UK orders review of public sector Russian energy contracts

By William James

LONDON (Reuters) -Britain on Monday instructed public sector bodies to review energy and other contracts they have with Russian firms and consider switching suppliers, noting that existing energy agreements could benefit the Russian state.

Alongside allies, Britain is seeking to cripple the Russian economy through wide ranging sanctions in response to its invasion of Ukraine but has stopped short of sanctioning Russia’s main energy companies.

“Public money should not fund (Russian President Vladimir) Putin’s war machine,” government minister Steve Barclay said in a statement.

“We are asking hospitals, councils and other organisations across the public sector to urgently look at all the ways they can go further to sever their commercial ties to Russia.”

That could affect firms linked to Russia who buy gas on the wholesale market and sell it on.

Gazprom Marketing & Trading (GM&T), which is owned by Russia but registered in Britain, has a British unit which trades as Gazprom Energy and supplies 21% of the country’s industrial and commercial customers including the National Health Service and other public sector bodies.

GM&T narrowly averted insolvency in March. If it were to collapse this could plunge the European gas market into disarray and would be likely to require a costly intervention by a special administrator.

Gazprom Energy did not immediately reply to a request for comment. GM&T has not responded to a request for comment. Gazprom Energy has previously said in a statement on its website that its parent GM&T sourced gas from wholesale energy markets and did not depend on gas supplied from Russia. “Neither do we have gas contracts with Russia,” it said.

Britain placed consumer energy company Bulb into a special administration last year, with the government covering its losses which, according to official estimates, are around 2.2 billion pounds.

The British government has announced it will phase out Russian oil imports by the end of the year and is working on a new energy strategy to end any reliance on Russian gas, which currently makes up less than 4% of Britain’s supply.

The latest advice came in a procurement policy guidance.

“You must seek advice from an energy expert and/or a relevant public sector buying organisation before taking action to terminate an existing energy supply contract to ensure an alternative source of supply is available and affordable,” it said.

Russian President Vladimir Putin sent his troops into Ukraine on what he calls a “special military operation” to demilitarise and “denazify” Ukraine. Ukraine and the West say Putin launched an unprovoked war of aggression.

(Reporting by William James, Editing by Kylie MacLellan, Kate Holton and Jane Merriman)