Because Austria’s economy remains tied to Russia. Le Monde report
Austria still imports most of its gas from Russia. And the reluctance of the national economic sector to break with Moscow is not criticized by politics. Le Monde article
The figure came as a shock to Austria. In December 2022, ten months after the start of the war in Ukraine and despite calls from the European Union (EU) for an urgent exit from Russian gas, this prosperous country of nine million still imported more than 70% of its gas from Russia . This is almost the same percentage as before the war.
While the rest of the EU boasts that it has managed to reduce Russian imports from 50% to less than 15% of the total, and whole countries like the Czech Republic and Bulgaria have switched their supplies in a matter of months, the Austria, not a member of the North Atlantic Treaty Organization and fiercely attached to its neutrality, is clearly unable to keep up.
“[Throughout the year], our share of non-Russian gas in our imports has increased, thanks in particular to the additional supply contracts signed with customers in Norway and Italy,” defended Alfred Stern, managing director of the national energy company OMV, meeting with Le Monde on Wednesday 8 March for an interview that quickly became tense as we pressed the reasons for this Austrian exception.
According to him, the December 2022 figure is explained by the return to normality of Gazprom deliveries in the gas pipeline that opens on the border with Slovakia, "just before Christmas". “I don't know why,” he says, explaining that he is “forced to accept these deliveries under [their] contract.”
Austria is accused of supporting the Russian war effort
If the subject is so sensitive in Austria, it is because OMV is not the only large company to maintain close ties with Moscow, despite the war, sometimes giving the impression that the country remains economically dependent on Russia. In January, the second largest bank in the country, Raiffeisen, published a record profit of 3.6 billion euros for 2022. The problem is that 60% of these profits come from its Russian branch, for which the management assures that since the beginning of the war it has been "studying all options", including the sale, without having yet made a decision.
During the presentation of the results, the head of Raiffeisen Bank International (RBI), Johann Strobl, had to defend himself by saying that the new laws in force in Russia prevented him from easily selling the branch, which has more than two million customers, or also to repatriate the profits to Vienna.
Meanwhile, though, the Austrian bank is taking full advantage of being one of the last Western financial institutions to maintain a presence in Russia, alongside Italy's UniCredit – Société Générale sold its subsidiary in May. For example, it now handles 30% of all transfers to and from Russia through the Swift system.
"Many Russian banks were excluded from Swift, which mechanically increased the market share of Western banks," says a spokeswoman for a group that says its priority is to "preserve its financial integrity and stability." This stance has resulted in RBI being routinely accused by the Ukrainian government of supporting the Russian war effort.
“The contracts do not contain a termination clause”
In January, she even received a questionnaire from the US Treasury asking her to justify her actions in Russia. But, like all Austrian companies, RBI and OMV ensure that they apply European sanctions to the letter. Has Austria not experienced a slowdown in exports to Russia as a result of EU sanctions?
Yes, but the volume of imports doubled in 2022. Due to soaring gas costs, Austria paid Gazprom more than 7 billion euros, a record amount. OMV head Alfred Stern hides behind contract with Russian gas company to justify being the last in the EU to maintain such a level of dependency, alongside Hungary, led by pro-Russian Viktor Orban .
“We don't have an immediate legal option to get out, because unfortunately the contracts don't contain a termination clause,” Stern insists. Even unexplained variations in delivery levels in recent months, or the fact that Gazprom has requested – and received – payments in rubles, would not be enough to break a contract whose contents are kept top secret. The Austrian chancellor himself, the conservative Karl Nehammer, assured at the end of February that he "did not know" its contents.
An argument that surprises Gerhard Mangott, political scientist specializing in Russia at the University of Innsbruck. “Nehammer's government has certainly taken a clear position in favor of Ukraine, relations with Russia have cooled down, but in practice, economic and political players seem to want to maintain their positions on the Russian market and hope that the war will end soon to ease the pressure."
“Russian gas dogma has not yet disappeared”
“All this gives the impression that the Russian gas dogma in Austria has not yet disappeared. And that there is hope that the war will end soon and that the caravan passes again,” agrees Herbert Lechner, head of the Austrian Energy Agency's science department and author of a highly critical study of Vienna's strategy of dependence on Russian gas.
Historically, Austria was the first country west of the Iron Curtain to conclude a gas import agreement with the USSR, in the 1960s. Since then, Russia has become the main gas supplier. Since then, Russia has become the main source of gas – up to 80% in some years – even though Moscow has regularly used gas "as a political and economic weapon," says Lechner in his study, in which he recalls that Vienna she had already refrained from criticizing the crackdown on the "Prague Spring" in 1968.
Vienna's reputation as a bridge between East and West began during the Cold War and continued after the fall of communism. Behind its neutrality, the central European country has always welcomed Russian leaders, including Vladimir Putin, with open arms. The most striking episode was the appearance of the Russian president at the wedding of former foreign minister Karin Kneissl, close to the far right, in 2018. Is this a coincidence? In the same year, the contract between OMV and Gazprom was extended until 2040.
Few criticisms
Although the green-conservative government in power since 2019 has promised that this era is over and that Austria will get rid of Russian gas "in 2027", OMV refuses to commit itself to this deadline, hiding behind the famous contract. “We have said that Russia can no longer be a core region for our business and that we will no longer invest there,” promises Stern.
The reluctance of the Austrian business sector to break with Moscow may be met with some criticism from the Conservatives' minority partners, the Greens, but they are weak compared to the rest of the political landscape. The powerful far-right opposition has been fighting for months to lift all sanctions against Moscow. While the conservatives obviously want to spare their business champions: Owned by a network of regional banks, Raiffeisen has always been known for its proximity to Nehammer's Austrian People's Party (ÖVP).
Appointed by this party, the Foreign Minister, Alexander Schallenberg, openly defended the bank on Monday 6 March, criticizing "those who point the finger at it", while "it is being used by many Western states and companies to liquidate their commercial activities residues” in Russia.
"Arguing that it is possible to isolate Russia economically like North Korea is an aberration," added the professional diplomat. As for the management of OMV, which is more than 30% state-owned, Alfred Stern still refuses to criticize his predecessors for their all-Russian strategy.
One of them, Richard Schenz, who led the company in the 1990s before founding and chairing several associations promoting economic relations between Austria and Russia, died suddenly at the age of 83 in early March. The Austrians learned of the death of this pillar of the local business community through a tweet from the Russian embassy in Vienna.
(Excerpt from the press release of eprcommunication)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/austria-russia-economia/ on Sat, 18 Mar 2023 06:16:03 +0000.