The EU proposed options for paying for Russian gas without violating sanctions

The European Commission confirmed that the scheme of paying for Russian gas in rubles is contrary to the EU sanctions regime.One of the options proposed by the European Union is to consider only the transfer of currency to Gazprombank as the fulfillment of payment obligations

The European Commission confirmed that the new scheme approved by RUSSIA for payments in rubles for Russian gas by companies from countries recognized by Moscow as unfriendly would potentially conflict with the European sanctions regime. RBC got acquainted with the document dated April 21, which contains explanations from the European Commission on the issue of paying for Russian gas.

Why did the EU consider the decree on gas payment violating sanctions

EU companies can legally comply with the requirements of the Russian presidential decree No. 172 on the procedure for paying for gas supplies, only if this does not run counter to the norms of the EU sanctions regulations against Russia, first approved in 2014, the European Commission emphasizes. In mid-April, BLOOMBERG and Politico reported, citing a non-public EU legal preliminary assessment, that the scheme Russia is pushing for would amount to circumventing existing sanctions.

According to the regulator, the procedure for the mandatory conversion of euros or dollars transferred by European importers to a special foreign currency account with Gazprombank into rubles, followed by transfer to a special ruble account and transfer of this payment to Gazprom's account with Gazprombank, may qualify as a foreign currency loan to this bank from the European companies. Sectoral sanctions in 2014 prohibit Europeans from providing Gazprombank and a number of other Russian banks with new loans for a period of more than 30 days. “The conversion process may take an indefinitely long time, during which the foreign currency will be entirely in the hands of the Russian authorities,” the European Commission believes.

Peskov refused to name countries who agreed to pay for gas in rubles Politics

In addition, Brussels fears that the payment scheme will also involve the Bank of Russia "through a series of transactions related to the management of assets and reserves of the Central Bank of Russia, which is prohibited by European sanctions." The decree on payment for gas supplies states that Gazprombank will sell the currency received from a foreign buyer at organized auctions on the Moscow Exchange. However, the Board of Directors of the Bank of Russia has the authority to determine a different procedure for the sale of foreign currency. From April 1, the Central Bank also determined the regime of special bank accounts for gas payments with foreign importers. RBC sent a request to the press service of the Central Bank.

President Vladimir Putin, explaining the need to transfer payments into rubles, stated that in the case of further gas supplies and their payment according to the traditional scheme, new financial receipts in euros or dollars could be blocked. According to him, "such a development of the situation is quite expected." Recalling the freezing of foreign exchange reserves by the Central Bank, Putin said: “In fact, what is happening, what has already happened: we have supplied European consumers with our resources, in this case, gas. They received it, paid us in euros, which they then froze themselves. In this regard, there is every reason to believe that we delivered part of the gas delivered to Europe virtually free of charge. Presidential spokesman Dmitry Peskov explained that the scheme to pay for gas in rubles was adopted so that Western countries could not arrest the dollars and euros Russia receives for gas.

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What compromise options does the EU offer?

The European Commission claims that even after the approval of the Russian decree on paying for gas in rubles, options remain on how to pay for Russian gas supplies without violating European sanctions.

The European Commission considered payment for gas in rubles as a circumvention of sanctions Politics

Firstly, the decree itself provides for exceptions: the government commission for the control of foreign investments can issue separate permits for the continuation of settlements in foreign currencies. European companies can ask the Russian side to fulfill their obligations to pay for gas in the same manner as it was done before the decree, the EU regulator notes. “The decree does not prohibit payment in accordance with the restrictive measures of the EU. However, the procedure for granting exceptions to the requirements of the decree is not yet clear,” the document says.

Secondly, European companies can transfer euros or dollars to a special account with Gazprombank and at the same time make a "clear statement" that their payment obligation is considered fulfilled, "in accordance with existing contracts." But for this, it will be necessary to obtain confirmation from the Russian side that such a procedure is permissible under Decree No. 172, Brussels points out. It now follows from the text of the decree that the foreign buyer's obligation to pay for gas supplies is considered fulfilled from the moment the funds received from the sale of foreign currency are credited to Gazprom's ruble account in Gazprombank. President Vladimir Putin asked the government to instruct Gazprom to amend existing contracts in terms of the currency of payment.

The European Commission also notes that the European clients of Gazprom have the right to negotiate with him or Gazprombank to find a mutually acceptable solution. Also, buyers of Russian gas are not prohibited from opening foreign currency accounts with Gazprombank.

RBC sent requests to Gazprom, Gazprombank, as well as to the government, where the request was forwarded to the Ministry of Finance.

“Indeed, Decree No. 172 establishes a different procedure for making payments, however, Decree No. 295 states that all applications to the subcommittee [on issuing permits for transactions with non-residents] are submitted by the body responsible for such decisions, in this case, such body is the Ministry of Energy of Russia. To date, no such applications have been received. The subcommittee will ensure prompt consideration of the recommendations of the Ministry of Energy as part of its work, ”the press service of the Ministry of Finance told RBC. RBC sent a request to the Ministry of Energy. The office of Deputy Prime Minister Alexander Novak, who oversees the fuel and energy complex, declined to comment.

To date, no company from the European Union has been reported that has begun paying for Russian gas in rubles. The only EU country that declared its readiness to pay for gas in Russian currency was Hungary.

How much Russian gas Europe buys

In 2021, the EU imported 155 billion cubic meters from Russia. m of natural gas (pipeline and LNG) in the amount of €17.8 billion, followed from the data of the European Commission.

The Federal Customs Service and the Bank of Russia have suspended monthly publication of data on Russian exports, so it is not yet possible to say exactly how much natural gas Russia has been supplying since February. At the same time, Gazprom itself publishes timely data on gas supplies to the EU in three directions (Nord Stream-1, Belarus, Ukraine), says Otkritie Investments analyst Alexei Kokin. According to him, in January 2022, the drop in supplies to the EU by January 2021 was close to 40%, at the end of February, the volumes increased, in March, the year-on-year decline was only 17%. “In April, the fall accelerated, probably due to warm weather in Europe, in recent days it is again approaching 40%,” adds Kokin.