Gazprom Announces Force Majeure for Some European Customers

On Sunday, July 14th, the Russian Giant gas company Gazprom declared a state of force majeure for several European customers. The company cannot guarantee natural gas supply because of 'extraordinary' circumstances.

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According to the document, this legal clause is only applied for the last month's supplies. The announcement came in light of the current annual Nord Stream 1 maintenance carried out in the vital pipeline delivering Russian gas to Germany and beyond. The maintenance work is expected to be done by Thursday.

Last month, the gas company was suffering problems with delivering gas requested by the customers, which has been explained by citing some difficulties with turbines at its main pipeline to Europe that ends in Germany. In the scenario of the ongoing armed conflict in Ukraine, one of the two main entry points on the border with Russia has affected the flows via Ukraine.

The head of natural gas, coal, and carbon at Energy Aspects Ltd, Trevor Sikorski, said it "does feel like a signal that the low flows could continue for longer than just the scheduled maintenance period." This news is added to European countries fear that the Russian company could handle the cuts in supplies as a retaliatory measure for the sanctions imposed on the federation.

Force majeure is usually known as an 'act of God' clause, decreed in business contracts and spells out extreme circumstances that excuse a party from their legal obligations. Sikorski said that to present the clause  retroactively is "unusual, to say the least."

As one of the buyer companies of Gazprom expected to react in light of such a clause, Uniper SE said that Gazprom's export unit claimed "force majeure retroactively for past and current shortfalls in gas deliveries. We consider this unjustified and formally rejected the force majeure claim."

RWE AG, alongside Wideangle LNG, has been among other companies which received the notice but rejected it.

"This move may sound quite odd because first of all, a force majeure event declared by a seller is supposed to be beyond the seller's control, which is arguable given the level of weaponization of the gas since the start of the conflict," said Jean-Christian Heintz, founder of advisory firm Wideangle LNG. "And secondly, the FM should be addressed by mitigation efforts, which are not too obvious at this stage."