gazprom's grave legacy: Global traders try to make money on the Ukraine war
A legal confrontation is brewing in Europe, which may cost the German company 1 billion euros
The European gas market, which was created with the dominant participation of gazprom, went haywire after February 24. The state of uncertainty and tectonic shifts on it is now being used by the largest among international commodity traders to make money on the war in Ukraine and strengthen their impact on the political processes defining the shape of regional energy security. Among their instruments are audacious gas wars.
One of the gas fronts is now unfolding following the initiative of the trading giant Vitol Group. This company, along with other things, was involved in partnership projects with Ukrainian businessman Viktor Pinchuk.
What is the point of the conflict? Vitol and the German energy company Securing Energy for Europe (SEFE), formerly known as Gazprom Germania from the russian gazprom empire, are arguing about gas. 1 billion euros is at stake.
The trading company claims to have the right to cease supplying gas to SEFE as early as this week due to the change of ownership that occurred in April. Back then, as a result of anti-russian sanctions of the West, gazprom refused to fulfil the terms of the contract in force, and the German government nationalised russian assets.
In response, the German-controlled trader SEFE filed a lawsuit against Vitol in a London court to avoid losses and breaking contractual duties to consumers in the UK where it trades gas.
Last week, according to Bloomberg, a London judge rejected an urgent request by SEFE to block Vitol's actions and said that hearings in the case could continue in February or March.
How might the conflict end? There is a chance that the opposing parties will settle the dispute themselves. In any case, they have been already negotiating, trying to work out the terms. The goal is to prevent a reduction in gas supplies, which may entail 1 billion euros losses for the German supplier.
"Suspension of gas supplies to Vitol is not unavoidable. SEFE refutes the legality of the announced suspension and will continue to deny it by all available channels," a SEFE spokesman confirmed in an emailed comment to Bloomberg. A Vitol representative declined to comment.
What can this bring about? If Vitol stops supplying gas, SEFE will have to compensate for the missing purchases on the spot market at much higher prices than those in the actual contract with the trading giant. This bears risks for German taxpayers and SEFE customers (we are talking about supplying gas by pipeline from Germany to the Great Britain).
"The valid contracts with Vitol were signed when market prices were much lower," SEFE said in a statement. The firm "will continue to appeal against the legality of eventual termination of gas supplies through all available channels". Otherwise, it will aggravate the crisis in the European industrial sector that has already suffered due to russian aggression.
What do officials say? The German regulator BNetzA which oversees SEFE, refused to comment on the Vitol incident referring to the court proceedings. "It is about the safety of supplies to Europe," their press service said.
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