EU provides wriggle room for companies buying Russian gas
The European Union (EU) has offered companies with a get-out from sanction busting, with the bloc still highly dependent on Kremlin-backed fossil fuels to meet its energy needs.
Its executive arm, The European Commission, has told EU countries that companies can open accounts at designated banks and pay for Russian gas.
Updated guidance from the commissions, shared with EU countries last week and seen by news agency Reuters, outlines that transactions can be defined as completed when the agreed currency is paid.
The trading bloc is still reliant on Russia for around 40 per cent of its supplies, raising the prospect of supply shortages this winter if companies and countries become unable to trade natural gas.
The clarification follows Russian President Vladimir Putin signing into law demands for “unfriendly'” overseas buyers, including EU nations, to pay for Russian gas supplies in roubles.
His decree confirmed that a transaction would only be deemed complete by Russian authorities after the foreign currency was converted to roubles.
The Kremlin is demanding EU businesses and nations set up Gazprombank accounts which will convert euros or dollars into roubles prior to the transaction.
This would not specifically be allowed under the latest update from the European Commission, with nearly all of the supply contracts between Russia and the West are in euros and dollars.
However, if companies sign off deals as completed as soon as euros are placed in banks – it would remove their potential culpability for sanction busting.
Gazprombank is currently not included in EU sanctions, but such conversion processes would likely involve Russia’s central bank, which is under trading restrictions.
Kremlin keeps the pressure on Europe
Russia has routinely engaged in retaliatory measures following the West’s imposition of multiple sanction packages on the country following the invasion of Ukraine.
The Kremlin has already ordered for gas supplies to be shut off to Poland and Bulgaria after both countries failed to pay in roubles, and also cut off all exports of electricity to Finland today after the country pledged to join NATO.
Several EU governments and large importers have since sought more clarity from Brussels on whether they can keep buying gas, which heats homes, produces electricity and powers factories across Europe.
The bloc is also edging slowly towards oil sanctions, although Hungary is continuing to withhold support for the measure – which is seen as the key feature of the EU’s proposed sixth package of measures against the Kremlin.
However, reflecting the current malleability of its measures, it has already provided Czechia, Slovakia and Bulgaria an extended window to phase out supplies.
The three countries will have two years rather than six months to stop buying Russian oil.
This reflects the Europe’s desperation to meet its consumption needs, and the required brinkmanship to get heavy sanctions over the line.