German gas companies sue Russia’s Gazprom for breach of contract

The combined losses of the two companies exceed €12 billion

editor: REMIX NEWS
author: Mandiner
FILE - The logo of Gazprom Germania is pictured at the company's headquarters in Berlin, April 6, 2022. (AP Photo/Michael Sohn, File)

Two German natural gas importers are demanding compensation from Russian state energy company Gazprom for the non-delivery of natural gas, the German daily Handelsblatt reported on Monday.

According to the German business daily, the country’s largest natural gas importer Uniper and another energy major, RWE, have initiated arbitration proceedings against the Russian energy giant to recover damages. Both companies have signed gas purchase contracts with Gazprom, which has been increasingly cutting back its gas supplies to Germany following Russia’s war against Ukraine began in February. Since the end of August, the company has completely halted gas deliveries to Germany, even though the EU’s punitive measures against Russia over the war do not affect gas trade.

Uniper and RWE have been forced to buy gas on the world market at very high prices and resell it to their customers, including many local utilities, at much lower prices than originally agreed in the original contracts. Uniper has so far suffered losses of €11.6 billion, while RWE has suffered losses of around €1 billion.

Gazprom considers the financial claims from RWE and Uniper to be unfounded.

According to the business paper, both companies have agreed on gas supplies with their Russian partner in a way that includes a clause in the contracts that any disputes will be settled through arbitration. In Uniper’s case, the competent body is the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), whose rules state that the absence of the defendant does not prevent the proceedings from being conducted.

This means that a claim for damages can be brought before the SCC even if Gazprom refuses to participate in the proceedings. Before the war in Ukraine, Germany used Russian imports for over 50 percent of its natural gas consumption. However, with the closure of the Nord Stream 1 pipeline, which connected Russia directly to Germany, at the end of August, imports stopped completely, making September 2022 the first month since the start of Russian gas imports in 1972 that no gas has been imported from Russia to Germany.

A number of developments are underway to replace Russian pipeline imports, including the construction of seven offshore terminals to receive liquefied natural gas (LNG). Construction of the first terminal, in Wilhelmshaven, has already been completed and is scheduled to come on stream in January.

According to the Federal Network Agency, for the time being, the loss of Russian imports has been compensated for. The agency reported on Monday that “gas supply in Germany is stable” and “security of supply remains guaranteed,” with storage facilities at 96.98 percent of capacity.

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