Ukraine war: Portsmouth City Council set to scrap decision to ditch Russia's Gazprom as energy supplier after it is taken over by Germans

PORTSMOUTH City Council is set to U-turn on plans to end a £5.5m gas supply contract with Gazprom after the subsidiary responsible for its UK operations was taken over by the German energy regulator.

By Josh Wright
Tuesday, 14th June 2022, 10:51 am

In response to the invasion of Ukraine, the council confirmed it would use a break clause to terminate the contract with Gazprom Marketing and Trading Ltd which, until April 4, was wholly-owned by the Russian government.

Next Tuesday (June 21) the council's cabinet will be asked to abandon this decision, which was expected to cost millions of pounds.

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The logo of Russia's energy giant Gazprom is pictured at one of its petrol stations in Moscow Picture: Kirill Kudryavtsev / AFP via Getty Images

'The imperative that existed to end the contract in March no longer exists as, in so far as can be reasonably ascertained, no money from the contract is flowing back to the Russian state,' a report by the council's head of energy services, Andrew Waggott, says. 'The change of shareholder of Gazprom M&T and the control of Gazprom Germania by the German Federal Network Agency breaks the link between the contract and Russia.

'Terminating the contract with Gazprom M&T will have an inevitable cost increase to the council which cannot be quantified, but it will result in a negative effect.'

It add that Gazprom M&T neither has contracts to buy Russian gas and that Gazprom Germania, its parent group, is unable to buy Russian gas due to sanctions.

Under German law, the company can only be seized for a six-month period although this can be extended indefinitely. Mr Waggott's report says it is ‘extremely unlikely’ it would cede control back to the Russian government.

And it adds that the decision of the US government to remove sanctions on It can be reasonably inferred from the US removal of sanctions on Gazprom Germania implied 'they are satisfied that the link with the Russian state has been severed'.

Several councils have said in recent weeks that they will no longer be able to end similar contracts, including Eden District Council which said German control over the company was the reason for doing so.

However, its leader, councillor Gerald Vernon-Jackson said a replacement contract would have cost about £1m a year more due to the rising cost of gas.

'It was absolutely right that we sent the really clear message to the Russian government that we would not send them any money as a result of their invasion of Ukraine,' he said. 'But with the German government stepping in and that is no longer an issue and we are also able to save a substantial sum of money.’

Before the war, the London-based arm of Gazprom, the world's largest natural gas company, provided more than a fifth of commercial gas in the UK and worked with a number of public bodies.

Gazprom has several links to Russian president Vladimir Putin, who returned it to state control when he came to power in 2000.