Thierry Monasse | Getty Images News Getty Images The European Union is struggling to find alternative gas suppliers following the reduction of Russian Gazprom flows to two EU countries, sparking fears that more will follow. Developments come as Brussels fears nations and energy companies bypassing tough international sanctions on Russia – imposed on Moscow in the wake of its unprovoked invasion of Ukraine. Russia’s Gazprom, Russia’s state-owned energy company, cut off gas supplies to Poland and Bulgaria earlier this week after both countries refused to pay for the ruble – something President Vladimir Putin has called for amid growing support. of the West for Ukraine. The decision puts further pressure on the EU, which imports about 40% of all its gas from Moscow, to find alternatives. “It helps to open the eyes of those who still believe that Russia would not use gas as a lever,” an EU official told CNBC on condition of anonymity because of the sensitive nature of the situation. Russia. European Commission President Ursula von der Leyen went further on Wednesday, accusing the Kremlin of blackmailing the bloc. Kremlin spokesman Dmitry Peshkov has denied allegations that Moscow used its gas supplies to blackmail European countries into Poland and Bulgaria, saying Russia was a reliable energy supplier. He also declined to say how many countries agreed to switch to paying for gas in rubles, Reuters reported. But the pressure could escalate if Gazprom chooses to cut supplies to other EU countries. The Kremlin warned on Wednesday that other countries would face the same issue if they did not pay in rubles – something the Commission, the executive branch opposes as it would violate current sanctions. “Russia’s move to cut off gas supplies to Poland followed Berlin’s decision – under intense political pressure – to supply Ukraine with air defense weapons. The implicit threat is that Russia will cut off German gas supplies if “Berlin continues to send weapons to Ukraine,” analysts at Gavekal, a financial research firm, said in a note on Thursday. “The economic consequences would be catastrophic,” they added.
Payments in rubles
The Commission is therefore working to become less dependent on Russian gas. It signed an agreement with the United States earlier this year, where the EU will receive at least 15 billion cubic meters of liquefied natural gas this year. “We are working hand in hand with our Member States to secure alternative gas supplies from other partners,” von der Leyen also said on Wednesday. In the meantime, Brussels will have to decide how to continue to pay for Russian gas without violating the rules of the bloc. Russia issued a decree in late March saying European companies would continue to pay for gas in euros at Gazprombank – an institution not part of European sanctions – and that the cash would then be converted into rubles in a secondary account. these energy companies. The EU has decided to continue paying for Russian gas in dollars and euros at Gazprombank and then the institution converts it into rubles when it sends money to Gazprom. This is after the Russian gas company decided to cut supplies to Poland and Bulgaria because they did not pay for the goods in rubles. Bloomberg | Bloomberg | Getty Images But this is where the Commission has its concerns. The institution wants to ensure that as soon as European companies make the first payment in euros, then the contractual obligation will actually be fulfilled. The Commission is also wary of European companies having a second account with Gazprombank and the Central Bank of Russia that come into contact with this cash, possibly violating European sanctions. “EU and European officials continue to warn companies that ruble payments to Gazprom will violate sanctions,” analysts at consulting firm Eurasia Group said in a note on Thursday. The solution on the table is for Gazprombank to convert to rubles and pay this amount to Gazprom’s account. Hungary, for example, said on Thursday it would allow their gas payments to be converted from euros and dollars to rubles, as Putin had demanded. Media reports said nine other countries were also paying for their gas in euros at Gazprombank, which then converted them. German Economy Minister Robert Habek said such a move could be compatible with the sanctions imposed. Either way, the issue further blurs the deterioration of Europe’s economic prospects. Speaking to CNBC on Thursday, the governor of Italy’s central bank, Ignazio Visco, said that if Russia cut off all gas supplies, then his country would be in recession later this year and next year, albeit mediocre. Earlier this week, UBS CEO Ralph Hamers also expressed concern about how changes in gas supplies could affect the economy. “Russian gas is different – a much bigger challenge, and that’s largely due to that[s] “Industries depend on gas as their main commodity to produce their product … so this could have a second-rate effect especially on the European economy,” Geoff Cutmore told CNBC.
