Gazprom warns Europe of potential supply halt, makes $40B deal with Iran

A day after Reuters reported Russian state gas monopoly Gazprom had warned customers in Europe of a potential halt in its oil supply, the company penned a $40 billion memorandum of understanding with an oil company in Iran. The deal with the National Iranian Oil Company (NIOC) was reported on by Iran’s oil ministry’s news agency SHANA.

Under the deal, Gazprom will help NIOC in the development of the Kish and North Pars gas fields and also six oil fields. Gazprom will also be involved in the completion of liquefied natural gas (LNG) projects and construction of gas export pipelines.

Tuesday’s deal was signed during an online ceremony by the CEOs of both companies. The ceremony came on the same day Vladimir Putin visited Iranian President Ebrahim Raisi.

The Iran deal comes less than a week after a Gazprom letter cited by Reuters in its report on a potential supply halt to customers in Europe was sent out. In the letter, Gazprom said it was retroactively declaring force majeure on supplies from June 14. Nord Stream 1, the key pipeline delivering Russian gas to Germany and beyond, is undergoing 10 days of annual maintenance scheduled to conclude on Thursday.

Given the impact of Gazprom announcing the uncertainty in gas supplies, Europe will need to look for more options for oil imports. One of those options could be the United States, as Treasury Secretary Janet Yellen has already voiced opposition to the war in Ukraine.

“Russia’s illegal war and the global energy shock that has followed underscores the need to protect ourselves from dependence on foreign oil that makes us vulnerable to the whims of authoritarians like Vladimir Putin,” Yellen said.

With Russia being one of the top oil exporters in the world, Yellen said this is where great economic impact can occur if the world turns to alternative oil supply out of Russia.

“We will also discuss our ongoing efforts to hold Russia to account for its brutal and illegal war against Ukraine, including by exploring a price cap on Russian oil to deprive Russia of oil revenues and to lower prices of oil for consumers,” Yellen said.

Reuters contributed to this report.