European Officials Seek More Clarity as Russia Defends Ruble Demand for Gas


Gas wells at the Bovanenkovo ​​gas field on the Arctic Yamal Peninsula, Russia, on May 21, 2019.Maxim Shemetov/Reuters

Businesses and countries were at loggerheads over Moscow’s ruble-for-gas payment system on Friday, while European officials promised more guidance on whether buying Russian gas can comply with sanctions and Russia said it saw no problem with its plan.

Russia cut off gas supplies to Bulgaria and Poland on Wednesday after they refused to meet the demand issued in a Russian presidential decree last month for gas payments in rubles, raising concerns that other countries could be the following.

Germany, which imports about half of its gas from Russia, said on Friday that energy companies can open special accounts with Gazprombank to pay for Russian gas, without breaking sanctions if the transfer of euros or dollars meets their contractual obligations. .

He did not specify whether companies could do this and also open a ruble account, as requested by Russia, without breaking EU sanctions.

Denmark’s Orsted said he has no intention of opening a ruble account in Russia, although he declined to comment on paying in other currencies. Italy’s ENI also said that it had not opened a ruble account.

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

EU energy ministers will hold an emergency meeting on Monday to discuss their response to Russia’s demand.

The European Commission, the EU’s executive, has already said that countries can make sanctions-compliant payments as long as they declare their payments complete once they are made in euros and before they are converted into rubles.

EU countries, however, have said they want more clarity, while Germany, the bloc’s largest economy and one of the most dependent on Russian gas, says it cannot afford to stop buying Russian supplies, even though it is taking steps to find alternative sources of energy. .

A European Commission official told Reuters on Friday that the executive will provide EU countries with additional guidance following complaints from some countries that the ambiguity would leave different countries coming to different interpretations of what they were allowed to do.

Russia said on Friday that it did not see any problem with its proposed system.

“If the buyer observes the established procedure for interaction between gas buyers and the authorized bank, and there are no problems for the authorized bank in terms of selling foreign currency on the stock exchange due to restrictive measures by foreign states, so there can be no obstacles to paying for and receiving natural gas,” said Elvira Nabiullina, governor of the Russian central bank.

The ruble has benefited to some extent from Moscow’s demand for payment of rubles. The currency hit its highest level against the euro in more than two years on Friday thanks to capital controls as the central bank cut interest rates for the second time this month.

Gas prices in Europe have reached record levels since the invasion of Ukraine by Russia, Europe’s main gas supplier, and rose slightly on Friday.

At the heart of the confusion for European buyers is whether Russia would only consider payment complete after the conversion of gas to rubles has taken place, a transaction that would involve Russia’s central bank, which is subject to sanctions of the European Union.

Speaking on condition of anonymity, an EU diplomat admitted that a certain amount of ambiguity could be useful as the bloc seeks to avoid widening divisions between countries, which have different levels of dependence on Russia and different time frames for making payments.

“Given the circumstances, a bit of disorder might be preferable,” the diplomat said.

Poland and Bulgaria have contracts with Gazprom due to expire at the end of this year, so their search for alternative supplies was well under way. Poland also has very healthy gas reserves around 77 percent.

Austria’s OMV, which has a contract with Gazprom until 2040, said it was looking at how a switch could be implemented so that it pays in rubles without breaching sanctions when the next payment is due in May.

Germany’s advice on Friday echoed that given by the Commission last week, but the Commission also warned that fully complying with Russia’s scheme could breach the bloc’s sanctions.

Germany’s largest energy companies, Uniper SE and RWE AG, declined to comment.

EnBW’s CNG unit said on Friday that it is following the law when it comes to paying for required Russian volumes under current currency requirements, adding that it will not disclose details of contracts with its suppliers.

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