Buzz Update Putin’s ruble stalemate with Europe is causing real gas sanctions TOU

Buzz Update Putin’s ruble stalemate with Europe is causing real gas sanctions


Putin’s ruble stalemate with Europe is causing real gas sanctions

(Bloomberg) – The European Union and Russia are at risk of imposing genuine sanctions on Russian gas, as the coalition’s lawyers have drawn the preliminary conclusion that the mechanism demanded by President Vladimir Putin to pay in rubles violates the blockade’s sanctions.

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Countries, including Germany, are still considering a preliminary EU assessment that Putin’s ruble demand violates sanctions imposed by Russia on its invasion of Ukraine. The Netherlands has told its energy companies to reject the new payment system in light of EU legal analysis.

Russia can still provide explanations or adjustments to its decree that will affect how the EU and companies move forward. Moscow is taking in nearly 1 billion euros a day in energy purchases from Europe, which has helped protect it from the impact of EU sanctions.

If Russia follows its threat to cut off gas supplies, it will pose a serious threat to the EU, which receives 40% of its gas from Russia. The Coalition is trying to find alternative energy sources in line with the external leverage that Moscow has on its security, but the transition will take time. The EU is working on its sixth sanctions package, but moves to target Russia’s power are fraught with dependence on the alliance.

According to a joint estimate by financial institutions, a sharp reduction in gas supplies could hurt Germany’s production of 220 billion euros ($ 238 billion) over the next two years. This equates to an annual output cut of 6.5% and this will push the country into a recession of more than 2% next year.

On March 31, Putin issued a decree directing “unfriendly” buyers of gas to open accounts with Gazprombank, both in foreign currency and in rubles. Russian bank converts foreign currency payments into rubles before transferring payments to state-owned gas company Gazprom PJSC.

A preliminary analysis by lawyers for the European Commission, the executive branch of the EU, found that payments using this system would violate block sanctions, according to someone familiar with the matter. Another source said the European Council’s lawyers, an organization comprising leaders of 27 member countries, agreed with the commission’s estimate.

The commission aired the analysis to member states this week, saying the government needed to notify 150 companies that have gas contracts with Russia. The EU said it plans to provide more guidance on the situation to help countries and companies.

The Netherlands told its companies this week to reject the new gas-payment terms demanded by Russia. “The Dutch government agrees with the conclusion of the European Commission,” Bloomberg, a spokesman for Dutch economic affairs and climate policy, told PTI. “This means that Dutch companies will not be allowed to accept these terms.”

New sanctions package

Gazprom gas exports to the Netherlands were relatively low by regional standards, accounting for only 4% of shipments made by Russian gas giant EU and Turkey in the first half of last year.

German Finance Minister Robert Habeck accepted the commission’s report to Politico, “We cannot allow sanctions to be passed through the back door.” However, he did not elaborate on what action Germany would take if his government agreed with the estimate.

Read more: Germany’s Fastian deal with Russia chases industrial giants

Germany was particularly exposed, as half of its gas and coal came from Russia.

According to a source close to the matter, the commission is working on a package of six sanctions that would impose restrictions on certain oil imports and goods, but member states, including Germany, Austria and Hungary, have expressed reservations over the full ban. However, two separate officials said the commission was unlikely to make any specific representations until after the second round of the French election on April 24.

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