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3rd Jul 2022

EU warns paying roubles for Putin's gas may breach sanctions

  • Russia's gas-for-roubles strategy is to divide EU countries — and 'winter is the best ally of Putin', energy expert Simone Tagliapietra warned (Photo: kremlin.ru)
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The European Union has said gas payments in roubles would breach the EU sanctions regime against Russia — urging companies not to accede to Moscow's demands.

"To pay in roubles, if this is not foreseen in the contract, is a breach of our sanctions," said European Commission president Ursula von der Leyen on Wednesday (27 April).

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Von der Leyen said that 97-percent of gas contracts explicitly stipulate payment in euros or dollars, pointing out that Moscow's demands for gas payments in roubles constitute a "unilateral decision" in breach of the contracts.

"Companies with such contracts should not accede to the Russian demands. This would be a breach of the sanctions, so high risk for the companies," she warned.

The comments come after a Bloomberg report revealed that some European buyers have already paid Russia for gas supplies in roubles — and following Russian energy giant Gazprom's decision to halt gas supplies to Bulgaria and Poland.

Cuts in Russian gas flows to Poland and Bulgaria after refusing to pay in roubles was dubbed as "blackmail" and a "provocation" by European leaders.

Polish president Andrzej Duda said on Wednesday that Warsaw will take legal action against Russia and request compensation for its violation of gas contracts.

And the country's climate minister, Anna Moskwa, assured Polish consumers there will not be a shortage of gas in Polish houses because the country's gas storage is filled at 76-percent capacity and liquified natural gas deliveries are increasing.

For his part, Bulgarian energy minister Alexander Nikolov said that it was "obvious that natural gas is being used as a political weapon."

The government in Sofia described the move as a "gross violation" of gas contracts.

Nikolov said that Bulgaria would lose control of the payment in the two-stage payment process demanded by Gazprom, in which payments would be first done in dollars and then a bank would convert this into roubles.

The Bulgarian prime minister also said that gas deliveries to consumers will not be reduced because there is a clear action plan in place. He said that the Greece-Bulgaria gas interconnector, expected to be completed in June, could help the country diversify supplies.

This infrastructure would also help fill the national gas storage capacity, currently at 15 percent, according to Simone Tagliapietra, an energy expert at Brussels-based think tank Bruegel.

Russian gas imports represent 90 percent of Bulgaria's gas consumption and 50 percent of Poland's.

But their contracts were expiring in 2022 and both countries had announced that they would not renew them, Simone said, arguing that other EU countries may follow the same course as Poland and Bulgaria soon.

Russia's gas-for-roubles strategy is to divide EU countries and "winter is the best ally of Mr. [Russian president Vladimir] Putin," he added.

Hungary has been the only EU country which has so far said it was prepared to pay in roubles for gas.

Meanwhile, calls to trigger new sanctions on Moscow have increased. The sixth package of sanctions is expected to include some sort of oil embargo although gas is likely to be left out.

"The era of Russian fossil fuel in Europe is coming to an end," said von der Leyen.

The commission is expected to come up with a plan to phase out Russian fossil fuels by 2027 in mid-May.

Putin's rouble shift: mistake or masterstroke?

Russia's plans to demand rouble payments for natural gas purchases from "unfriendly nations," unveiled on Wednesday, further escalated the battle of sanctions with Europe, but experts are divided on what Russia will gain from it.

EU Commission proposes Russian oil-ban in new sanctions

Commission president Ursula von der Leyen said EU countries should phase out Russian crude oil imports within six months, and refined oil by the end of the year to minimise the impact on European economy and global supply.

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