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EU energy groups prepare to meet Putin’s terms for Russian gas

Some of Europe’s major energy companies are making arrangements to comply with a new payment system for Russian gas demanded by the Kremlin, in moves that critics say will undermine EU sanctions, threaten EU unity and transfer billions of critical cash to Russia’s economy.

Gas distributors in Germany, Austria, Hungary and Slovakia – including two of the only major importers of Russian gas, Unifer from Düsseldorf and OMV from Vienna – are preparing to open ruble accounts at Gazprombank in Switzerland, according to people with knowledge of preparations.

Negotiations between the electricity companies and Gazprom, the state-controlled Russian gas supplier, intensified as payment dates approached, they said.

Italian Eni, another of Gazprom’s major customers, is exploring its options, said two people familiar with the discussions. The Rome-backed company has until the end of May, when its next payment for Russian supplies is due to make a final call, Italian officials said.

The preparations show the effect of Russian efforts to kiss the gas supply On the ability of the EU to maintain a united front vis-à-vis Moscow.

They are following a decree by Russian President Vladimir Putin in late March that says gas buyers from so-called “unfriendly” countries – which include the entire EU – are forced to set up foreign currency bank accounts and Swiss-based Rubprombank. Gazprom’s financial trading arm, to pay for their supplies. The measure was perceived as a way of Neutralization of EU sanctions Against the Central Bank of Russia on Moscow’s Invasion of Ukraine.

Gas importers in Poland and Bulgaria, who flatly refused to join the Kremlin program, saw on Wednesday the gas supply from Russia halted, a decision that Ursula von der Lane, president of the European Commission, described as a pretext for extortion.

Brussels struggled to deal with new request: Commission issued official technical directive acknowledging that financial engineering prepared by the Kremlin may be “compliant with sanctions” Under certain conditions. But its end result will see Russia able to access billions in gas revenues to support its currency and economy, EU member states and officials said.

Under the new Russian mechanism, European electricity companies will continue to pay Gazprombank for their imports in euros – to ensure they do not violate the sanctions regime. The Russian bank, which is not subject to EU sanctions, will then, at its request, convert deposits denominated in euros into rubles in a second account opened in their name, for further payment to Russia.

The commission’s advisers concluded that any move by the EU to impose sanctions on Gazprombank – which would be the quickest way to close the loophole – could jeopardize the entire existing payment mechanism for Russian gas, resulting in a catastrophic halt to shipments to the bloc.

Vladis Dombrowski, the commission’s vice president, said in an interview that it was largely up to the individual companies that signed the contracts with Gazprom to implement and interpret them. But he urged them to stick to those of these contracts.

“Prices are agreed in euros or dollars. So you pay that amount of euros for a given amount of fuel, the end of the story,” he said.

The Russian move against Bulgaria and Poland was nevertheless a challenge, he admitted: “It is important to maintain the unity of the European Union in this regard and as President von der Lane said, we should not succumb to this kind of blackmail.”

OMV said that the company had analyzed Gazprom’s request for payment methods in light of EU sanctions and was now working on a compatible sanctions solution.

“We see that the amendment of the payment process complies with the Sanctions Act and therefore the payments are possible,” said Tina Tomela, CFO of UNIFER.

Italian officials said the commission’s guidelines on whether Gazprom’s payment plan represents a breach of sanctions are ambiguous and unclear to member states.

German Deputy Chancellor and Economy Minister Robert Habeck said on Wednesday that the Russian payment mechanism is “the path the EU has marked for us”.

“This is the way that complies with the sanctions, and I understand that the German companies that do it this way live up to their contracts,” he said. “Most EU countries take this approach.”

He added that following a visit to Poland on Tuesday, he understood that Warsaw intends to take a more uncompromising line with Moscow. “They are not afraid of an embargo,” he said.

Additional reports by Amy Casmin in Rome, Neil Home in London, Joe Miller in Frankfurt and Sam Fleming in Brussels

EU energy groups prepare to meet Putin’s terms for Russian gas Source link EU energy groups prepare to meet Putin’s terms for Russian gas

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