What is the EU’s position on Russia’s demand for ruble gas payments?

3D-printed natural gas pipes are placed over the European and Russian flags displayed in this illustration taken January 31, 2022. REUTERS/Dado Ruvic

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BRUSSELS, April 27 (Reuters) – Russia cut off gas supplies to Bulgaria and Poland on Wednesday over its rejection of its demand that European buyers start paying for Russian gas in roubles. Read more

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

However, Brussels has also presented options that could allow EU buyers to continue paying for Russian gas without breaching sanctions.

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Here is an overview of the question.

In March, Moscow issued a decree proposing that energy buyers open accounts at 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 of these accounts, then a Russian bank would convert the payment into rubles and transfer the rubles to another “K” account belonging to Gazprom.

The decree stipulated that the buyer’s obligation would be considered fulfilled only when the rubles arrived in Gazprom’s account.

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

The Commission last week sent a consultative document to EU countries, saying Russia’s proposed payment system could breach EU sanctions – even if EU buyers send euros to Gazprombank. Indeed, under the Russian decree, the EU buyer’s contractual obligation would not be considered complete until the euros were converted into rubles, the Commission said.

This would put the actual completion of the purchase in the hands of the Russian authorities and involve the Russian central bank, which is subject to EU sanctions.

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

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

To avoid breaching sanctions, companies should ask for additional terms on transactions, to confirm that their contractual obligations are fulfilled once they deposit euros with Gazprombank – as opposed to once Russia converts payment in 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 paying the amount due in euros or dollars”, said the Commission in its consultative document, which is not legally binding. .

However, the procedure for obtaining exemptions from the requirements of the decree is not yet clear, he added.

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

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

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

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Reporting by Kate Abnett; edited by Philip Blenkinsop and David Evans

Our standards: The Thomson Reuters Trust Principles.

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