UK government embraces £8B energy deal with firm linked to Russian gas imports

LONDON — U.K. hospitals, town halls and government departments will be heated via a massive energy deal with a subsidiary of a firm still importing Russian gas to Europe — just days after U.K. ministers boasted they were “driving Putin out of the market.”

The National Health Service (NHS) is among several British public sector bodies set to benefit from a four-year gas supply contract, worth up to £8 billion, agreed last year between the U.K. government and TotalEnergies Gas and Power. 

The company is a subsidiary of the French fossil fuel giant TotalEnergies which, two years after Russia rolled its tanks into Ukraine, continues to be a major importer of Russian liquefied natural gas (LNG) into Europe.

The U.K. has publicly taken a strong stand against Russian fossil fuel exports to Europe, which help finance Vladimir Putin’s war. But under this deal, billions of pounds of British taxpayers’ cash will ultimately flow to a firm which is still trading in Russian gas.

A U.K. government spokesperson said gas supplied under the contract would be acquired via Britain’s domestic market, insisting the “presence of Russian gas is extremely unlikely.” TotalEnergies said it continues to supply Russian LNG to Europe under an existing contract which it “cannot unilaterally terminate.”

‘Should be a non-starter’

Unlike the U.K., EU countries have not banned shipments of Russian LNG following the invasion of Ukraine, and large volumes of Russian LNG are still imported to countries including France, Belgium, and Spain. TotalEnergies is one of the major suppliers. 

U.K. Energy Secretary Claire Coutinho has urged allies to halt Russian LNG imports, boasting in a speech last week that her government “led the world” in efforts to force Russia out of the energy market “once and for all.”

But campaigners said that U.K. ministers should not therefore be handing public money to a firm with links to Russian fossil fuels.  

“TotalEnergies is one of the largest buyers of Russian gas globally. They’ve played a key role in bringing Putin’s LNG, a crucial lifeline for Russia’s wartime economy, to market,” said Louis Wilson, head of fossil fuels investigations with the NGO Global Witness.

“For a government focused on energy security and supporting Ukraine, buying gas from Total should be a non-starter.”

NHS savings

The U.K. government contract, known as ‘Supply of Energy 2’, runs until 2027. It covers electricity and gas supplies for lighting and heating public buildings, including hospitals, Whitehall offices, and local council headquarters. 

The contract is split into two parts, with up to £43 billion of electricity set to be provided by EDF and up to £8 billion of gas by Total Energies Gas and Power. It was secured by the U.K. Cabinet Office’s procurement body, the Crown Commercial Service (CCS), with the aim of centralizing energy purchasing and lowering prices for public bodies. When it was finalized last year, the CCS said that it would be “the biggest energy contract ever awarded in the public sector.”

It replaced a previous four-year energy supply agreement with EDF and TotalEnergies Gas and Power, which ran from 2019 to 2023. The new deal was announced in March 2023, more than a year after Russia’s full-scale invasion of Ukraine.

It is not mandatory for U.K. public bodies to join the scheme. But earlier this year, NHS England “strongly” recommended that all hospital trusts join an “NHS-specific energy agreement under the CCS framework.” NHS England said it hoped the deal would save the health service, the biggest public sector employer in England, as much as £100 million a year.  

NHS England referred POLITICO’s questions to the government. 

‘Crazy hypocrisy’

For a gas deal this size, the British government would have had only a handful of major energy companies to choose between. But industry experts told POLITICO there would have been alternatives to TotalEnergies Gas and Power, had officials wanted to switch supplier.

Margaret Hodge, a Labour MP and former chair of the House of Commons Public Accounts Committee, the U.K. parliament’s spending watchdog, said the deal amounted to “crazy hypocrisy.”

“If we want our sanctions regime to be effective, we need to smash our links with companies that are profiting from Russian gas and deprive Putin of an important revenue stream,” Hodge said. 

Svitlana Romanko, director of Razom We Stand, a Ukrainian campaign group which calls for a total Western ban on Russian energy imports, said that the U.K. and other governments “must begin to truly prioritize the lives of Ukraine’s people and global peace” over agreements with energy companies.

Russian ties

TotalEnergies had significant ties with the Russian energy sector prior to the full-scale invasion of Ukraine, and holds stakes in two Russian LNG production projects. One of these — Arctic LNG 2 — was placed under sanctions by the U.K. government last month. 

The company, however, initiated so-called force majeure proceedings on the project when the U.S. sanctioned it late last year, which allow parties to break the terms of a contract if it is affected by extreme, unforeseeable events. TotalEnergies said it does not expect to take any gas from the scheme in 2024.

Approached for comment, the company referred POLITICO to its “principles of conduct” for its “Russian related business,” which include “strict compliance” with European sanctions, a pledge to “gradually suspend” activities in Russia, and a refusal to provide further capital for developing projects there.  The company has also halted all short term “spot trading” in Russian gas.

“TotalEnergies firmly condemns the military aggression of Russia against Ukraine, which has tragic consequences for the Ukrainian population and threatens peace in Europe,” a spokesperson for the company said.

The company continues to supply Europe with Russian LNG from another Arctic plant, Yamal.

“In accordance with the European Union’s decisions to maintain at this stage Russian gas supplies, TotalEnergies continues to supply Europe with liquefied natural gas from the plant within the legal framework, and within the framework of long-term contracts that it must honor as long as Europe’s governments consider that Russian gas is necessary,” the spokesperson said.

They added: “TotalEnergies cannot unilaterally terminate the long-term contract. If we decided not to take the volumes of gas, we would still be obliged to pay for it.”

Chief executive Patrick Pouyanné said last September: “As long as the European authorities do not impose sanctions and ask us to continue supplying the region with Russian LNG, we will do so.” 

There is no suggestion that TotalEnergies has directly imported Russian LNG to the U.K. in breach of the U.K.’s ban.

Earlier this year, gas market experts told POLITICO that, so long as Russian LNG imports to mainland Europe continue, it is possible that small amounts of Russian-origin gas could enter the U.K. system via pipeline connections with Belgium and the Netherlands. Although ministers have often referred to the U.K. “banning Russian gas,” the legislation which underpins the ban only refers to LNG, so any indirect imports via pipeline would not breach U.K. law.

The government spokesperson said: “Like most U.K. suppliers, TotalEnergies purchases gas from the U.K. domestic open market, where the presence of Russian gas is extremely unlikely.

“All public sector procurement decisions follow U.K. sanctions restrictions, and full due diligence checks are carried out on all companies awarded contracts.”

The government declined to say whether specific Whitehall buildings such as No. 10 Downing Street or the Department for Energy Security and Net Zero are being supplied with gas under the contract.