EU Gives Companies Green Light to Keep Buying Russian Gas

By Ewa Krukowska and Alberto Nardelli (Bloomberg) —

The European Union said companies can keep buying could keep buying gas without breaching sanctions, as it softened its stance in a standoff with Moscow over energy supplies.

The European Commission sent its revised guidelines to member states on Friday, a spokesperson said on Monday. In the updated recommendations, it said companies should make a clear statement that they consider their obligations fulfilled once they pay in euros or dollars.

EU sanctions “do not prevent economic operators from opening a bank account in a designated bank for payments due under contracts for the supply of natural gas in a gaseous state, in the currency specified in those contracts,” the commission said. “Operators should make a clear statement that they intend to fulfil their obligations under existing contracts and consider their contractual obligations regarding the payment already fulfilled by paying in euros or dollars, in line with the existing contracts.” 

The guidance does not prevent companies from opening an account at Gazprombank and will allow them to purchase gas in accordance with EU sanctions following Russia’s invasion of Ukraine. But it stops short of addressing the requirement by Moscow to open a second account in rubles, which according to a decree by President Vladimir Putin is needed to make the payment complete. The guidance matches what Bloomberg reported on Saturday.

European gas prices extended losses on Monday.

European companies are starting to move ahead to comply with Russian demands and keep the gas flowing. Italian energy giant Eni SpA will move to open accounts in rubles and euros with Gazprombank by Wednesday so that it can make payments on time this month and avoid any risks to gas supplies, according to people familiar with the situation.

The company was waiting for those guidelines to be formally published before acting, one of the people said. 

German giant Uniper SE and Austria’s OMV AG have also said they expect gas purchases to continue. 

German Economy Minister Robert Habeck expressed optimism Monday that German utility companies will be able to make their next gas payments to Moscow, despite the sanctions regime and Moscow’s new rules. 

“The companies will pay their next bills in euros,” Habeck told reporters during a tour of the Leuna refinery in eastern Germany. EU sanctions would still allow Russian banks to transfer this money internally to “so-called K accounts,” he added, leaving it open whether these would be euro or ruble accounts. “That is, in my view, in conformity with the sanctions, also according to the EU commission,” he said.

Polish Prime Minister Mateusz Morawiecki criticized the EU for softening its stance on ruble payments. 

“I am disappointed to see that in the European Union there is consent to pay for gas in rubles,” he said on Sunday. “Poland will stick to the rules and will not yield to Putin’s blackmail.” Russia halted gas flows to neighboring Poland in late April.  

In full, the EU guidance says: 

“Council Regulation (EU) 833/2014 and Council Regulation (EU) 269/2014 do not prevent economic operators from opening a bank account in a designated bank for payments due under contracts for the supply of natural gas in a gaseous state, in the currency specified in those contracts for the fulfilment of payments pursuant thereto, provided that payments are made in that currency, under normal commercial conditions, it being understood that such payments in that currency discharge definitively the economic operator from the payment obligations under those contracts, without any further action from their side as regards the payment. For that purpose, those operators should make a clear statement that they intend to fulfil their obligations under existing contracts and consider their contractual obligations regarding the payment already fulfilled by paying in euros or dollars, in line with the existing contracts.”

–With assistance from Alberto Brambilla, Chiara Albanese and Arne Delfs.

© 2022 Bloomberg L.P.