EU warns energy companies would breach sanctions by paying in roubles

Energy companies that comply with a demand by Russia to pay for gas by opening a rouble-denominated bank account would be in breach of European Union sanctions, and member states have unanimously agreed not to comply, EU officials have said.

The warning follows reports that some companies were preparing to comply with a Russian decree that payments for gas should be made in roubles, seen as a move to support the value of the currency and weaken the effect of sanctions imposed over the invasion of Ukraine.

“There is consensus on this from all member states that none is willing to pay in in roubles,” an EU official said. A second official said complying with the Russian decree would be “clearly a breach of the sanction”.

Currently, 97 per cent of EU purchase contracts for Russian gas stipulate payment in dollars or euros. The Russian decree requires energy companies to deviate from the usual system by which they pay for gas deliveries, which involves sending payments to a Gazprombank account in Luxembourg.

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To comply with the new requirements, the companies must open a new rouble-denominated bank account with Gazprombank. They would pay in the usual dollars or euros into one bank account, and this would then be converted into roubles via a transfer to the rouble-denominated bank account, at which point the payment is considered complete. Gas distributors in Germany, Austria, Hungary and Slovakia are reportedly planning to open rouble accounts at Gazprombank in Switzerland.

A second EU official said this system of double bank accounts could even be considered “a loan by the European companies to the Russian central bank”.

“It will be a transaction, an implicit transaction with the central bank of Russia,” the official said, making this a “clear breach” of sanctions that forbid transactions with the central bank.

“The payment is only properly completed once the euros have been converted into roubles. And we don’t know how long that will take. And of course, during that period of time, the Russian authorities can do whatever they want with the money,” the official said.

If companies continue to pay in the normal way as set out in their gas purchase contracts however, it will not be in breach of sanctions, officials said.

Played down

The officials played down a report by Bloomberg that cited a source close to the Russian energy giant Gazprom, that four companies had already made payments through the rouble system and that ten had opened rouble bank accounts. "Not everything that you see coming from Russia is actually true," the first EU official said.

National authorities in EU members states are charged with the task of enforcing whether sanctions are being followed by companies.

This week Russian state energy giant Gazprom cut off gas supplies to Bulgaria and Poland on the grounds that they had not made payments in roubles, escalating the economic conflict with the EU in the fallout of the war.

German vice-chancellor and economy minister Robert Habeck said on Wednesday that the Russian payment mechanism was "the path that the EU marked out for us".

“It’s the path that is compatible with sanctions, and as far as I understand the German companies that are doing it this way are in compliance with their contracts,” he said. “Most EU countries are taking this approach.” – Additional reporting: Copyright The Financial Times Limited 2022