likely to face even more legal challenges in the months ahead, the company’s future in Europe is uncertain. As the European energy landscape continues to evolve, these ongoing legal battles may be pivotal in defining how the region adapts to a post-Russian energy era.

Conclusion: Gazprom’s Shrinking Hold on Europe

Gazprom’s diminishing role in Europe is being compounded by legal actions from the companies it once supplied. As more European utilities like OMV and Eni prepare to take legal action over lost gas supplies, Gazprom faces an increasingly difficult road ahead. The question now is whether the company can weather this storm or if its position in Europe will continue to erode.