What is the position of the EU on the demand for payment of gas in rubles from Russia?

A 3D printed natural gas pipeline is placed on the EU and Russian flags in this illustration taken on January 31, 2022. REUTERS/Dado Ruvic

BRUSSELS, April 27 (Reuters) – Russia halted gas supplies to Bulgaria and Poland on Wednesday after rejecting its demand that European buyers start paying for Russian gas in rubles. read more

The European Commission has said that countries should not pay in rubles and that complying with Russia’s request could violate European Union sanctions against Moscow for its invasion of Ukraine.

However, Brussels has also outlined options that may allow EU buyers to continue paying for Russian gas without breaking sanctions.

Here’s a look at the problem.

WHAT DOES THE RUSSIAN DECREE SAY?

In March, Moscow issued a decree proposing that energy buyers open accounts with Gazprombank to make payments in euros or dollars, which would then be converted into rubles and paid to gas supplier Gazprom.

The decree said that Gazprombank would open special “K” type accounts for gas payments from foreign buyers. An EU company would transfer foreign currency to one such account, and then a Russian bank would convert the payment into rubles and transfer the rubles to another “K” account belonging to Gazprom.

The decree said that the buyer’s obligation would be considered fulfilled only when the rubles reached Gazprom’s account.

WHY RUSSIA’S PROPOSAL MAY BREACH THE EU SANCTIONS?

The European Commission has said that EU companies must continue to pay the currency agreed in their contracts with Gazprom, 97% of which are in euros or dollars.

The Commission sent an advisory document to EU countries last week, which said Russia’s proposed payment system could breach EU sanctions, even if EU buyers send euros to Gazprombank. That’s because, under Russia’s decree, the EU buyer’s contractual obligation would not be considered complete until euros are converted into rubles, the Commission said.

That would put the actual completion of the purchase in the hands of Russian authorities and implicate Russia’s central bank, which is subject to EU sanctions.

“Since the conversion process can take an indefinite time, during which time the foreign currency is completely in the hands of the Russian authorities, including the central bank, it can even be considered as a loan granted by EU companies,” the statement said. Commission. .

IS THERE ANY SOLUTION?

Possibly. Moscow’s decree does not necessarily prevent a payment process that would comply with EU sanctions, the Commission said.

To avoid sanctions breaches, companies would have to look for additional conditions on transactions, to confirm that their contractual obligations are complete once they deposit euros with Gazprombank, as opposed to after Russia has converted the payment into rubles.

“EU companies can ask their Russian counterparts to fulfill their contractual obligations in the same way as before the adoption of the decree, i.e. by depositing the amount due in euros or dollars,” the Commission said in its statement. advice, which is not legally binding. .

However, the procedure for obtaining exemptions from the decree’s requirements is still unclear, he said.

Another option could be for EU companies themselves to declare that they consider their contractual obligations fulfilled when they deposit euros or dollars with Gazprombank.

“It would be advisable to seek confirmation from the Russian side that this procedure is possible under the rules of the decree,” the commission said.

EU companies can open accounts with Gazprombank and engage with the bank to try to find a solution. Gazprombank is not subject to EU sanctions.

Information from Kate Abnett; edited by Philip Blenkinsop and David Evans

Our standards: The Thomson Reuters Trust Principles.