Austria and the Indecision for the Gas Embargo

PeopleOther ♦ Published: May 3, 2022; 20:41 ♦ (Vindobona)

The war in Ukraine has been raging for two months. To stop Russia, a great many countries have imposed tough sanctions on Russia. Many European countries and the U.S.A. want to impose a gas embargo on Russia. Austria is still very cautious about this step.

Austria is still very cautious about imposing a gas embargo. / Picture: © Gazprom

To counter Russia's aggression against its neighbor Ukraine, many countries have imposed tough sanctions on Russia. These sanctions are doing enormous damage to the Russian economy and thus to Russia's war effort. Many European countries and the U.S. want to impose a gas embargo on Russia. Austria is still very reluctant when it comes to the gas embargo.

In Austria itself, politicians are undecided. Many political representatives and representatives of business, industry and politics are not yet in agreement about the gas embargo.

EU Commission circles indicated that an Oil embargo is coming. The EU member states had discussed the sixth round of sanctions against Russia due to its aggression against Ukraine.

Germany and Austria now want to join in this Oil embargo. "Austria is prepared to consistently support an oil embargo," assured Austria's energy minister, Leonore Gewessler from the Austrian Green party.

In Austria, for example, 7.8 percent of imported crude oil comes from Russia. Most of the 7.6 million tons that Austria imports annually come from Kazakhstan and Libya. In addition, the partly state-owned energy company OMV, which also has a gas supply contract with Gazprom, recently announced that it has imported virtually no oil from Russia since the start of the war.

But many fear that this Oil embargo will be the first step to a Gas embargo.

After Russia cut off gas to its previous major customers in Poland and Bulgaria, the nervousness in the business and political communities of Austria and especially Salzburg has increased significantly.

Austrian government in favor of oil embargo

Austria does not oppose an import ban on Russian oil. Leonore Gewessler (Greens), Austria's energy minister, said Monday that her country is ready to support an oil embargo if the EU Commission and member states decide in favor of doing so. However, some countries still oppose the embargo. By Wednesday at the latest, the EU Commission wants to present its proposal for a new package of sanctions against Russia.

Austria believes that, unlike in the case of gas, an embargo on Russian oil would not hit most EU countries so hard.

For Russia itself, it is assumed that oil exports are almost more important than gas exports. With 512 million tons of crude oil exports, Russia is the world's second-largest crude oil exporter after the U.S.A. and ahead of Saudi Arabia. In the previous year, this brought 178.9 billion euros to the Russian state. Half of the exports go to Europe, primarily to Germany, but also to Hungary and Slovakia.

But yet Gas seems to be still a highly discussed topic and the situation remains somewhat unchanged. Many fear that the Oil embargo is just the first step to a Gas embargo.

New developments in Austrian energy supply

Entrepreneurs in Austria and Europe started searching for alternative sources of energy when they are concerned about energy supply security. Additionally, oil trader Franz Leikermoser confirms that quite a few medium-sized companies and large industrial enterprises are already making preparations for a possible gas lockdown. They are also considering long-term contracts for oil supply."

Salzburg's industry is vehemently against the gas embargo The same applies to numerous industrial companies in Salzburg, says Peter Unterkofler of the Federation of Austrian Industries: "We cannot do without Russian gas. That is why there is a very clear desire in Europe to get away from this boycott idea. Other countries may be in a different position. But Austria cannot do without Russian natural gas."

As reported, Austrian companies are also preparing for the uncertain future: one of the largest Austrian energy companies, Wien Energie, plans to invest one billion euros in the coming 5 years to phase out outgas. With massive investments in geothermal energy, large heat pumps and the expansion of photovoltaics and wind power, Austria's largest energy service provider wants to end its dependence on fossil fuels step by step.

Austrian government on the Gas embargo

"Energy supply security is a major concern for us. In the Council of Ministers, we have made provisions for this, because legal framework conditions are needed. In addition, the appropriate storage facilities and the availability of gas volumes in terms of pipeline flow must be organized," reported Chancellor Karl Nehammer in the press foyer after the Council of Ministers, which he held together with Energy Minister Leonore Gewessler and Agriculture Minister Elisabeth Köstinger.

Austria now already fears an increase in the price of gas and wants to prepare for the next winter and fill the gas storage facilities.

Leonore Gewessler, Austria's energy minister, says the Russian war of aggression makes Austria's dependence on Russian energy imports painfully obvious. The minister explained, "Our natural gas supply is 80% Russian. That puts us under pressure."

"The supply of natural gas to our country depends on Russia. In recent days, gas has been continuously supplied and also stored. Currently, gas is flowing to Austria without interruption. The levels in Austrian storage facilities have increased significantly," Minister Gewessler said.

However, this is not a sign of secure supply since these reserves will be consumed eventually. As a result, the federal government has drawn up emergency plans in case Russia restricts or interrupts gas supplies to Austria. The consequences would be far-reaching, from production declines to economic damage to short-term jobs.

"These are effects that no one in our country wants. That's why we are doing everything we can to prevent such a situation. Today, the federal government decided in the Council of Ministers that Austria's natural gas storage facilities must be at least 80 percent full by the start of the next heating season," the energy minister informed. Several steps have already been taken in this direction with the strategic gas reserve. The Austrian sub-area manager can then purchase and store gas on behalf of the federal government.

Developments in other countries show that the gas embargo is coming. It is also possible that Russia will turn off the gas tap itself in order to exert pressure against the West. Energy security is an important issue and must be clarified. Austria will have to make a decision, otherwise, Russia will do it for Austria.