U.K. working out how to reduce local exposures to Gazprom

The U.K. government is helping local councils figure out ways to limit their exposure to Russia’s energy giant in the aftermath of war in Ukraine and subsequent sanctions.

Public bodies are trying to cut ties with Gazprom Marketing & Trading Retail Ltd., which supplies more than 20% of the industrial and commercial gas in the U.K., while minimizing the costs associated with exiting current contracts and signing new ones. Vladimir Putin’s invasion has roiled energy markets and pushed prices to a record.

“It is of the utmost importance we explore every possible avenue to ensure British taxpayers’ money isn’t funding Putin’s war machine,” a government spokesperson said in a statement. “That’s why we’re exploring all options on how we can further cut ties with companies that prop up the Russian and Belarusian regime.”

Belarus has been hit with sanctions for its involvement in the Ukraine conflict.

U.K. government bodies and agencies, including the National Health Service, had about 127 million pounds ($167 million) in contracts with the subsidiary of Russian state-run Gazprom PJSC over the past decade, according to public-sector data platform Tussell. Gazprom isn’t the subject of sanctions, and its parent company still is a large supplier of gas to European utilities through pipelines.

Market dynamics are putting the U.K. government in a difficult position. Ending contracts early could free up hedged volume for Gazprom to sell at higher prices than it paid, potentially generating more profit.

The government is “working closely with councils and other public bodies to ensure they are able to comply with the financial and investment restrictions on Russia,” the spokesperson said.