As Austria grapples with its own energy woes, Russia extends an olive branch to Germany, offering energy deals if Berlin expresses interest, hinting at possible changes in global energy alliances
In a significant geopolitical and economic move, Russia has announced the suspension of gas supplies to Austria starting Saturday. It marks the end of Moscow’s last major gas supply route to Europe, as Russia now shifts its focus to exports only to Hungary and Slovakia. The development highlights how the landscape has changed dramatically since Russia once supplied 40% of the European Union’s gas needs, before its invasion of Ukraine in 2022.
Austria, the first Western European country to import Russian gas in 1968, will have to turn to alternative sources after a contractual dispute between Russian gas giant Gazprom and Austria’s OMV. According to the European Gas Hub platform, OMV received a notification from Gazprom indicating the interruption of gas supplies, although Gazprom did not offer further comment.
DECISION
MV said it is preparing for the eventual interruption of Russian gas and that it can still send gas to its customers by importing via Germany, Italy and the Netherlands. “We still expect this to exacerbate an energy crisis in Austria that has caused its gas demand to fall sharply and hit its manufacturing sector,” analysts at Eurointelligence said. “Austria’s economy is currently stuck in recession. Germany is sneezing and Austria is catching a cold,” they added. Germany was also heavily dependent on Russian gas before the war, but deliveries stopped when the Nord Stream pipeline under the Baltic Sea was blown up in 2022.
GERMANY’S IMPACT
The announcement of the end of supplies to Austria came as Russian President Vladimir Putin and Chancellor Olaf Scholz of Germany, Russia’s biggest gas customer until Moscow’s forces invaded Ukraine, held their first phone conversation since December 2022. Russia was ready to look at energy deals if Berlin was interested, the Kremlin said. “It was emphasized that Russia has always strictly fulfilled treaties and contractual obligations in the energy sector and is ready for mutually beneficial cooperation if the German side shows interest in this,” the Kremlin said. Russia shipped about 15 bcm of gas through Ukraine in 2023 – representing just 8% of peak Russian gas flows to Europe via various routes in 2018-2019, according to data compiled by Reuters.
MOVEMENT
In 2023, the transit route met 65% of gas demand in Austria and its eastern neighbors, Hungary and Slovakia, according to the International Energy Agency. Ukraine has said it does not plan to extend the transit agreement beyond 2025, which would mean a loss of gas for Austria and Slovakia. Hungary no longer receives any more gas via Ukraine and imports volumes via the TurkStream pipeline, which runs along the Black Sea bed. Slovakia still receives Russian gas via Ukraine. EU Energy Commissioner Kadri Simson told Reuters on the sidelines of a UN climate conference in Azerbaijan that all EU countries that receive gas via the Ukrainian route have access to other sources of supply that could fill the gap.
CONSEQUENCES
The loss of Russian gas could worsen Austria’s ongoing energy crisis, which has already led to a slump in gas demand and a recession hitting the manufacturing sector. Austria plans to meet its energy needs by importing gas from Germany, Italy and the Netherlands. As Austria grapples with its own energy woes, Russia is extending an olive branch to Germany, offering energy deals if Berlin expresses interest, hinting at possible changes in global energy alliances.
