Austria to Traders: Don’t Bank on Russian Gas Transiting Ukraine

Jonathan Tirone
·2 min read

(Bloomberg) -- Austria’s top energy official has a message to natural gas traders: don’t bank on Russian fuel continuing to flow into the European Union via Ukraine.

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Traditionally one of the Kremlin’s best and oldest gas customers in central Europe, Austria is redoubling efforts to reduce its reliance on Russia shipments, which still cover more than half the country’s demand. Much of the fuel transits pipelines crossing Ukraine, but that could change quickly, Energy Minister Leonore Gewessler said.

“We have a pipeline that goes through an active war zone,” she said an interview. “Deliveries could stop anytime. We have to be prepared.”

Benchmark European gas prices have risen more than 40% since Gerhard Roiss, the former chief executive officer of OMV AG and an adviser to Gewessler, warned early in June that it’s unlikely Ukraine and Russia will prolong their transit agreement once it expires in 2024. That deal was brokered by the EU in 2019 and there’s no guarantee that either Ukraine or Russia will ask the bloc to find a solution, Gewessler said.

“But even without a transit agreement, gas can be transported,” the minister said, adding that the agreement between Ukraine and Russia is “only one part of the equation.”

Austria maintains one of Europe’s deepest connections to Russian energy. At the height of the Cold War in 1968, it became the first nation to the west of the Iron Curtain to buy then-Soviet gas. Russian producer Gazprom PJSC covered about 80% of Austrian demand at the start of the Ukraine conflict, but that’s dropped closer to 50% over the past 18 months.

“We managed to get the dependency down significantly, but without the question it’s still too high,” Gewessler said.

Gewessler, 45, said her ministry will be working at “high speed” over the next couple months to mitigate the risk of winter fuel shortfalls. Those initiatives range from enlarging storage capacity, to booking alternative pipeline routes and reducing consumption.

Longer-term energy security will only come with kicking fossil fuels altogether, said Gewessler, who’s also a member of the government team reviewing the neutral nation’s defense strategy.

“Conventional war back in Europe necessitates we rethink our security policy in broader terms,” she said. “We see that energy deliveries have become an instrument in this conflict. And so energy independence and the energy transition become a matter of national security.”

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