Gazprom declares force majeure

This article was last updated on July 19, 2022

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Due to “force majeure” Gazprom is unable to provide gas to key European clients.

According to some clients, Gazprom, the state-owned Russian utility, has informed them that gas deliveries are no longer guaranteed owing to “force majeure” circumstances. Two of these clients are Uniper, Germany’s largest gas importer, and RWE, a globally active German energy firm.

Reuters has received confirmation from an unnamed source that this incident involves supplies made through the Nord Stream 1 pipeline. It is temporarily unavailable while repairs are made. At first, there were worries that Russia might use the summit as an excuse to cut off all of Europe’s gas supplies.

According to Jilles van den Beukel, energy expert at The Hague Center for Strategic Studies, “I think it is too early to state clearly that Nord Stream 1 will actually close.” Vladimir Putin is playing chess, and this is his thirty-first move out of forty. In spite of the fact that I’m not privy to his thoughts, it’s becoming increasingly common for Russia to produce less and less gas. “

The use of force majeure, also known as force majeure excuse, is a technique to get out of commitments under a contract when the going gets tough. Gazprom may do this to protect itself from having to pay compensation if it stops supplying gas.

This reliance on “force majeure” is regarded by many experts as unwarranted. In Van den Beukel’s opinion, “if Russia wants to export, it is actually feasible.” The Yamal pipeline, for example, is another option.

Nord Stream 1 is responsible for 40% of Europe’s gas imports, which arrive in Germany from Russia. Gazprom, which is owned by the Russian government, has said that some of the recent delivery problems were caused by a turbine.

For now, Russia is making a lot of money from the gas deliveries to Europe. As Van den Beukel puts it, “Putin delivers around a fifth of 2019’s volume for 10 times the price.” As a result, he makes 2.5 times as much money as he would in regular circumstances.

In spite of this, the price of gas hasn’t risen significantly since hearing about the use of force majeure. As soon as the Nord Stream 1 pipeline is repaired, “the market has already priced in to a great extent that the gas will no longer flow through,” says Van den Beukel. The International Energy Agency issued a code-red alert for Europe earlier today.