European companies can continue to buy Russian gas for foreign currency

The European Commission has sent an explanation to EU member states regarding the payment procedure for Russian gas

Companies in EU countries can circumvent Russia’s obligation to pay for Russian natural gas in rubles without violating sanctions if they pay in euros or dollars, which will then be converted into Russian currency, the European Commission announced on Friday.

Businesses will also be required to comply with additional transaction conditions, such as providing a statement that they consider their contractual obligations fulfilled after depositing foreign currency.

Moscow has previously warned Europe that it could cut gas supplies to EU buyers who refuse to pay in roubles. In March, Russian authorities issued a decree ordering gas buyers to open accounts with Gazprombank to make payments in euros or dollars, which are then converted into rubles.

The commission said companies must continue to pay in the currency agreed in their contracts with Gazprom, 97% of which are in euros or dollars.

“Companies holding contracts that require payments in euros or dollars should not agree to Russia’s demands. This would be contrary to the current sanctions,” the European Commission representative said.

In a document sent to member states on Thursday, the Commission said the Russian proposal could breach EU sanctions because it would allow Russian authorities to have full control over the process of receiving currency from gas sales.

However, Moscow’s decree does not necessarily prevent a payment process that would be in line with EU sanctions imposed on Russia following the conflict in Ukraine, the Commission said.

Brussels said in the document that there are options that could allow companies to continue to pay for gas legally.

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“Companies from EU countries can require their Russian counterparties to fulfill their contractual obligations in the same way as before the adoption of the decree, i.e. by paying the amount due in euros or in dollars,” the document said.

However, the procedure for obtaining exemptions from the requirements of the decree is not yet clear, according to the report.

Before making payments, EU operators can also declare that they consider their contractual obligations fulfilled when depositing euros or dollars in Gazprombank accounts, and not later, after converting the payment in rubles, the document indicates.

“It is advisable to seek confirmation from the Russian side that this procedure is possible according to the rules of the decree,” the document says.

The Commission’s recommendation is not legally binding, but tries to steer the discussion on supplies and payments in the right direction while member states decide how they can continue to import Russian gas.

The EU sanctions regime does not prohibit companies from opening accounts with Gazprombank or interacting with the bank to find a solution, the document says.

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