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European Union warns buyers of Russia gas

Countries could breach sanctions if they converted payments into roubles
A gas installation in Sofia, Bulgaria.
A gas installation in Sofia, Bulgaria.
Reuters

Reuters   |   Brussels   |   Published 29.04.22, 01:18 AM

The European Commission on Thursday warned buyers of Russian gas they could breach sanctions if they converted gas payments into roubles, as officials struggled to clarify the EU’s stance on Moscow’s payments scheme, which has sowed confusion in the bloc.

Russian gas giant Gazprom cut supplies to Poland and Bulgaria on Wednesday after they refused to pay for gas in roubles, marking Moscow’s toughest response yet to sanctions imposed by the West over the conflict in Ukraine.

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 Bulgaria and Poland had already said they would not renew contracts with Gazprom after they expired at the end of this year and say they can secure supplies from other sources.

 The escalation follows a decree issued by Russian President Vladimir Putin last month requiring that countries Moscow deems “unfriendly” must pay for gas in roubles under a new payment scheme.

 Under the mechanism, buyers are obliged to deposit euros or dollars into an account at Gazprombank, which will then convert them into roubles, place the proceeds in another account owned by the foreign buyer and transfer the payment in Russian currency to Gazprom.

 EU energy ministers will meet on Monday to discuss the situation, which has left member states divided over whether sanctions would be broken if they used Russia’s mechanism.

 Speaking at a briefing on Thursday a senior EU official said that if EU buyers declare their payments for gas are completed once the payment has been made in euros and before it is converted into roubles, sanctions would have been respected.

 The difficulty for European buyers is that the decree requires buyers to also open a rouble account at Gazprombank into which their euro or dollar payments would be deposited after conversion into the Russian currency.

 Russia’s decree would only consider the payment to be complete after the gas-to-roubles converson is done — a transaction that would involve Russia’s central bank, which is subject to EU sanctions.

“What we cannot accept is that companies are obliged to open a second account and that between the first and second account, the amount in euros is in the full hands of the Russian authorities and the Russian Central Bank, and that the payment is only complete when it is converted into roubles,” the senior EU official said.

“This is absolutely clear circumvention of the sanctions.”

 Opening a roubles account at Gazprombank in itself may breach the EU sanctions, the official added, without providing a conclusive assessment.

 Thursday’s clarifications followed a demand on Wednesday from EU country ambassadors for clearer advice on the issue.

 Poland and Bulgaria said in the meeting the commission’s guidance was confusing, while countries including Denmark, Finland, Greece, Slovakia and Spain said more clarity was needed, EU officials told Reuters.

 Both Bulgaria and Poland opposed the new payment mechanism and stuck to their original contracts to pay for gas. Bulgaria’s deputy prime minister said the US dollars intended to use to pay Gazprom for April supplies had been returned.



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