Why One Country Is Struggling to Break Away From Russian Gas

In the 17 months since Moscow ordered soldiers into Ukrainian territory, countries across Europe have moved with surprising speed to reduce their longstanding dependence on cheap Russian gas.

Germany, which got 55 percent of its supply from Russia before the war, now imports zero. Poland, Bulgaria and the Czech Republic have halted or are close to halting flows. And Italy has been steadily trimming imports, and pledges to be free of Russian natural gas by the end of this year.

By contrast, Austria, which received nearly 80 percent of its gas from Russia before the invasion, still got more than half its total from Russia in May. And in March, when demand was higher, the figure reached 74 percent. As long as Russia is selling gas, Austria will buy it, the chief executive of the Austrian energy company OMV Group said this month.

The government’s difficulties in weaning itself off Russian gas, which it has pledged to do, have drawn complaints from critics who say Austria’s gas payments are helping to finance Moscow’s war machine.

“I don’t think they are doing enough,” said Anne-Sophie Corbeau, a research scholar at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs. “The government is among the friendliest toward Russia.”

Austria, the first Western European country to sign a gas contract with the Soviet Union in 1968, has for decades been heavily reliant on gas piped in from Russia.

A major reason the European Union has not initiated any formal sanctions against Russian gas imports, like those that apply to Russian oil and coal, is that Austria and other huge buyers have argued they need it. And some European countries remain buyers of Russian liquefied natural gas, which arrives by ship, although the overall amount sold is a small fraction of the volumes that used to arrive to the continent by pipeline.

An immediate cutoff would lead to economic ruin and mass unemployment, Chancellor Karl Nehammer of Austria warned last year.

Leonore Gewessler, the energy minister and a member of the progressive Green Party in Austria’s coalition government, said the government remained committed to ending imports of Russian natural gas by 2027.

But “it’s not easy to undo years and decades of wrong policies in just a few months or in a year,” Ms. Gewessler added. And as a landlocked country, Austria, unlike Germany, Italy or Greece, cannot simply build terminals for ships to carry in liquefied natural gas.

The question of whether the government in Vienna is working fast enough is as much a political problem as it is a logistical and economic one.

Austria remains officially neutral — a principle written into its Constitution since 1955, when the end to its postwar occupation was ultimately negotiated with the Soviet Union. As a result, it is not a member of the military alliance the North Atlantic Treaty Organization.

The country has strongly condemned the invasion of Ukraine, taken in refugees and permitted weapons shipments to Ukraine to cross its borders. But while the Russian energy giant Gazprom abruptly stopped supplying many European countries, Austria has continued to receive its full allotment and secured approval from Russia to pay with euros instead of rubles.

Prime Minister Viktor Orban of Hungary is clearly Russia’s closest ally in the European Union. But Vienna’s reluctance to switch more quickly to other energy sources has prompted concerns that Austria remains too closely tied to Russian interests.

“The political elite in Austria is, in my opinion, among the most sympathetic to Russia,” said Grzegorz Kuczynski, director of the Eurasia program at the Warsaw Institute. “Therefore, I think Vienna will try to influence a less confrontational E.U. policy toward Moscow.”

Mr. Kuczynski referred to figures like Karin Kneissl, a former foreign minister who, at her wedding in 2018, caused a sensation by dancing with Vladimir V. Putin, the Russian president, and accepted his gift of sapphire earrings worth 50,000 euros. In 2021, she joined the board of Rosneft, Russia’s state-owned oil company, though she left under pressure after sanctions were proposed in May 2022.

A refinery in Moscow. While the Russian energy giant Gazprom abruptly stopped supplying many European countries, Austria has continued to receive its full allotment.Credit…Natalia Kolesnikova/Agence France-Presse — Getty Images

Other Austrian political figures also had ties to Russia before the invasion last year. Several former top national leaders served on the boards of Russian businesses and organizations. Wolfgang Schüssel, a former chancellor, was on the board of Lukoil, the largest private corporation in Russia. He resigned a month after Russia invaded Ukraine in February 2022.

The far-right Freedom Party, which has had close links to Mr. Putin’s United Russia party and has been gaining ground in public opinion polls, walked out of Parliament in March during a speech from Ukraine’s president, Volodymyr Zelensky.

“There are political players which are not fully on board” when it comes to denouncing Russian policy or hastening the transition to renewable energy, Ms. Gewessler, the energy minister, said.

The current deal with Gazprom, whose signing in 2018 was attended by Sebastian Kurz, the Austrian chancellor at the time, and Mr. Putin, calls for Austria to buy six billion cubic meters of gas per year, and remains in effect for an unusually long period — until 2040. The company was also a financial backer of the now-defunct Nord Stream 2 pipeline between Russia and Germany,

Since the invasion began, OMV, the Austrian energy company, has spent €7 billion, about $7.7 billion, on Russian gas.

Alfred Stern, the chief executive of OMV, said in a recent interview with The Financial Times that “we will continue to take these quantities from Gazprom” as long as they are available.

OMV did not respond to repeated requests for comment. But on Friday the company announced a 10-year agreement to buy gas from the energy giant BP beginning in 2026, to “drive forward our ongoing diversification of supply source,” Mr. Stern said in a statement.

The Austrian government owns roughly 30 percent of OMV. The United Arab Emirates owns 25 percent.

Georg Zachmann, a climate and energy expert at the Bruegel think tank in Brussels, said strategic decisions about the nation’s energy supply should be made in government offices, not boardrooms.

“OMV is a private company, and they’re trying to make as much money as possible for their shareholders,” Mr. Zachmann said. “It would be in the interest of the Austrian government and European policymakers to constrain their ability to do business.”

He acknowledged that reducing supplies from Gazprom would inevitably mean higher prices.

Official decisions may be overtaken by events in any case. The current five-year contract, which has allowed Gazprom to continue shipping natural gas from Russia to Europe in pipelines that run through Ukraine despite the war, expires at the end of next year, and the government in Kyiv has indicated it will not renew that deal.

The Ukrainian pipelines carry about 5 percent of the European Union’s gas imports, according to Ms. Corbeau, from the Center on Global Energy Policy. Ending their use would leave TurkStream, the direct link between Russia and Turkey, as the only entry point for piped gas into Europe.

“The clock is ticking,” Ms. Corbeau said about the Ukrainian transit arrangement. When it comes to gas supplies from Russia, Austria “has been living on borrowed time.”

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1: https://www.nytimes.com/2023/07/31/business/energy-environment/austria-natural-gas-russia.html

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