Uniper gas storage

German headquartered energy company Uniper decided on 12th of June 2024 to terminate its long-term Russian gas supply contracts and thus legally ended the long-term gas supply relationship with the Russian state-owned company Gazprom Export.

The decision was made possible after an arbitration tribunal on 7th of June 2024 awarded Uniper the right to terminate the contracts and awarded it an amount of more than €13 billion in damages for the gas volumes not supplied by Gazprom Export since mid-2022.

Although only limited gas volumes had been delivered since June 2022 and no gas volumes since the end of August 2022, the long-term gas supply contracts between the two companies were still legally in force and individual contracts would have continued to exist until the mid-2030s.

After Uniper suffered substantial losses due to the Russian gas supply restrictions, the company initiated arbitration proceedings against Gazprom Export at the end of 2022. The option of dispute resolution via an arbitration tribunal was contractually agreed and had in the past in respect of other disputes been invoked repeatedly by both sides. The tribunal, seated in Stockholm, ruled in accordance with Swiss law and the arbitration ruling is legally binding and final.

Uniper took over and continued the contracts from its predecessor companies when it was founded in 2016. Since the 1970s, the contracts have formed the core of the German-Russian energy partnership. From June 2022, Gazprom Export initially supplied less natural gas to Germany and then none, although such supplies to this day are not sanctioned by the EU. Uniper had to procure gas for its customers by other means, in some cases at extremely high market prices, which at times led to additional costs for Uniper in the hundreds of millions of euros every day. Uniper was only able to bear these additional costs with state support. Uniper’s insolvency was averted with the stabilization agreement of December 2022 and the entry of the federal government as the main shareholder in Uniper.

“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. 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,” says Michael Lewis, CEO of Uniper, who adds that “Our termination of the contracts with Gazprom Export is the latest in a series of consistent decisions over the last three years. During this time, Uniper has written off its share in the financing of the Nordstream 2 pipeline, 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.”

Source: Uniper