Russia economy crisis intensifies as Kremlin energy row sends gas price surging

Putin is facing a number of serious economic problems (Image: Getty)

Gas prices have surged after a long running dispute between Russia's Gazprom and a major European client intensified following a court case ruling in a move that could pile the pressure on the country's already fragile exconomy.

Dutch front-month futures – the benchmark contract used in Europe – soared by as much as 5.4% on Thursday, as markets reacted to the news.

The Austrian energy company OMV has been in dispute with the Kremlin-owned Gazprom over disruptions to gas supplies in the wake of Russia's 2022 invasion of Ukraine.

OMV won an arbitration case this week which resulted in an award of €230m (£190m) in compensation.

Gazprom is highly unlikely to pay the money owed, due to the imposition of Western sanctions on the company.

A Gazprom facility close to Ukraine border (Image: Getty)

Consequently, OMV hinted it would seek payment in kind by withholding money it owes to Gazprom for current deliveries of gas.

Markets are afraid this could result in Gazprom retaliating by stopping future deliveries of gas to Europe.

Austria's energy minister exacerbated those fears in a post to her X social media account.

"Austria can and will manage without Russian gas," Leonore Gewessler wrote.

"Nevertheless, it is clear that a sudden interruption in supply could cause tension on the gas markets.”

Gas prices exceeded €46 per megawatt hour on Thursday for the first time since November last year.

Since February, prices have nearly doubled and have risen by more than a third since the middle of September amid concerns about supplies.

Market jitters have been stoked by uncertainty over whether Russian gas supplies sent through Ukraine will continue after a transit deal between the countries expires next year.

The dispute with OMV could mean flows through that route decline before the end of the contract.

Austria still relies heavily on Russian gas for its energy supplies, despite trying to find alternative sources.

A German DIW study published in May put the share of Russian gas in annual Austrian usage at 95 percent compared with 14 percent in the rest of the EU.