Russia’s Gas Giant Shunned by European Traders — and Its Landlord

“This is a fast-moving, complex situation, and we will continue to review all measures that are available to us, while remaining fully compliant with sanctions requirements,” British Land said.

Gazprom is one of British Land’s top 10 clients by rents paid for office properties, ahead of Microsoft Corp., Vodafone Group Plc and Deutsche Bank AG, according to a company filing last year.

The trading unit of the state-controlled Russian energy giant currently occupies the top floors of the building at 20 Triton Street, a curving lattice across from the park bordered by rows of houses owned by wealthy Russians. The unit trades gas, power and emissions in the European market and supplied more than a fifth of the U.K.’s industrial and commercial gas in 2020. Last year, it had 23 million pounds of supply contracts with local governments and National Health Service units, according to public sector data platform Tussell.

Gazprom M&T has more than 450 employees in London, and the building’s location allows it to form “excellent relationships” with major energy players throughout Europe, according to the company’s website. The firm, which is wholly owned by a German subsidiary of Gazprom, opened its first office in London in 1999 with two workers.

During a visit this week, the calm inside the airy, glass-walled lobby belied the havoc gripping the global gas market. A lone receptionist sat unbothered in front of a corporate logo, while six floors up, the company was facing a major reckoning with British buyers.

Since Russia’s invasion of Ukraine, a raft of companies have turned their backs on dealing with the gas giant’s subsidiary. Traders are heavily reducing their dealings with the closely held company, and many won’t initiate new deals, according to people familiar with the matter. Gazprom has been removed from credit sheets for trades.

A spokesperson for Gazprom M&T declined to comment when asked if more clients were cutting ties.

Gazprom faces increasing pressure as energy giants slash their investments in Russia and boycott its commodities, and British Prime Minister Boris Johnson is being urged to deepen sanctions. While the U.K. gets little gas directly from Russia, European energy companies are still buying high volumes of the fuel from Gazprom’s export arm through pipelines from the east.

British ministers are reviewing the country’s exposure to Russian natural gas and links, and Business Secretary Kwasi Kwarteng met last week with the chief executives of four domestic suppliers. London-listed Shell Plc and BP Plc are dumping assets in the country, even though that may mean writing down billions of dollars.

“Everyone who deals with Russia in energy has probably long had it in the back of their mind that geopolitical risks could suddenly ramp up,” said Kathryn Porter, an independent British energy consultant. “Companies are seeing a backlash against Russia and may be anticipating further sanctions on Russian companies.”

Risk Premium

Gazprom M&T’s troubles are filtering through to the suppliers who buy its wholesale gas. In the past two weeks, risk premiums added to gas sold by the firm have soared above market prices, according to a longstanding customer who didn’t want to speak publicly.

The price hike, compounded by market volatility, could pile further stress on domestic energy suppliers, 26 of which have collapsed since August.

Some surviving suppliers use Gazprom as a wholesaler and gas shipper, which means the company helps arrange the delivery of gas to homes and businesses across the country. Alternatives are slim in the shipping market after the collapse of Yorkshire-based CNG Group Ltd. in October, which triggered more suppliers to fold.

More British customers may feel the heat if the trading arm comes under further strain. Under its Gazprom Energy brand, the unit supplied over 177,000 commercial customer sites in 2020.