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    Uniper to terminate long-term Russian gas contracts


This decision follows an arbitration tribunal's ruling on June 7, granting Uniper the right to terminate the contracts and awarding it over €13bn ($13.95bn) in damages. [Image: Uniper]

by: Shardul Sharma

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Natural Gas & LNG News, Europe, Security of Supply, Corporate, Political, News By Country, Germany, Russia

Uniper to terminate long-term Russian gas contracts

Germany utility Uniper has decided to terminate its long-term Russian gas supply contracts and end its relationship with the Russian state-owned company Gazprom, it announced on June 12.

This decision follows an arbitration tribunal's ruling on June 7, granting Uniper the right to terminate the contracts and awarding it over €13bn ($13.95bn) in damages for gas volumes not supplied by Gazprom Export, a Gazprom unit, since mid-2022.

Despite limited gas deliveries since June 2022 and none since late August 2022, the long-term contracts between the two companies were still legally binding, with individual contracts set to last until the mid-2030s. Uniper, having suffered losses due to the supply restrictions, initiated arbitration proceedings against Gazprom Export at the end of 2022. The tribunal, seated in Stockholm and ruling under Swiss law, provided a final and legally binding resolution.

“This ruling provides legal clarity for Uniper. With the right of termination that we received in the arbitration ruling, we are ending the contracts with Gazprom Export. Uniper's legal position was also confirmed on the issue of damages,” said Michael Lewis, CEO of Uniper. “Any amounts would flow to the German federal government. From today's perspective, it is not yet clear whether significant amounts are to be expected.”

Uniper inherited these contracts from its predecessor companies when it was founded in 2016. Since the 1970s, these contracts have been central to the German-Russian energy partnership. Gazprom Export had reduced and eventually ceased gas supplies to Germany from June 2022 onwards, although these supplies are not sanctioned by the EU.

Due to the supply disruptions, Uniper had to procure gas for its customers through alternative sources, often at “extremely high” market prices, leading to additional costs covered with state support, the company stated. Uniper's insolvency was averted by a stabilisation agreement in December 2022 and the German federal government becoming its main shareholder.

“Our termination of the contracts with Gazprom Export is the latest in a series of consistent decisions over the last three years,” Lewis said. “During this time, Uniper has written off its share in the financing of the Nordstream 2 pipeline, divested its stake in the Russian subsidiary Unipro, and allowed its coal supply contracts with Russia to expire. Since then, Uniper has worked hard to diversify its gas business and is now well positioned with its global LNG portfolio and pipeline gas supplies from various regions.”

In its pursuit of energy diversification, Germany has actively sought new suppliers following Russia's invasion of Ukraine in February 2022, which marked the end of Germany's dependence on Russian gas.