The European Union warned its member countries that President Vladimir Putin’s demand for “unfriendly” countries to pay in rubles for Russian gas would be a violation of the sanctions imposed upon Moscow after its invasion.
According to someone familiar with the matter, the European Commission, which is the EU’s executive branch, has presented its analysis of Putin’s decree. This assessment raises concerns about Europe’s energy security, as Putin threatened to stop gas supplies to customers who don’t follow the decree.
Putin’s March 31 request requires that European gas buyers open two accounts in foreign currencies and one in rubles. Gazprombank is responsible for converting foreign currency into rubles and the transfer of the ruble payment to Gazprom.
The preliminary legal analysis of the commission found that Putin’s decree significantly alters the process and creates new legal situations. This was stated by the person who requested anonymity because it is confidential.
The decree’s operational meaning is still unclear to both European governments and companies. According to the person, the EU would collaborate with national authorities to inform European businesses that have contracts about the assessment and provide guidance. The Dutch government supported the EU analysis and stated that it wouldn’t permit its companies to comply with the Russian payment demand.
Putin will host an energy meeting Thursday. This may give more information about payments for Russia’s fuel in rubles. According to Interfax, logistics issues and payments for Russian oilmand gas exports will all be addressed at the meeting.
Benchmark Dutch front-month gas futures dropped as much as 5.6%, to 99.48 euros/ megawatt-hour. They were also down 4.3% at 11:01 AM in Amsterdam. Trading and demand tend to slide before holidays due to the Easter break. The U.K. equivalent contract fell 7.6%
According to an analysis, the new process would give the Russian state total control through its central bank over when and how the transaction is completed. This would give Russia complete control over the exchange rate, which Moscow could manipulate for its advantage.
According to the person, the analysis indicated that the new method could cause additional costs for the buyer as Russia would control the transaction.
Importantly, the mechanism would violate restrictive measures that the EU took in response to Moscow’s invasion in Ukraine. This includes sanctions that were applied to Russia’s government, its central banks, and their proxies. Gazprombank could also issue other bans on money-market instruments.
Many member states have stated that they won’t pay for gas in rubles. Germany
