Finnish Gasum terminated gas supply contract with Gazprom

The Finnish company Gasum on May 22 terminated a long-term contract withGazprom export” (a structure of Gazprom) for the supply of pipeline gas a year after its suspension, according to the Gasum website. At the same time, the long-term contract between Gasum and Gazprom Export for the supply of liquefied natural gas (LNG) to Finland remains in force.

“The parties will continue to agree on the details of terminating the contract. Gasum will not comment on these details,” the company said.

In 2021, Gazprom supplied Gasum with 1.49 billion cubic meters. m of gas, or 2/3 of the total gas consumption in Finland.

The Finnish company recalled that in April 2022, Gazprom Export demanded that payments for gas supplies be made in rubles, and not in euros specified in the agreement. Gasum did not agree to this demand, and the parties also had “substantial disagreements regarding certain other requirements put forward on the basis of the contract.” As a result, in May last year, Gazprom Export stopped supplying fuel to Finland, and Gasum referred the case to arbitration in Stockholm “in accordance with the contract.”

The Arbitration Court decided last November that Gasum was not obliged to pay for gas in rubles using the procedure proposed by Gazprom. The arbitration also ordered the parties to continue negotiations on the contract to resolve the situation.

In addition, the arbitration ordered Gasum to pay “Gazprom exports” of 300 million euros, including debt for gas supplies, payments in connection with the failure to fulfill the obligation “take-or-pay” (take-or-pay) and interest on late payments, Gazprom reported on November 17. The company noted then that the arbitration recognized the issuance of a decree of the President of Russia on the transition to rubles as force majeure and thus confirmed the legitimacy of suspending gas supplies if the importer refuses to pay in rubles.

“Negotiations between Gasum and Gazprom Export have now been completed. The parties failed to resolve the situation within the time limit determined by the arbitration court, and therefore Gasum terminated the long-term contract for the supply of natural gas with Gazprom Export on May 22, 2023,” the company added.

In the spring of 2022, Russian President Vladimir Putin signed a decree obliging unfriendly countries that joined the anti-Russian sanctions because of the NWO in Ukraine to pay for Russian gas supplies in rubles. To do this, importing companies had to transfer payment in the currency of the contract to Gazprombankwho then converted it into rubles and transferred them to the Gazprom account.

Many European companies, including Gasum, abandoned such a scheme, after which Gazprom stopped supplying them with fuel. As a result, importers began to file claims in arbitration, demanding a penalty for non-fulfillment of the contract. Following Gasum at the end of November last year, the CEO of the German Uniper, Klaus-Dieter Maubach, announced that the company had filed a lawsuit in Stockholm. The company demanded to recover 11.6 billion euros from Gazprom Export for the undelivered gas since June. In February of this year, the Czech CEZ filed for arbitration due to shortages of gas supplies in 2022. On May 19, the Polish EuRoPol GAZ, the operator of the Polish section of the Yamal-Europe gas pipeline, also applied to arbitration at the Stockholm Chamber of Commerce. The company wants to recover about $1.4 billion from Gazprom for the suspension of gas supplies through the pipeline.

In addition, other factors also affected the volume of pipeline gas supplies from Russia to Europe last year. In May, Ukraine refused to accept Gazprom’s bids for pumping gas through its territory through one of the two gas measuring stations (GMS), which led to a halving of supplies through the country (on May 22, Gazprom’s bid was 40.9 million cubic meters). Nord Stream 1 and the yet-to-be-launched Nord Stream 2 suffered (were blown up) as a result of sabotage in September 2022. Gas deliveries to Europe continue along a branch from the Turkish Stream, according to data as of May 22, over the past day, pumping along this route amounted to 22.1 million cubic meters. m.

After the termination of the contract, Gasum and Gazprom may discuss the terms of paying a fine in connection with the termination of the contract, compensation for losses and expenses, as well as repayment of the debt for the gas supply, Forward Legal lawyer Oleg Sheikin explains. According to him, negotiations on such large contracts take “at least several months.”

If negotiations reach an impasse, new lawsuits from Gazprom as a fuel supplier are not ruled out, says Yury Fedyukin, managing partner at Enterprise Legal Solutions. Sheikin clarifies that, by default, the proceedings should take place in the arbitration of Stockholm, but if desired, Gazprom can take advantage of changes in Russian legislation and transfer proceedings to a Russian court.

According to Sheikin, other companies importing Russian gas may follow the example of Gasum. This will depend on the terms of the contract and the situation of the particular buyer, he added. “In itself, Gasum’s rejection of the contract with Gazprom does not make other contracts of the Russian company vulnerable,” the lawyer believes.

Kirill Rodionov, an expert at the Institute for the Development of Technologies in the Fuel and Energy Complex, notes that Gazprom played a key role in gas supply to Finland. From 2016 to 2020, the company supplied the country with 2.32 billion cubic meters. m of gas per year with an average consumption of 2.38 billion cubic meters. m, he adds. Other sources of gas for Finland are the Balticconnector gas pipeline with a capacity of 2.62 billion cubic meters. m per year, according to which gas is supplied from a storage facility in the Latvian Inčukalns, and a floating LNG regasification unit FSRU Exemplar with a capacity of 5 billion cubic meters, which has been in use since 2023. m per year.

Vedomosti sent a request to Gazprom.