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May 14, 2022
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Vienna has its eye on Gazprom’s property

Vienna has its eye on the property of "Gazprom"

Photo: Alexander Ryumin / TASS

The Austrian authorities are preparing to confiscate one of the largest gas storage facilities in Europe from Gazprom. The relevant plans were announced by the Federal Chancellor of the country Carl Nehammer.

In an interview with local media – publications Kronen Zeitung and Kleine Zeitung – he said that in order to ensure the security of the republic’s energy supply, the Austrian government intends for the first time to create a state strategic gas reserve in underground gas storage facilities, which will operate on the “use it or lose it” principle. And he actually put forward an ultimatum to the Russian Gazprom: if the company does not fill Austria’s largest underground storage facility with blue fuel, then the authorities will take it away and transfer it to other suppliers. At the same time, Nehammer stressed that there was no question of nationalization.

Actually, the chancellor was referring to the Haidach storage facility in the federal state of Salzburg, the largest in Austria and the second largest in Central Europe, which is currently empty.

“If you use it, then everything is OK, if you don’t use it, other companies will take it. Haidach is strategically important not only for Germany, but also for the western regions of Austria,” said the head of the Austrian government.

However, something else remains unclear. Namely, how the seizure of this underground gas storage from Gazprom will help the authorities of the republic to form the very strategic gas reserve.

After Germany, Austria is the second buyer of Russian gas. It accounts for 80% of the country’s total imports of this energy resource. And, as Bloomberg analysts previously wrote, referring to the report of the Austrian Energy Agency, Vienna will be able to refuse gas from Russia at best only in five years.

But Chancellor Nehammer, judging by the severity of his tone, is clearly not going to wait so long for this “happy” moment. The only question is, who are these alternative suppliers to whom he is going to give the property to the Russian company?

To comment on the threats of the head of the government of Austria, “SP” asked expert of the National Energy Security Fund and the Financial University under the Government of Russia Igor Yushkov:

— In fact, de facto we are talking about the nationalization of all Gazprom assets in Europe. We have already seen how Poland took away, in fact, a share in the operating company Yamal-Europe, how Gazprom’s sales companies that were engaged in trading were confiscated in Germany – WINGAS and other UGS facilities are also following this path.

But in some respects, the story with gas storages and sales companies is even profitable. The fact is that the Europeans are now obliging UGS owners and operators to fill them up to 80% by October 1st. Thus, the Russian company must purchase fuel from itself and pump it there. And if some crisis situations arise in winter and there is a deficit, then Gazprom will also be obliged to give this gas to consumers.

That is, there are no guarantees that if you pump gas into underground storage facilities, then they will buy it from you, and not take it away.

Therefore, it really makes no sense for Gazprom to be the owner and operator of these storage facilities. Now let the Europeans buy gas from him and pump it there already paid for, which they own.

The same is true for sales companies. Gazprom had contracts with them with discounts, which just allowed Germany to get cheaper gas than other Europeans. Now Russian counter-sanctions prohibit Gazprom from any economic cooperation with them, as well as from fulfilling obligations to them under completed transactions.

“SP”: – But this does not mean that we will stop selling gas?

– Of course not. But now Gazprom says: “Send some other companies. We will calmly sell them gas, but we can no longer sell gas to you, it is forbidden for us.” All this is spelled out in the contracts – force majeure.

Therefore, the Germans may well come in the face of some other companies, buy Russian gas, but at market prices. There will be no cheap gas. Because cheap gas was provided to them through mutual integration — i.e. we owned stakes in distribution companies, and the Germans owned stakes in mining projects in Russia. And since now this integration has gone backwards, what’s the point of giving them a discount…

Thus, due to the sanctions, Gazprom will sell its gas to Germany at a higher price. And sell more, since now it will not be him who will fill the gas storages, but, accordingly, some other structures. That is, in this regard, some formal losses of the Russian holding due to the fact that it has now ceased to be the owner of some assets, they will be covered by the fact that more gas will be bought from it.

“SP”: – I would like to understand who else will be able to fill the storage in Austria, except for “Gazprom”? What “other suppliers” is the chancellor talking about?

– Storage facilities, in principle, are not provided for one supplier. There should be competitive access to any underground storage facilities. And the fact that “Haidach” was filled by “Gazprom” just says that no one else had to fill this underground storage. Only Gazprom itself needed this.

Now, most likely, the storage near Salzburg will be transferred to some independent operator, and the buyer companies will store the gas there. That is, they will purchase gas from Gazprom, pump it there, and this fuel will be their property.

We are not talking about the fact that the gas storage should always belong to some supplier. Just the same, it is not the supplier who should pump into UGS facilities, but the consumer. He needs to prepare for the heating season, he needs to stock up on gas. The provider doesn’t need it. Gazprom did it simply out of the kindness of its soul, believing that if it pumps part of the gas into storage itself, then in winter there will be no need to maneuver with production and pumping. And to extinguish the growing demand due to the fact that he got it from underground storage facilities and sold it to European buyers, respectively.

Now there is no guarantee that you will keep this gas in underground storage facilities and that it will not be taken away. Therefore, this strategy no longer makes any sense.

“SP”: – In other words, the suppliers to whom the Austrians are ready to give “Haidach” are just intermediaries who will buy the same Russian gas and pump it into the same storage?

— Let’s put it this way, these are wholesalers who then sell gas to end consumers.

“SP”: – Austrian Energy Minister Leonore Gewessler recently admitted that gas supplies from Russia are uninterrupted and in normal volume. At the same time, the main UGS facilities of the country, as the media write, are not filled. Why?

The heating season has just ended. No one is in a hurry to pump gas into storage, because buyers expect prices to drop a little in the summer. That now is a certain crisis period, and then, perhaps, it will become cheaper.

In the meantime, prices are still very high: 1,000 cubic meters of gas costs more than a thousand dollars. For May, this is a record. Therefore, everyone hopes that the price will drop a little, and then it will be possible to start pumping gas into UGS facilities more actively.

In general, underground storage facilities are needed just to balance. Gas is expensive in winter because demand is high, but historically it has always been cheap in summer because demand has fallen.

That is, it was logical to buy cheap gas in summer and consume it in winter, since imports in winter were more expensive than those pumped into underground storage facilities in summer. And now, in many ways, the meaning of underground storage is lost – both in summer and in winter, gas is equally expensive. Therefore, the original meaning of UGS, it is gradually disappearing.

“SP”: – And what about the new scheme of payment for gas supplies – for rubles? Vienna, it seems, refused to pay in rubles …

– Not everything is clear here, because there are no official prohibitions either at the EU level or at the level of national governments to switch to payments with the participation of the ruble. That is, it is not prohibited. But Brussels continues to play up: first it says it is a violation of sanctions, then it is not a violation.

It is not for nothing that many countries are already demanding from the leadership of the European Union to decide and clearly state whether this will be regarded as a violation of sanctions or not. The answer, however, is not yet.

So let’s see what happens during May. At the beginning of the month, Gazprom was supposed to issue invoices for the gas delivered in April, which implies payment only through the ruble.

But the fact that the ruble is so strongly strengthened on the stock exchange means exactly that someone comes and buys the currency. That is, it changes the currency to rubles. And the Russian national currency is becoming more and more in demand.

Apparently, some companies still switched to ruble settlements. But, again, it is still difficult to say whether Austrian companies have switched or not, and to what extent. We still have to wait for an official statement from Gazprom.

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