Wednesday, May 18

Brussels warns companies that consider paying in rubles: what Putin demands “violates sanctions”

The hydrocarbon giant Eni, controlled 30% by the Italian Treasury, is considering opening accounts in rubles at the Russian bank Gazprombank to pay for its gas purchase contracts with Moscow. And Brussels has recalled this Thursday, 24 hours after Russia cut off gas to Poland and Bulgaria for not paying in rubles, that doing so would mean violating the sanctions imposed against Russia for the invasion of Ukraine. As published by Bloomberg, Eni is preparing while seeking clarity from the Italian and European authorities what can be done. Similarly, Germany’s Uniper, a large buyer of Russian gas, has also said it believes it can continue to buy gas without violating sanctions.

In this sense, the president of the Community Executive, Ursula von der Leyen, explained that the payment in rubles violates the sanctions imposed on Russia. “Our guidelines are clear: paying in rubles, if it is not provided for in the contract, is a breach of our sanctions. We have about 97% of all contracts that explicitly stipulate payments in euros or dollars. It’s very clear. And the request of the Russian side to pay in rubles is a unilateral decision not in accordance with the contracts. Companies with these contracts must not agree to Russian demands. It would be a breach of sanctions. It is a great risk for companies.”

Community sources explain: “Russia unilaterally changes what is foreseen in the contracts, and this is why, from the beginning, the day after this decree that forced payment in rubles, President Von der Leyen has been very clear asking for a common position to remain in compliance with contracts. This new payment system would be a sanctions bypass.” Why? Because what the Kremlin demands is that the payment will only be considered complete if it is converted into rubles and transferred in rubles to the companies. You can open a first account in a Russian bank to pay in euros, but you can’t open a second account, where you pay in rubles as requested by Russia.

The Commission says that what the Government of Vladimir Putin is asking for is that the payment take place in two tranches: first the payment is deposited in euros in Gazprombank, and then the Russian central bank converts it into rubles and transfers it to a second account which the company is obliged to open in rubles.

In this case, the Community Executive points out that there is no time limit, and that, therefore, this money can be in the hands of the Russian authorities for as long as they want: “It is up to the Member States to guarantee compliance with the sanctions, they are obliged to check if the sanctions are being circumvented by some of the companies. And payment in rubles constitutes a violation of sanctions.”

In relation to the double payment system, the community sources add: “This money is in the hands of the Russian central bank and there is no time limit, so they can speculate with it before converting it into rubles in the second account. If companies open an account and deposit their money in Gazprombank in euros, and they say that they have completed their payment, then we have no problem”.

The problem, according to Brussels, is that they are forced to open a second account in which the money in rubles would be deposited with which they would later pay Gazprom. “What we cannot accept is that companies are obliged to open a second account in rubles and that the payment is completed only when the payment is converted into rubles. It is equivalent to a credit that companies give to the Russian central bank before the payment is made.”

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