Some of Russia’s biggest natural gas customers in Europe prepare to accept new Kremlin payment terms rather than risk being cut off by Moscow, fate suffered this week by Poland and Bulgaria.
Gas distributors in Germany and Austria have told CNN Business they are working on ways to accept a Russian ultimatum that final payments for its gas must be made in rubles, while respecting EU sanctions. .
Russian President Vladimir Putin said last month that “hostile” nations should pay rubles, rather than the euros or dollars quoted in contracts. Buyers could make payments in euros or dollars to an account with Russian bank Gazprom, which would then convert the funds into rubles and transfer them to a second account from which payment to Russia would be made.
Germany’s Uniper said on Thursday it would continue to pay for Russian gas in euros, but added it believed a “sanctions law-compliant payment conversion” was possible.
“Uniper is in discussions with its contract partner on the concrete terms of payment and is also in close coordination with the German government,” the company said in a statement.
A Uniper spokesperson told the Rheinische Post newspaper on Thursday that the company would make payments to a Russian bank in euros, instead of a European-based bank.
Germany has reduced its consumption of Russian gas to 35% of imports from 55% before the war in Ukraine, but says it must continue buying from Moscow at least until next year to avoid a deep recession.
Uniper said it could not do without Russian gas in the short term.
“It would have dramatic consequences for our economy,” he said in his statement.
Austrian energy company OMV (OMVJF) said on Thursday it had reviewed Russian gas giant Gazprom’s new payment request and was “currently working on a sanctions-compliant solution.”
On Wednesday, Putin followed through on his threat to cut off countries that refuse the new payment terms. Gazprom announced it had suspended gas supplies to Bulgaria and Poland because they refused to pay in roubles, fueling fears that other EU countries – including major importers of gas, Germany and Italy – could be next.
Escape from sanctions? There might be a workaround. The European Commission issued guidance to EU member states last week saying it “appears possible” that buyers could comply with the new Russian rules without coming into conflict with EU law.
EU governments will likely allow the payment mechanism to go ahead, Eurasia Group said in a note Thursday.
Deepen the story here.