VIENNA – Russian state natural gas company Gazrom will cut off supplies to Austrian utility OMV on Saturday morning, the Austrian chancellor said, adding that his country’s underground gas storage is full and it has alternative supplies from outside Russia.

The cap follows OMV’s announcement that it will stop paying for Gazprom gas to its Austrian subsidiary to make up for a 230 million euro ($242 million) arbitration award it won over an earlier gas cut to its German subsidiary .

Chancellor Karl Nehammer said on Friday that Austria had a secure supply of alternative fuel and that “no one will freeze this winter, no house will be cold”.

“Our gas storage facilities are full and we have enough capacity to get gas from other regions,” Nehammer said in a hastily called appearance at the chancellery. “We cannot be blackmailed.”

OMV announced this disruption in a trading statement on the Central European Gas Hub website. An OMV spokesman could not be reached for comment. Gazprom had no immediate comment.

The cap will cost Gazprom about $2.5 billion a year in annual revenue, said Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs. Oil and gas exports and associated tax revenues are the most important single source of cash for the Kremlin.

Russia has cut off most natural gas supplies to Europe in 2022, citing disputes over payment in rubles, a move European leaders described as energy blackmail for supporting Ukraine against a Russian invasion. The cap pushed up gas prices and contributed to a sharp spike in inflation that reached double digits in October 2022, but has since eased.

European governments have had to scramble to line up alternative supplies at higher prices, much of it liquefied natural gas shipped in from the US and Qatar.

However, three European countries – Austria, Slovakia and Hungary – received Russian gas supplies through a pipeline through Ukraine, despite the fighting there. Ukraine has said it will not resume gas transit after Jan. 1, leaving those countries scrambling for other supplies. Austria receives the largest share of natural gas from Russia, up to 98 percent in December 2023, according to Energy Minister Lenore Gewessler.

The European Union has cut off most Russian oil supplies, but has not directly sanctioned Russian gas. Instead, it set a non-binding target of 2027 for member countries to stop importing Russian gas.

In 1968, Austria became the first country in Western Europe to import gas from the Soviet Union, and its dependence on Russian energy increased in the following decades. During a visit of Russian President Vladimir Putin to Austria in 2018, an agreement to extend natural gas supplies to Austria until 2040 was signed by Gazprom head Alexey Miller and Rainer Seele, then chairman of the OMV Executive Board. The contract obliges the Austrian side to pay for the gas regardless of whether it receives delivery or not.

Gewessler convened a commission to analyze the circumstances under which he was signed and the legal possibilities to get out of it.

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David McHugh reported from Frankfurt, Germany.