# What is the EU’s stance on Russia’s roubles gas payment demand?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-04-27
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: How Russia's Gas Payment Dispute Could Affect EU
Meta Description: Find out why Russia stopped gas supplies to Bulgaria and Poland after demanding rouble payments for European gas purchases. Get the latest updates on this issue here.
URL: https://financedigest.com/what-is-the-eus-stance-on-russias-roubles-gas-payment-demandhtml

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By Kate Abnett

BRUSSELS (Reuters) – Russia halted gas supplies to Bulgaria and Poland on Wednesday for rejecting its demand that European buyers start paying for Russian gas in roubles.

The European Commission has said countries should not pay in roubles, and that complying with Russia’s request could breach European Union sanctions against Moscow over its invasion of Ukraine.

However, Brussels has also outlined options that may allow EU buyers to continue paying for [Russian gas without breaching sanctions](https://www.financedigest.com/new-u-s-sanctions-for-russian-bank-oligarchs-crypto-miner-bitriver.html "New U.S. sanctions for Russian bank, oligarchs, crypto miner BitRiver").

Here is a look at the issue.

WHAT DOES [RUSSIA’S DECREE SAY](https://www.financedigest.com/renault-to-offload-its-stake-in-lada-maker-for-one-rouble-russia-says.html "Renault to offload its stake in Lada maker for one rouble, Russia says")?

In March, Moscow issued a decree proposing that energy buyers open accounts at Gazprombank to make payments in [euros or dollars](https://www.financedigest.com/dollar-jumps-euro-dips-before-fed-minutes.html "Dollar jumps, euro dips before Fed minutes"), which would then be converted to roubles, and paid to gas supplier Gazprom.

The decree said Gazprombank would [open special “K” type accounts for gas payments](https://www.financedigest.com/open-banking-the-real-step-change-for-the-global-payments-industry.html "Open banking: The real step change for the global payments industry") from foreign buyers. An EU company would transfer foreign currency into one such account, and then a Russian [bank would convert the payment](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments") to roubles and transfer the roubles to another “K” account belonging to Gazprom.

The decree said the buyer’s obligation would be considered fulfilled only when the roubles arrived in Gazprom’s account.

WHY COULD [RUSSIA’S PROPOSAL BREACH EU SANCTIONS](https://www.financedigest.com/russia-unleashes-rockets-after-mariupol-ceasefire-eu-eyes-oil-sanctions.html "Russia unleashes rockets after Mariupol ceasefire, EU eyes oil sanctions")?

The European Commission has said EU companies should continue to pay the currency [agreed in their contracts with Gazprom – 97% of which are in euros](https://www.financedigest.com/iag-agrees-to-buy-80-stake-in-air-europa-for-400-million-euros.html "IAG agrees to buy 80% stake in Air Europa for 400 million euros") or dollars.

The Commission sent an advisory document to EU countries last week, which said Russia’s proposed payment system could breach EU sanctions – even if EU buyers send euros to Gazprombank. That is because under [Russia’s decree the EU buyer’s contractual obligation would not be considered complete until the euros](https://www.financedigest.com/barclays-warns-of-sub-parity-euro-5-ppt-gdp-hit-if-russia-turns-off-gas-taps.html "Barclays warns of sub-parity euro, 5 ppt GDP hit if Russia turns off gas taps") are converted into roubles, the Commission said.

That would put the [effective completion of the purchase into the hands of the Russian authorities and involve Russia’s central bank](https://www.financedigest.com/banking-turmoil-will-not-have-knock-on-effect-on-commodities-trafigura-cfo.html "Banking turmoil will not have knock-on effect on commodities -Trafigura CFO"), which is subject to EU sanctions.

As the conversion process may take an undefined amount of time, during which [time the foreign currency is entirely in the hands of the Russian authorities including the central bank](https://www.financedigest.com/georgias-tbc-bank-slashes-loan-decision-time-with-fico-solution.html "Georgia’s TBC Bank Slashes Loan Decision Time with FICO Solution"), it may even be considered as a loan granted by EU companies,” the Commission said.

IS THERE A SOLUTION?

Possibly. Moscow’s decree does not necessarily prevent a [payment process](https://www.financedigest.com/are-your-payment-processes-in-cheque-for-the-new-legislation.html "ARE YOUR PAYMENT PROCESSES IN CHEQUE FOR THE NEW LEGISLATION?") that would comply with EU sanctions, the Commission said.

To avoid breaching sanctions, companies would need to seek additional conditions on the transactions, to confirm that their contractual obligations are complete once they deposit [euros with Gazprombank – as opposed to after Russia has converted the payment](https://www.financedigest.com/delivery-hero-ramps-up-interest-payments-to-raise-1-billion-euro-convertible-bond.html "Delivery Hero ramps up interest payments to raise 1 billion euro convertible bond") into roubles.

“EU companies can ask their Russian counterparts to fulfil their contractual obligations in the same manner as before the adoption of the decree, i.e. by depositing the due amount in [euros or dollars,”](https://www.financedigest.com/dollar-slips-after-upbeat-china-data-euro-pound-rise.html "Dollar slips after upbeat China data; euro, pound rise") the Commission said in its advisory document, which is not legally binding.

However, the procedure for securing exemptions from the requirements of the decree is not yet clear, it said.

Another [option could be for EU companies themselves to declare that they consider](https://www.financedigest.com/3-options-to-consider-when-you-owe-the-irs-back-taxes.html "3 Options to Consider When You Owe The IRS Back Taxes") their contractual obligations to be completed when they deposit euros or dollars with Gazprombank.

It would be advisable to seek confirmation from the [Russian side that this procedure is possible under the rules](https://www.financedigest.com/eu-to-restrict-travel-rules-for-russians-split-on-how-far-to-go.html "EU to restrict travel rules for Russians, split on how far to go") of the decree,” the Commission said.

EU companies are allowed to open accounts with Gazprombank and [engage with the bank](https://www.financedigest.com/how-conversational-commerce-can-help-banks-engage-with-millennials.html "How conversational commerce can help banks engage with Millennials") to attempt to seek a solution. Gazprombank is not subject to EU sanctions.

(Reporting by Kate Abnett; editing by Philip Blenkinsop and David Evans)


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