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The European Commission has warned companies that Moscow’s proposed workaround to process gas payments may not breach sanctions imposed over the invasion of Ukraine.
“EU companies can ask their Russian counterparts to fulfill their contractual obligations in the same way as before the decree was adopted, i.e. by depositing the amount due in euros or dollars,” read a statement distributed by the European Commission on Thursday Document.
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Moscow threatened to cut off Europe’s gas supplies if companies didn’t make payments in rubles. The Kremlin worked with Russian gas company Gazprombank to set up a system that would allow companies to deposit foreign currency into an account, while Gazprom would settle transactions in rubles.
Russian President Vladimir Putin attends a meeting with young award-winning cultural figures in Moscow, Russia, via videoconference on Friday, March 25, 2022. Russia demands payment in rubles for its natural gas exports to Europe. And that’s already upsetting the markets with the war in Ukraine. Already high gas prices have skyrocketed following President Vladimir Putin’s announcement last week. | AP images
“Failure to make those payments, we consider it a buyer’s failure to meet its obligations, with all the ensuing consequences,” Putin said last month when the issue first surfaced.
The commission originally said the program could violate sanctions, but said this week the proposal does not necessarily violate the sanctions, Reuters reported.
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“It would be advisable to seek confirmation from the Russian side that this procedure is possible under the rules of the decree,” the document said. Companies should make clear statements that they consider contractual obligations fulfilled when they make their deposits.
All payments were still to be made in the originally agreed currency, which would be made almost exclusively in dollars or euros. Brussels said in the document that there are options that could allow companies to continue to legally pay for gas, but the procedure for securing exemptions is not yet clear.
The advice is not legally binding but highlights the complications of sanctions against Russia for its invasion of Ukraine.
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The Russian economy is still suffering from the sanctions, which are likely to tighten in the coming months. The US and UK have cut all Russian energy imports, and Poland is working to reverse its own commitments.
Other European countries like Germany are trying to emulate but are struggling to divest themselves of their main energy source. European companies signed contracts to pay for oil and gas in dollars or euros – both currencies of no value to Russia as long as Western sanctions remain in place.
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“What his ideas are about how that can happen, we’re going to take a close look now,” Scholz told reporters in Berlin after the original proposal for Moscow’s workaround. “But it is definitely true for companies that they want to and can pay in euros.”
Companies still have the opportunity to open accounts and discuss options with Gazprombank, according to the commission.