EU Rejects Russia’s Ruble-For-Gas Scheme, Warns Of Supply Shock

At the conclusion of its Monday meeting, the European Union has said it will not heed Russian demands to pay for gas in rubles, with a mid-May deadline for payment looming. 

The bloc also warned its member states to prepare for Russia to cut off gas to all members. 

Failure to meet Russian demands on this point have already resulted in gas being cut off to Poland and Bulgaria last week. 

European energy commissioner Kadri Simson said on Monday that all energy ministers across the bloc had acknowledged that paying in roubles would represent a breach of sanctions against Russia for its invasion of Ukraine. 

According to the Guardian, several EU countries are in a position in which they have to renew supply contracts by the end of this month and may be considering a loophole–one that the Kremlin itself has suggested. The loophole would reportedly have a buyer open two accounts at Gazprombank–a euro or dollar account and a rouble account, with payments deposited into the Western currency account and then transferred to the ruble account after passing through the Russian Central Bank, which is sanctioned.  

According to Simson, using this loophole would violate sanctions. 

“Many European energy companies are due to make the next payment to Gazprom in mid-May and are trying to understand better what they should do and we need to give them the clarity that paying in roubles through the conversion mechanism managed by the Russian public authorities and a second dedicated account at Gazprom bank is a violation of the sanctions and cannot be accepted,” the commissioner said. 

The announcement and the warning comes as the European Commission prepares to unleash new sanctions against the Kremlin on Tuesday. 

Also on Tuesday, the EU is expected to propose a phased-out ban on imports of Russian oil, but not Russian natural gas, over the next six to eight months, with possible exemptions for some countries–most notably, Hungary, which has threatened to veto a ban. 

In the coming days, according to Bloomberg, the EU will provide further guidance on payment for gas in rubles.

By Charles Kennedy for Oilprice.com 

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