Gazprom PJSC, a Russian state-owned energy company, has written to its European customers to reassure them that they can continue to pay for gas without breaching sanctions.
This comes after European Commission proposed a total ban on Russian oil imports to the European Union. The EU’s planned ban on Russian oil comes after Russia fought back against Western sanctions by demanding oil payment in rubles.
Gazprom told clients in a letter seen by Bloomberg that a fresh order issued by the Kremlin on May 4 “clarifies the procedure” outlined in the initial decree on ruble payments.
What you should know
- Poland and Bulgaria were first to be cut off for refusing to engage with the new terms, but several European companies continue to look for workarounds, seeking guidance from the European Commission on what is allowed.
- It’s unclear whether the revised directive will satisfy the European Union’s concerns, which have stated that opening a ruble account and engaging with the central bank would violate sanctions.
- According to the new legislation, foreign cash received from buyers must be converted to rubles through accounts at Russia’s National Clearing Center.
- The measure, according to Gazprom, ensures transparency of financial flows from foreign buyers and eliminates the prospect of any “third party” being engaged in settlements. The sanctioned central bank appears to be excluded from the procedure as written.
- Nairametrics reported that despite European Commission’s proposed oil ban, the Russian ruble has shown extraordinary resilience, rising over 10% against the dollar and euro within a week. The Russian ruble soared to a two-year high against the dollar and the euro today. Despite decreasing interest rates twice in a short period, the ruble has maintained its upward momentum.
What is the dispute?
Russia has requested that businesses open two accounts, one in euros and the other in rubles.
The EU has said this gives too much power to Moscow and breaches sanctions on the central bank. The EU suggests companies pay in euros and seek confirmation from the Russian side that the transaction ends there.
The EU recommends that companies continue to pay for Russian gas in euros.
Russia’s central bank released its clarification of Putin’s original decree in late April.
The Bank of Russia stated that if international gas buyers paid in good faith into their foreign-currency accounts, the gas would not be switched off even if Gazprombank failed to transfer the payments into ruble, as long as the delay was not caused by sanctions.