European officials: EU countries will not pay for Russian gas directly in rubles

LAST UPDATE: 17:37

The EU said on Thursday that companies paying for Russian gas could avoid violating sanctions if their payments are considered complete when they have made deposits in euros or dollars, but there may be no solution if Moscow insists on using also account in rubles for the transaction, as reported by Reuters.

The Commission today reminded that European companies must continue to pay for Russian gas, in the currency of the contracts, and that in the event of a cut in supplies by Russia’s Gazprom, it would be considered a “breach of contract”.

A Commission spokesman said that if a contract stipulates that payment must be made in euros or dollars, the company’s obligation ends as soon as the payment is made in euros or dollars. He also added that if the payment is made in rubles, then this is considered a circumvention of sanctions against Moscow.

It is the responsibility of the Member States to ensure that sanctions against Moscow are implemented (respected). “If there is a lack of compliance with sanctions, there are procedures at European level to ensure that Member States respect sanctions. But we are not at this point yet,” he said.

The same spokesman explained that the Russian authorities did not make it clear that if a company wanted to continue to supply gas, it would have to pay in rubles. Instead, the Russian authorities have implemented a “sophisticated system” in which European companies are considered to have paid when the amount has been converted into rubles.

The Commission is in close contact with all Member States to assist them in the current situation. However, as the spokesman admitted, there is still no final solution. EU energy ministers will meet extraordinarily on May 2, and in mid-May the Commission will present its proposals for decoupling from Russian fossil fuels.

At the same time, all EU countries agree that they will not pay Russia directly in rubles for gas imports, noting that the deadline for further payments is expected to expire on May 20, senior European Union officials assured today.

“What we know, and there is a consensus from all the Member States, is that no one is willing to pay in rubles,” the official told reporters, adding that the European Commission had no idea how many buyers had open accounts for gas payments to Gazprombank.

A senior official clarified that Poland and Bulgaria used the existing payment methods for Russian gas before Moscow suspended their gas supplies yesterday, Wednesday, and that they did not use the mechanism proposed by Moscow to pay rubles.

“According to our information, both countries insisted on the original form of payment,” the official told reporters.

However, two sources told Reuters today that few European companies have started paying Russia in rubles for gas, although large customers have not yet done so.

“Some commercial companies, perhaps more than five, have started making payments,” said a source, speaking on condition of anonymity because he had not been authorized to speak to the media.

Greece and other EU countries are demanding clarity on ruble payments

Several European Union countries are pushing for clearer guidance on Russia’s requirement to pay for gas in rubles, saying current directives are highly ambiguous, according to a Bloomberg News report.

The European Commission told ambassadors in a closed-door meeting on Wednesday that it would improve the wording of its guidelines, according to those familiar with the discussions. Some countries that have raised the issue want the Commission to clarify whether buyers have an alternative to agreeing to the Kremlin’s demands.

The confusion was caused by the cessation of gas flows from Russia to Poland and Bulgaria, which refused to pay in rubles. At the same time, four European companies have made payments in rubles, although it is not clear if these are EU countries, while other companies are ready to open accounts to pay in rubles.

According to Bloomberg, Poland and Bulgaria, backed by Greece, Slovakia, Denmark, Latvia, Belgium, Austria, Hungary and Finland, protested at the meeting for lack of clarity and detail in some of the the Commission guidelines. Poland has said that a selective interpretation of the Russian decree is a tool for Russia to break EU solidarity.

Poland and Bulgaria have also told other EU ambassadors that they are benefiting from alternative supply arrangements and that Moscow’s move does not pose a direct threat to their economy at this stage.

The EU is preparing to “arm” energy supplies to Europe in order to avoid disrupting gas flows.

At the same time, companies are looking for solutions to maintain vital gas supplies, and governments are at odds over how hard line they will take against Moscow.

European Commission President Ursula von der Leyen warned companies on Wednesday not to comply with Russia’s demands, saying such a move would violate sanctions.

However, companies are taking steps to comply at least partially with Russia’s demands, and the bloc’s own instructions issued last week seem to provide them with the cover to do so.

The Commission document

It is recalled that the Commission said on Friday that EU companies may be able to circumvent Russia’s requirement to receive gas payments in rubles without violating sanctions if they pay in euros or dollars, which are then converted into Russian currency.

Companies should also seek additional terms for transactions, such as a statement stating that their contractual obligations are completed as soon as they deposit euros or dollars, the Commission recommends.

The commission said companies should continue to pay in the currency agreed in their contracts with Gazprom, 97% of which is in euros or dollars.

“Companies with contracts that provide for payments in euros or dollars should not give in to Russian demands. That would be contrary to the current sanctions,” a commission spokesman said.

In an advisory letter to member states on Thursday, the commission said Russia’s proposal runs the risk of violating EU sanctions, as it would put the actual completion of the payment in the hands of the Russian authorities.

However, the Moscow decree does not necessarily preclude a payment process that would comply with EU sanctions against Russia over the conflict in Ukraine, the document said.

Brussels said in the document that there were options that could allow companies to continue to pay legally for gas.

“EU companies can ask their Russian counterparts to fulfill their contractual obligations in the same way as before the decree was issued, ie by depositing the amount due in euros or dollars,” the document said.

However, the procedure for securing exemptions from the requirements of the decree is not yet clear, it said.

Prior to the payments, EU institutions could also make a clear statement that they consider their contractual obligations to be fulfilled when they deposit euros or dollars in Gazprombank, as opposed to later, when the payment will be converted into rubles, he said. The document.

“It would be appropriate to seek confirmation from the Russian side that this process is possible under the rules of the decree,” the document said.