by Hannes Hofbauer*
On 13 November 2024, an arbitration tribunal sentenced the Russian gas giant Gazprom to a fine of 230 million euros plus interest “under the rules of the International Chamber of Commerce” – as it reads on the homepage of the Austrian multinational integrated oil, gas and petrochemical company (OMV), headquartered in Vienna. On the same day, the OMV Executive Board announced its intention to offset this sum against currently outstanding receivables. This is out of the question for Gazprom, which is why the Russian company stopped supplying gas to OMV on 16 November.
What looks from a distance like a normal court dispute between financially strong companies is in fact the result of a long-term provocation against Russia by Austria’s largest partially nationalised company. In this way, Vienna wants to end a supply and purchase agreement for Russian natural gas to Austria that is valid until 2040 and a 57-year energy partnership between the two countries. The OMV lawsuit before the Court of Arbitration of the International Chamber of Commerce was deliberately planned and executed in a self-damaging manner.
SMV since 1945,
Soviet gas since 1968
In 1968, Austria was the first Western state to conclude a natural gas supply contract with the Soviet Union. The “Baumgarten an der March” deposit served as the hub for this. Located directly on the Slovakian border, the site was particularly suitable because crude oil and natural gas had already been extracted in the area – albeit on a much smaller scale. Pipelines were built from Baumgarten to Italy in 1974, to the Federal Republic of Germany in 1980 and to Hungary in 1996.
However, the Austrian-Soviet energy partnership goes back much further into the past. After 1945, Moscow took over small energy production sites in eastern Austria in accordance with the Potsdam Treaties, according to which German property could be confiscated for the purpose of reparations, and expanded these into a large company: the Soviet Mineral Oil Administration (SMV). After the withdrawal of the Allied troops, the company passed into the hands of the nationalised industry and became the Austrian Mineral Oil Administration. The SMV became the OMV. This is still partly state-owned today: 31.5 % of the public limited company is held by the Austrian state, 24.9 % by the Sheikhdom of Abu Dhabi.
In early June 2018, on the 50th anniversary of the Soviet/Russian-Austrian energy partnership, Alexey Miller, the CEO of Gazprom, and Rainer Seele, the CEO of OMV, signed an extension to the gas supply contract that has existed since 1968. In the presence of Russian President Vladimir Putin and Austrian Chancellor Sebastian Kurz, the simple signing ceremony turned into a celebration. The new agreement, which also included a purchase obligation in addition to the supply obligation, is valid until 2040, guaranteeing both partners long-term planning security. Even at this early stage, there was opposition to the contract renewal from EU circles, as Brussels had been engaged in a small economic war with Russia since 2014. EU member states were prohibited from exporting oil and gas production technologies to Russia, but the raw material itself was not yet affected by coercive economic measures.
The major economic war against Russia launched by the USA and the EU following the invasion of Ukraine by the Russian army also put increasing pressure on the Austrian-Russian gas contract. OMV boss Rainer Seele was the first to experience this. The German-born manager is known for his pragmatism and has repeatedly defended himself against morally charged anti-Russian political voices. As President of the German-Russian Chamber of Foreign Trade, he stood for continued economic exchange between East and West. At the same time as his contract as OMV CEO came to an end, the majority of the Group’s Annual General Meeting in 2022 voted against him. The representatives of the state and the shareholders from Abu Dhabi refused to exonerate their CEO in a highly unusual international move. In doing so, they followed the recommendation of “International Shareholder Services” – an American proxy advisory firm (what is not all there in this world). The accusation was that compliance rules had been disregarded, citing, for example, a sponsorship agreement with the Russian football club Zenit St. Petersburg. But the main focus was on the supply contracts with Gazprom. After a year of intense wrangling, the next OMV Annual General Meeting in June 2023 retrospectively expressed its confidence in Rainer Seele, who had already left the board, and discharged him.
Whatever the cost:
Get out of Russian gas
The anti-Russian battle then shifted to the courts – or more precisely, to various international arbitration tribunals. In January 2023, OMV filed a lawsuit against Gazprom at an arbitration tribunal in Stockholm because the Russian company had cut back and temporarily suspended its gas deliveries to Germany. Austria was not affected at any time. Amount in dispute: 575 million euros. In April 2024, Gazprom was able to successfully reject this claim through an arbitration tribunal in St. Petersburg. According to the Russian company, the supply difficulties were due to the European Union’s sanctions policy and cannot be attributed to Gazprom.
In fact, at the end of February 2022, in response to the Russian army’s invasion of Ukraine, Brussels put together several packages of sanctions against the Russian economy (Brussels launched a sweeping attack on the Russian economy with several packages of sanctions), including the freezing of USD 300 billion in Russian central bank funds and the exclusion of Russian banks from the SWIFT system. The German government had already prevented the commissioning of the completed Nord Stream 2 pipeline with bureaucratic manoeuvres. Russia saw itself pushed against the wall economically and – in order to increase the pressure on Germany and the EU – reported difficulties with the transport of gas through Nord Stream 1. A – real or fictitious? – turbine damage meant that only 60 per cent of the contractually agreed gas reached Germany, and later only 40 per cent. The Siemens turbine could only be repaired at the site in Canada, which meant that Ottawa refused to export it to Russia after the repairs had been completed – turbines were on the Canadian sanctions list. After German Economics Minister Robert Habeck obtained a special export licence, the Russian customs documents were a long time coming. In this way, the battle for Russian energy for Germany continued until 26 September 2022, when a naval unit – presumably from the USA – put an end to the German-Russian energy partnership by blowing up three of the four Nord Stream pipes.
On 13 November 2024, an arbitration tribunal of the International Chamber of Commerce awarded OMV 230 million euros plus interest as compensation for the losses suffered on the German gas market in 2022. On the one hand, this is remarkable because the sanctions machine against Russia was in full swing at the time and this arbitration tribunal was of course aware of this, but treated the “case” as if it had occurred in economic peacetime. Secondly, the supply shortfall in Germany does not affect the Austrian market in any way, nor does it affect the long-term supply contract, which runs until 2040. This makes it all the more incomprehensible that OMV’s executive floor announced the day after the arbitration court’s rule that it wanted to offset the 230 million euros against future gas deliveries to Austria. This approach is only understandable if it was deliberately designed to torpedo the Austrian-Russian energy partnership in this way. And this is precisely the rationality behind the provocative behaviour of the new OMV team and the government behind it as the owner’s representative.
Three days later, on 16 November 2024, Gazprom stopped supplying gas to OMV. This gave the latter an argument that Russia had broken the contract valid until 2040, which was probably the point of the whole flood of lawsuits.
In future, OMV will rely on LNG gas from the USA – contrary to its own philosophy of wanting to operate as sustainably and with as little CO2 as possible. This gas will be pumped up through the Alps via Italian ports and then flow back into the Baumgarten storage facility east of Vienna. There is also talk of intermediaries already being found to bring Russian gas – relabelled as Azerbaijani gas – to Austria via the pipeline, which has existed since 1968. Calculators are currently expecting price increases of 20 % in the coming year, which is being recognised by politicians and OMV. According to them, the fight against Russia must be worth it. •
(Translation Current Concerns)
* Hannes Hofbauer’s most recent publication is: “Im Wirtschaftskrieg. Die Sanktionspolitik des Westens und ihre Folgen. Das Beispiel Russland”; (In Economic War. The West’s sanctions policy and its consequences. The example of Russia); Promedia Verlag Vienna, 2024, ISBN 978-3-85371-533-8
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