Germany’s leading utility company Uniper has opened arbitration proceedings as it seeks a multi-billion euro compensation payment from Russian gas giant Gazprom for failing to deliver contractual gas volumes.

The claim filed with an international arbitration chamber in Stockholm, Sweden, is the first such move from a European company after Gazprom started reducing gas supplies to the continent in the fourth quarter of 2021, leading to unprecedent increases in gas prices.

Uniper said it is seeking to recover damages incurred by having to buy “replacement gas” from other suppliers after Gazprom subsidiary Gazprom Export reduced gas deliveries below the minimum contracted volume in June this year.

German Uniper said that the lack of gas deliveries from Gazprom Export led to it carrying “the entire replacement costs”.

“These gas replacement costs alone, currently amount to at least €11.6 billion ($12.1 billion) and will continue to grow until the end of 2024,” Uniper said.

Gazprom has not commented on Uniper’s arbitration announcement, but has repeatedly said it “had been fulfilling all gas supply orders” from its European customers.

In September, the German government nationalised Uniper after the company’s financial situation had continued to deteriorate, despite a €15 billion stabilisation package provided in July.

Uniper chief executive Klaus-Dieter Maubach said: “We incurred these costs, but they are not our responsibility. We are pursuing these legal proceedings with all due vigour. We owe this to our shareholders, our employees and the taxpayers.”

The German company resolved to take the arbitration action against Gazprom, despite the risk of angering Russian authorities.

The Russian government has yet to approve Uniper’s plan to sell its Russian energy generating subsidiary Unipro to a local buyer in the country.

Uniper has not revealed the name of the buyer, but said the deal was agreed in September.

The German company will now take unilateral steps to “further distance itself as far as possible, legally and in terms of personnel, from Unipro”, it added.

Earlier this year, Gazprom threatened stop paying for Ukrainian gas producer and importer Naftogaz Ukrainy’s remaining gas transit deliveries unless the company withdrew its Swiss-filed arbitration claim against the Russian gas giant.

Demand adjustment claim

Gazprom said in a statement on Thursday that its total gas exports this year plummeted by 76.3 billion cubic metres — almost 45% — to 95.2 Bcm between January and November, compared with the same period in 2021.

In early September, Gazprom put a complete halt on gas shipments via the Nord Stream 1 subsea pipeline to Germany, claiming international sanctions imposed following Russia’s invasion of Ukraine in February had prevented proper maintenance of equipment on the Baltic Sea coast pumping station.

The decision closed off the supply of about 160 million cubic metres per day of gas from Russia to Germany.

Gazprom currently maintains estimated gas flows of about 74 MMcmd to Europe, excluding Turkey, via pipelines running across Ukraine and across the Black Sea to Turkey and Bulgaria.

Of that volume, about 5.7 MMcmd is being supplied to Moldova, leaving about 68.3 MMcmd for other European countries.

This rate would translate to deliveries to Europe of between 24.5 Bcm and 25 Bcm per annum.

In 2019, Gazprom delivered about 132 Bcm of gas to Europe, according to its financial report for the fourth quarter of that year.

Gazprom said it only acted to reduce its supplies to the continent because this year “demand for gas fell by 50 Bcm in 27 European countries and by over 6 Bcm in the UK”.