European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman/File Photo
European Union energy ministers will meet in an emergency meeting on Monday to try to come up with a united response to Moscow’s demand that European buyers pay for Russian gas in rubles or face having their supply cut off.
Last week, Russia cut off gas supplies to Bulgaria and Poland after they failed to comply with its demand that they pay in rubles.
These countries had already intended to stop using Russian gas this year and claim they will be able to manage, but it has sparked fears that other EU countries, especially Germany, Europe’s gas-dependent economic powerhouse, could follow suit.
It has also threatened to crack the EU’s united front against Russia amid disagreement on the right course of action.
With many European companies facing gas payment deadlines later this month, EU states have a pressing need to clarify whether companies can keep buying the fuel without breaching the EU’s sanctions against Russia over its invasion of Ukraine.
Moscow has said foreign gas buyers must deposit euros or dollars into an account at the privately owned Russian bank Gazprombank, which would convert them into rubles.
The European Commission has told countries that complying with Russia’s scheme could breach EU sanctions, while also suggesting countries could make sanctions-compliant payments if they declare the payment complete once it has been made in euros and before its conversion into rubles.
After Bulgaria, Denmark, Greece, Poland, Slovakia and others last week urged clearer advice, Brussels is drafting extra guidance.
Russia on Friday said it saw no problem with its decree, which considers the buyer’s obligation fulfilled only after the hard currency has been converted to rubles. Read full story
While Bulgaria and Poland refused to engage with Moscow’s scheme, Germany has echoed the Commission’s workaround to allow companies to pay, and Hungary has said buyers can engage with Russia’s mechanism. Read full story
Payments in rubles can help to shelter Russia’s economy from the impact of sanctions, while the fuel revenues can help to finance what it calls a special military operation.
EU countries have paid more than 45 billion euros ($47.43 billion) to Russia for gas and oil since it invaded Ukraine on February 24, research organization the Centre for Research on Energy and Clean Air found.
Russia supplies 40 percent of EU gas and 26 percent of its oil imports, a dependency that means Germany and others have so far resisted calls for an abrupt halt to Russian fuel imports for fear of economic damage.
The EU is edging towards a ban on imports of Russian oil by the end of the year, diplomats said, after talks between the Commission and EU countries at the weekend ahead of meetings this week.
Ambassadors will discuss at a meeting on Wednesday a sixth package of EU sanctions against Moscow being drafted by the Commission.
Ministers on Monday will also discuss the need to urgently secure non-Russian gas supplies and fill storage, as countries brace for supply shocks.
Dependency on Russian gas varies between countries, but analysts have said an immediate total cut-off of Russian gas would plunge countries, including Germany, into recession and require emergency measures such as factory closures to cope.
Austria, Hungary, Italy and Slovakia also had reservations over the weekend about the idea of an oil embargo, diplomats said.
The Commission will later this month unveil plans to end Europe’s dependency on Russian fossil fuels by 2027, including by expanding renewable energy and renovating buildings to consume less.