European Commission president Ursula von der Leyen speaks to the press in Brussels on Wednesday. (Photo by Thierry Monasse/Getty Images)
Berlin (CNSNews.com) – Russia’s energy giant Gazprom on Wednesday ended natural gas supplies to Poland and Bulgaria, citing their refusal to pay in the Russian currency, in a move seen as retaliation for Western-led sanctions over the invasion of Ukraine.
Although Russia accounts for 90 percent of Bulgaria’s gas consumption and 50 percent of Poland’s, the two governments sought to assure their citizens that supplies would not be disrupted by the Gazprom move.
Bulgarian Prime Minister Kiril Petkov said a new Greece-Bulgaria gas interconnector pipeline, expected to be completed in June, would support the country’s diversification of supplies.
Polish Climate Minister Anna Moskwa said the gas storage facilities were at 76 percent capacity, and that liquefied natural gas (LNG) deliveries were increasing.
European Commission president Ursula von der Leyen, in remarks focused on the bloc’s ongoing efforts to wean itself off Russian energy, announced that Poland and Bulgaria would now receive gas from their E.U. neighbors.
A Lithuania-Poland gas interconnector is set to begin operation on May 1, and Greek Prime Minister Kyriakos Mitsotakis told Petkov in a phone conversation Wednesday that Greece would deliver LNG to Bulgaria.
She also recalled a recent agreement with the United States to provide additional supplies of LNG this year and the years following.
Von der Leyen said the bloc was also working to “ensure alternative deliveries and the best possible storage levels across the E.U.” and would “continue working with international partners to secure alternative flows.”
Earlier in the day, von der Leyen warned companies in the E.U. against acceding to Moscow’s controversial demand for gas customers to pay in rubles.
“To pay in rubles, if this is not foreseen in the contract, is a breach of our sanctions,” von der Leyen told reporters in Brussels on Wednesday, following an emergency meeting of member states.
“Ninety-seven percent of gas contracts explicitly stipulate payment in euros or dollars,” she said. “Companies with such contracts should not accede to the Russian demands. This would be a breach of the sanctions, so high risk for the companies.”
President Vladimir Putin announced on March 23 that “unfriendly” countries” will have to begin paying for gas in rubles from April 1.
The E.U. effectively ignored the demand, telling member states that doing so would violate international sanctions, but a Bloomberg report has alleged that some unnamed European buyers have already begun to pay for gas in rubles.
Reuters reported on Monday that the German energy utility company Uniper announced it would continue buying gas without breaking sanctions, using a mechanism that allows for payments in euros, which are then converted to rubles by Russia’s Gapzrombank.
(The Kremlin has told gas customers to set up two special accounts at Gazprombank, one for foreign currency and one for rubles. After they transfer payment for gas in the currency stipulated in the contract into the first account, the bank will convert the funds to rubles on Moscow’s currency exchange and credit it to the associated ruble account, from which payment will then be made to Gazprom.)
A European Commission spokesperson said in response to queries that after careful analysis of Putin’s decree, guidance provided to member-states says that the decree “does not preclude a payment process which is in line with the E.U. restrictive measures.”
“E.U. companies can ask their Russian counterparts to fulfill their contractual obligations in the same manner as before the adoption of the decree, i.e. by depositing the due amount in euros or dollars,” she said.
Kremlin spokesman Dmitry Peskov defended the demand for gas payments in rubles.
“This is not blackmail,” the state news agency TASS quoted him as saying. “Russia has been and remains a reliable energy supplier to its clients, and Russia remains committed to its contract obligations.”
Peskov said the requirement for a “new payment method” was “dictated by the unprecedented hostile steps in economy and finance areas, take by unfriendly states against us.”
“This necessity (to switch to ruble payments) was dictated by the fact that we had a rather significant sum of our reserves blocked, or, as we say it in Russia, stolen from us,” he added.
“Putin is taking a couple of chances here, that Europe needs fuel more than it needs to sanction Russia (which, in reality, it does), and that counties like China and India can pick up the slack if the Europeans refuse to buy fuel in rubles,” said Tony Alexiou, the founder of international geopolitical risk assessment firm The Minotaur Group.
“On the flip side, if neither happens, Russia is going to have some significant economic problems, which very well could become political ones,” Alexiou said.
“In the end, it comes down to whether the E.U. feels that buying in rubles violates sanctions and, if it does, would they care if they run out of fuel?” he said. “That’s what Russia is banking on.”
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