Already days before the July 22 European "Doomsday" when the scheduled Russian 10-day maintenance of the crucial Nord Stream pipeline to Germany is slated to end - but which was thrown into deep doubt given Gazprom recently said it can no longer guarantee its "good functioning" due to crucial turbines being previously held up in Canada related to sanctions - the Russian energy giant has declared Force Majeure to one major European customer.
Simply put, Gazprom declared extraordinary and extreme circumstances to void itself from all contractual obligations to this customer, thus the gas will stop flowing indefinitely, as Reuters reports in a breaking development Monday, "Russian gas export monopoly Gazprom has declared force majeure on gas supplies to Europe to at least one major customer starting June 14, according to the letter seen by Reuters." The letter is dated July 14. "It said the force majeure measure, a clause invoked when a business is hit by something beyond its control, was effective from deliveries starting from June 14," writes Reuters.
The letter invoked "extraordinary" circumstances outside the company's control, Reuters continues, citing a source saying the customer in question is Germany via the Nord Stream 1 pipeline.
And Bloomberg is also confirming:
- GAZPROM SENT FORCE MAJEURE NOTICE TO AT LEAST 3 BUYERS
- GAZPROM FORCE MAJEURE NOTICE APPLIES TO FLOWS FROM JUNE 14
- UNIPER SAYS IT HAS RECEIVED LETTER FROM GAZPROM EXPORT IN WHICH COMPANY RETROACTIVELY CLAIMS FORCE MAJEURE FOR PAST AND CURRENT SHORTFALLS IN GAS DELIVERIES
- UNIPER: WE CONSIDER THIS TO BE UNJUSTIFIED AND HAVE FORMALLY REJECTED FORCE MAJEURE CLAIM
As we've been detailing, German authorities have of late taken unprecedented steps in anticipation of an enduring Russian gas halt, essentially dimming the lights across the country - which has included everything from limiting hot water, to shutting down swimming pools, to quite literally dimming city street lights as it entered "alarm" stage over dwindling supply.
And as demonstrated in the Monday morning oil price spike (below: WTI crude futures for September), the bid for oil will remain strong the longer the force majeure holds, given utility companies and the manufacturing sector are likely to seek transition to oil from gas...
It seems this letter declaring its legal release from supply obligations going back to June 14 is in preparation for definitive action on July 22, namely that the pipeline's operations are likely to remain suspended past the scheduled reboot/supply back online designated date.
In an analysis from earlier this month (available to pro subscribers), UBS economists laid out a detailed vision of what they see happening if Russia halts gas deliveries to Europe: It would reduce corporate earnings by more than 15%. The market selloff would exceed 20% in the Stoxx 600 and the euro would drop to 90 cents. The rush for safe assets would drive benchmark German bund yields to 0%, they wrote.
Meanwhile the Paris-based International Energy Agency (IEA) is still even amid this "red alert crisis" for Europe bizarrely focused on responding to the emergency in a way "consistent with the EU’s climate ambitions"... this as Germany and other European populations are about to clearly enter an extremely difficult winter, to put it mildly.
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