Russia’s decision to suspend gas supplies to Poland and Bulgaria for refusing to accept the new payment system devised by the Kremlin has opened a rift in the European Union between the most inflexible countries with Moscow and those in favor of seeking an accommodation for maintain energy imports. The European Commission has tried to clarify the situation with guidelines that allow it to maintain relations with Gazprom, the Russian gas giant, without violating Western sanctions against the Vladimir Putin regime. But the toughest within the community club are advocating a complete break and an end to imports that contribute billions of euros to finance the Russian invasion of Ukraine.
Are sanctions against Russia being violated?
No. Sources from the European Commission have assured this Thursday: “We have no evidence that any European company has violated the sanctions.”
But are they importing Russian gas and putting money into the Russian bank Gazprombank?
Yes. In fact, it is estimated that Russia has earned 46,000 million euros since the beginning of the invasion of Ukraine (on February 24) thanks to energy exports to the EU. And of that amount, more than 26,000 have been for gas purchases, according to data from the CREA energy study center.
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These operations do not violate sanctions because the EU has not vetoed Russian oil or gas purchases, only coal. And the financial sanctions also excluded Gazprombank, precisely because that entity is the one that was usually used to pay for imports.
Why then have they cut off the supply to Poland and Bulgaria?
Because those two countries have refused to accept the change in the payment system that the Putin government approved by decree on March 31.
What does that system consist of?
The new scheme requires European gas customers to open two accounts at the Russian bank Gazprombank: the first one in euros or dollars, the second, called the “K” account, in rubles. The client should enter the money in the first, but Moscow considers that the debt is not settled until the sum is transferred and converted to rubles in the “K” account.
Does the new scheme violate sanctions?
Brussels sees problems in opening the “K” account in rubles and in accepting that the debt is not paid off until the money in rubles is transferred to it. “It would be violating the sanctions,” say community sources.
What is Brussels afraid of?
The European Commission fears a ruse by the Kremlin to use Gazprombank as a central bank. Brussels believes that in the journey of the money from the account in dollars or euros to the “K” account, an indeterminate window of time could be opened in which the Russian central bank could dispose of the foreign currency at will. This could even come to be considered “as a loan” from EU companies to Moscow.
Have EU companies opened ruble accounts as required by Moscow?
The Commission says no: “There is no formal indication that any company has opened an account in rubles,” says a community source. Instead, Bloomberg said on Wednesday, citing sources close to Gazprom, that four European buyers had already paid in rubles and up to 10 had opened “K” accounts in Russian currency. The Commission understands that it could be false information: “Not everything that is seen coming from Russia is really true,” say sources from the EU Executive.
How can European companies pay without violating sanctions?
Brussels believes that European customers should continue to pay in dollars or euros, as specified in 97% of contracts, according to data from the Commission. The Community Executive considers it acceptable to follow the Kremlin system only partially: open an account in euros or dollars at Gazprombank and deposit the money into it, considering the debt settled at that time.
What can EU companies do?
The Commission proposes to European companies that they make a “clear statement” that they intend to fulfill their obligations in euros or dollars and that they ask for confirmation from the Russian side that this procedure, which only partially follows the Russian scheme, is possible under the new Kremlin regulations, according to an official guide published last week.
Is the debt paid off?
Brussels is aware that the decree is mandatory for the Russian counterpart, and that it “asks for the money to be converted into rubles,” according to Commission sources. Therefore, nobody really knows if Putin will accept the formula proposed by Brussels or if, understanding that the debt has not been paid, he will proceed to cut off the flow of fuel, as he has done with Poland and Bulgaria.
Is this the mechanism that Poland and Bulgaria have chosen?
No. Neither Poland nor Bulgaria have wanted to fully or partially accept the new two-account scheme proposed by the Kremlin, according to community sources. “They have maintained their original payment schemes,” they say from the Commission. The initiative of Warsaw, one of the most belligerent capitals against Moscow, in favor of an immediate embargo on Russian energy, seems aimed at executing this veto by deeds, while the Twenty-seven fail to agree on turning off the tap of Putin’s income.
Will Moscow cut off gas to other countries?
There is no answer to this question yet. It may or may not happen. It will be seen in the coming weeks, as the gas payment deadlines of the different EU customers expire.
What does Brussels advise?
“Companies should continue to pay for gas in euros as usual,” proposes a community source, although uncertainty will continue to float in the air. “There is always a risk when you pay for gas to a supplier in the situation that Russia is in right now,” she concludes.
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