Europe struggles for clarity on Russian roubles-for-gas demand

European Union states are attempting to maintain Russian gas supplies without violating sanctions against Moscow.

Russia ordered that energy companies from 'unfriendly countries' change their gas payments into roubles [File: Denis Sinyakov/Reuters]

European Union countries are scrambling to make sense of Russia’s decision to cut gas flows to Poland and Bulgaria, and eager to maintain their own supplies from Russia while steering clear of violating trade sanctions imposed against Moscow.

On Tuesday, Russia’s energy giant Gazprom announced it would be halting gas supplies to both countries after not receiving payment in Russian roubles from the two EU member states.

Gazprom said the countries had violated an order by Russian President Vladimir Putin that payments for Russian gas must be made only in Russia’s currency and not United States dollars or euros.

The demand for roubles is largely interpreted as a ploy by the Kremlin to weaponise its gas supply and create legal loopholes in sanctions imposed by the EU against Russia for its invasion of Ukraine.

Russia has ordered that energy companies from “unfriendly countries” make their payments in roubles at Gazprombank, a request that some in the EU, including Germany – which is hugely dependent on Russian gas – said did not break sanctionsb rules.

“The payments will be made in euros and then transferred by Gazprombank into a so-called K account,” said Germany’s Climate and Economy Minister Robert Habeck.

“That’s the path that we’re taking, that’s the path that Europe has shown us, that is the path that’s compatible with sanctions,” he said.

INTERACTIVE - Russian gas imports into the EU - Europe's reliance on Russian gasThe payment process basically requires buyers to open a rouble account at Gazprombank into which their euro or dollar payments would be deposited after conversion into the Russian currency via authorisation from the buyer.

But others, including the European Commission, which drafts the sanctions on Russia for the EU, warned that the transfer could constitute a violation, putting gas importers in legal danger.

The commission has said the process would breach EU sanctions on Russia as the currency conversion would involve a transaction through Russia’s central bank, which is subject to EU sanctions.

‘A circumvention of the sanctions’

EU spokesman Eric Mamer echoed the commission’s concern.

“If the contract stipulates that payments should be made in euros or in dollars, then the company’s obligation ends once it has made that payment in euros or dollars,” Mamer said.

“If the payment takes place in roubles, then we are no longer talking about the agreed contract and we’re talking about a circumvention of the 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,” a 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 of that.

To clear up the confusion, European energy ministers are holding an emergency meeting next week and will ask the commission, the EU’s executive, to give clearer legal advice on how to deal with Russia’s gas demands.

Member countries have expressed “some frustration on the commission’s guidance that has been interpreted in different ways by member states”, an EU diplomat said, on condition of anonymity.

But senior EU officials said the EU’s 27 member states agree that they will not pay Russia directly in roubles for their imports of gas, and the deadline for their next payments is expected to be May 20.

Poland and Bulgaria both used their existing method to pay for Russian gas, which involved making payments into existing accounts, rather than opening new Gazprombank accounts, before Moscow cut their gas supplies on Wednesday, another senior official said.

“According to our information, both have stuck to the original form of payment,” the senior EU official said.

Poland and Bulgaria are relatively minor customers for Russian gas and were about to end their contracts at the end of the year anyway. Poland’s entire gas import was 10 billion cubic metres per year, out of total European imports of 155 billion cubic metres from Russia. Gas in roughly that amount is already flowing to Poland from other European countries pitching in to help.

Simone Tagliapietra, an energy expert and senior fellow at the Bruegel think-tank in Brussels, said Putin is attempting to “fragment European countries and their stance toward energy diversification and the overall stance against Russia”.

“What he is creating is a system where he can basically divide countries, as we are seeing, for the ones that don’t want to comply with this new scheme will be cut off, while others will try to comply and essentially go against the European Union,” he said.

Last year, Russia supplied 32 percent of the total gas demand of the European Union and United Kingdom, up from 25 percent in 2009, according to the International Energy Agency.

Source: News Agencies