Germany has ceded to Russian President Vladimir Putin’s demand to pay for Russian gas with roubles.
It will make its payments through an opaque euro-to-roubles system, outlined by the Kremlin after Putin signed into law requirements last month for overseas buyers to pay for Russian gas supplies in the country’s currency.
This is despite the G7 and European leaders criticising the measure, with Germany previously insisting it will continue to pay for Russian gas in euros.
European Commission President Urusula von der Leyen warned yesterday that buyers of Russian gas could risk breaching sanctions imposed by the European Union (EU).
To purchase Russian gas, companies and countries will be required to open a Gazprombank account, which will convert euros and dollars into roubles before transactions are made.
Gazprom, which is backed the Russian state, has already halted supplies to Poland and Bulgaria after both countries failed to comply with the new payment system.
The intention of the new system is to support the value of the rouble, to bolster Gazprombank (which remains unto, and to retaliate against heavy Western sanctions since Russia’s invasion of Ukraine.
The trading bloc has imposed painful measures on Russia’s financial system, central bank, dozens of oligarchs and has imposed restrictions on coal imports.
Germany has announced plans to phase out Russian oil imports by the end of the year, a measure currently being weighed up by the EU for its upcoming sixth package of sanctions.
However, it has not made any commitments to reduce Russian gas supplies, with country reliant on Gazprom for over half its gas supplies, with the EU dependent on around Russia for around 40 per cent of its natural gas.
It recently triggered the early phase of emergency supply measures, which could lead to the country’s government seizing control of the nation’s gas supplies.
Robert Habeck, the German energy minister, justified the cave-in to Putin’s demands.
He argued the euro-to-rouble swaps had been given the legal green light by the European Commission and were compatible with sanctions and existing contracts with the Russian energy giant Gazprom.
The minister said: “German companies’ payments for gas will continue to be made in euros or dollars…in accord with the European sanctions regime. The companies have explained that the contractual commitments are satisfied with the payments in euros and dollars.”
Nevertheless, the European Commission reiterated von der Leyen’s warning that buyers of Russian gas could breach sanctions if they converted gas payments into roubles.
Officials have struggled to clarify the EU’s stance on Moscow’s payments scheme, which has sowed confusion in the bloc.
“Europe and Germany will make their payments in euros…and not in roubles, and the conversion after the payments are made is then a matter for Gazprom.”
Habeck’s comments follow a decision by Uniper, a private company that is the biggest Russian gas buyer in Germany, also use the procedure.
Meanwhile, Gazprom has reported record high profits of $29 bln in 2021, due to rising oil and gas prices.