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Putin's gas requests create difficulties for EU countries - VG

Putin’s gas requests create difficulties for EU countries – VG

Russian President Vladimir Putin has demanded since the end of March that “unfriendly countries” pay for gas in rubles. This creates difficulties for gas-dependent EU countries.

Vladimir Putin’s demand for the ruble, the European Union’s largest for gas, presents a devious dilemma: risk breaching sanctions, or live with the fact that the tap can be turned off again.

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Recently, the energy crisis in Europe turned to another degree when the Russian energy giant Gazprom announced that the countries of the European Union, Poland and Bulgaria, would no longer receive Russian gas.

Russia is the largest exporter of gas to Europe and covers about 40 percent of the European Union’s gas needs.

European Union energy ministers are due to meet on Monday for an emergency meeting to discuss the now-creating gas crisis.

Russia earlier this week halted all gas exports to Poland and Bulgaria because the two countries do not agree to the ruble payment clause.

– blackmail

Gazprom justified its decision to close the gas tap with the refusal of Poland and Bulgaria to pay in rubles, as demanded by Russian President Vladimir Putin.

European Commission President Ursula von der Leyen was quick to warn companies not to bow to Putin’s demands for a currency.

We will not allow our sanctions to be circumvented. She said the time when energy could be used to blackmail us is over.

At the same time, she clarified that payment for gas supplies in rubles is a violation of EU sanctions against Russia, unless this is written in the contract. According to von der Leyen, 97 percent of gas contracts in the EU state that payment must be made in euros or dollars.

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EU Commission President Ursula von der Leyen warns companies not to give in to Russia’s demand to pay in rubles, unless the contract provides for it.

complete confusion

But there is confusion among EU member states over what is actually a violation of sanctions imposed as a result of Russia’s invasion of Ukraine. Several countries have asked the commission for clarification, among them the reports of Denmark, Finland, Greece, Slovakia and Spain Reuters.

Meanwhile, several European energy companies are writing to agree to the Russian demands financial times. Among them are the German company Uniper and the Austrian OMV, while the Italian company Eni is considering various alternatives.

Hungary announced in late April that it would pay for Russian oil and gas in rubles.

In addition, four so far unnamed European gas companies paid for gas in Russian currency, a source close to Gazprom claimed to Bloomberg at the end of the same month.

Warns against paying the ruble

The European Commission, for its part, warns that dealings in the ruble could lead European companies into a legal quagmire.

“If the contract stipulates that the payment will be made in euros or dollars, then the company has fulfilled its obligations as soon as the payment is made in euros or dollars,” Commission spokesman Eric Mammer told a news briefing.

– If the payment is made in rubles, then this is no longer in line with the contract, and then we are talking about circumvention of sanctions, he said.

Russia’s requirement means that European customers must open two accounts to pay for gas at Gazprombank: one in foreign currency and one in rubles. Payment is made in dollars or euros, which are then transferred through the bank to the ruble account.

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From the Russian side, the payment is not considered complete until the currency is exchanged for rubles. The move includes the Russian Central Bank – which is on the EU sanctions list, many media outlets write.

Divide and conquer

In the European Union, Russia’s currency requirements are interpreted as an attempt to sow discord among member states, which depend to varying degrees on Russian gas shipments.

As far as NTB understands, Gazprom has the opportunity to exempt certain countries from the requirement to pay the ruble. In EU circles, it is seen as an opportunity for Russia to create conflict.

The other question is whether Russia will cut off gas supplies to other EU countries as well. In mid-May, the gas bill for a number of European companies are due.

Germany, which relies heavily on Russian gas, has warned that the country could enter a recession if the crane is suddenly turned off again.

Poland, for its part, has taken steps to become independent of deliveries from Russia, including by building an LNG import terminal. Bulgaria says it has enough gas for now, writes city council news for the Associated Press.

Work with the power plan

Meanwhile, the European Commission is working on a detailed plan to phase out gas, oil and coal from Russia. It must be submitted by the end of May.

The Commission also called for a requirement to fill gas reserves by 80 percent before winter. It may contribute to higher gas prices in the short term, but it would also provide the EU with an important buffer if Putin stops delivering.

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The goal is to reduce Russian gas use by two-thirds by the end of the year. By 2027, it will be completely phased out.