Russia’s Gazprom cut off its natural gas supply to Austria’s biggest oil and gas company OMV on November 16, the latter’s trading arm reported on the previous day, triggering a spike in European gas prices. The move came three days after OMV warned that Gazprom might halt deliveries in response to the Austrian company deducting from its invoice for current supplies more than €230mn ($243mn) in damages from the Russian supplier for past contract violations.

OMV reported on November 13 that it had been awarded €230mn in damages plus interests and costs from Gazprom Export by the Paris-based International Chamber of Commerce (ICC) for irregular supplies in Germany in 2022, which were halted in September of that year. OMV said it would take steps to enforce the ruling immediately, with OMV Gas Marketing & Trading (OGMT) offsetting its claims against invoices billed to Gazprom. 

OMV acknowledged that taking this step was expected to cause “a deterioration of the contractual relationship” with Gazprom, including a potential halt to gas supplies. 

In a statement on the Central European Gas Hub on November 15, OGMT said Gazprom Export had notified it that gas supplies would be suspended the following morning. The front-month contract at the Dutch TTF hub exceeded €47.3 per MWh ($530 per 1,000 cubic metres) in afternoon trading when the announcement was made, building on daily gains from €43.7 per MWh on November 13.

When announcing the arbitration award, OMV said that if the supply was cut off,  “small one-time hedging losses could occur, but will be clearly outweighed by the positive effects from the recovered damages”. It added that it would be able to fully satisfy the demand of its customers in this scenario, noting it had secured options for gas supply from Norway and in the form of LNG, and that its storage facilities in Austria were filled to more than 90% of capacity.

Austria relies on pipeline gas supplies for Russia to cover most of its demand, with its dependency reaching as high as 98% in December last year. The majority of purchases take place under OMV’s long-term contract with Gazprom, which does not expire until 2040.

Following the cut-off, the only two remaining significant buyers of Russian pipeline gas in Europe are Hungary and Slovakia. While Hungary gets most of its Russian supply via the TurkStream from Turkey, Slovakia receives all of its deliveries via Ukraine. Ukraine transited 14.3bn cubic metres of Russian gas to Europe in 2023, but Kyiv’s transit deal with Moscow is due to run out at the end of this year and it has repeatedly said it will not seek a renewal.

Unless an alternative arrangement is agreed – whether that involves Azerbaijan assuming responsibility for Ukrainian gas transit as has been suggested, or remaining European gas buyers taking ownership of gas at the Russia-Ukraine border – flows through Ukraine are due to halt almost completely in a month and a half.

The supply cut-off marks the end of a long era for Austria of energy reliance on Russia. It was one of the first Western European countries to start buying Russian gas after signing a supply contract with the USSR in 1968.