No Guarantee of Gas Supply for Europe

According to a letter seen by Reuters, Gazprom of Russia has informed its European customers that it cannot guarantee gas supplies due to "exceptional" conditions, upping the ante in an economic tit-for-tat with the West over Ukraine invasion by Moscow.

In a statement dated Thursday, July 14, Russia said that it has retroactively declared force majeure on supply since June 14.

The announcement comes as 10 days of yearly maintenance on Nord Stream 1, the major pipeline carrying Russian gas to Germany and beyond, are set to end on Thursday, July 21.

The letter increased concerns in Europe that, in retaliation for sanctions placed on Russia due to the war in Ukraine, Moscow may not reopen the pipeline at the conclusion of the repair period, escalating an energy crisis that may push the area into recession.

Force majeure, also referred to as an "act of God" provision, is a common clause in business contracts that describes extraordinary events that absolve one party from legal duties. The announcement doesn't necessarily imply that Gazprom will stop making deliveries; rather, it just states that it shouldn't be held accountable for breaching contract obligations.

Russian gas exports through key routes, such as through Ukraine and Belarus as well as the Nord Stream 1 pipeline under the Baltic Sea, have been dropping for a while.

“This sounds like a first hint that the gas supplies via NS1 will possibly not resume after the 10-day maintenance has ended,” said Hans van Cleef, senior energy economist at ABN Amro.

“Depending on what ‘extraordinary’ circumstances have in mind in order to declare the force majeure, and whether these issues are technical or more political, it could mean the next step in escalation between Russia and Europe/Germany,” added van Cleef.