Commodities News

EU Warns Members That Paying Rubles For Gas Would Violate Sanctions.

An internal European Commission note, the contents of which has come to light and is being reported for the first time on Thursday, has spelled out that European buyers agreeing to pay for Russian gas in roubles would be violating EU sanctions against Moscow

“This mechanism would lead to a breach of the existing EU restrictive measures adopted in respect of Russia, its government, the Central Bank of Russia, and their proxies,” Reuters reports of decrees in the internal note after reviewing its contents.

It threatens to further escalate the energy standoff which has ensued after Vladimir Putin demanded payment for Russian gas in roubles by “unfriendly countries” which have leveled sanctions on Russia in the wake of the Feb.24 Ukraine invasion – the exemptions given to Austria and Hungary of late notwithstanding. 

According to more from the internal memo

The EU buyer would still pay Gazprombank in the contract currency – euros or dollars – but the purchase would only be complete once Gazprombank exchanges the currency into roubles in a deal with the Russian central bank, and deposits the roubles in the second account, the note said.

The memo underscores, “The effect … is that a payment is completed not in the currency established under the contract at the moment it is deposited in the accounts … but rather only at an unknown and undefined moment once the foreign currency … is converted into roubles and credited to the second special account.”

The European Commission wrote further, “The Russian State, through its central bank, has total control over the foreign currency… which it can manipulate entirely to its own benefit.”

Essentially the commission ruling on the matter would make Putin’s rouble stipulation completely off limits for individual European countries and entities, especially as the process would involve Russia overseeing the whole payment process. 

Meanwhile, on Thursday Putin addressed the crisis in fresh statements. “Attempts by Western countries to squeeze out Russian suppliers and replace our energy resources with alternative supplies will inevitably affect the entire world economy. The consequences of such a step can become very painful, and first of all, for the initiators of such a policy themselves. What is surprising here is that our so-called partners from unfriendly countries admit that they cannot do without Russian energy resources, including natural gas, for example.”

He talked about reorienting “our exports to the fast-growing markets of the south and east…” and warned Europe at the same time:

A reasonable alternative for Europe simply doesn’t exist. Yes, it’s possible, but right now, it doesn’t exist. Everyone understands this; there are simply no free volumes on the global market right now, and supplies from other countries — primarily from the United States, which can be sent to Europe — will cost consumers many times more and will affect the standard of living of people and the competitiveness of the European economy,” Putin said.

He also addressed instances of payment failures and delays…

“Banks from unfriendly countries delay the transfer of payments. I will remind you, the task has already been set to transfer payments for energy resources in national currency, to gradually move away from the dollar and the euro. In general, we intend to radically increase the share of settlements in national currencies in the foreign trade system,” Putin said.

Thus, given the contents in this latest European Commission note, it looks as if there’s no off-ramp and the energy standoff will continue. At the same time Putin is touting that Russia still has ‘friends’ and thus greater options in the east and south, without doubt including India and China.


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