EU Says Buyers Must Confirm Initial Euro Payments For Russian Gas Purchases

The EU said on Thursday buyers of Russian gas could avoid breaching sanctions if they declare purchases complete when they have paid in euros or dollars, but there may be no workaround if Moscow insists they also use a rouble account for the transaction.

Russian gas giant Gazprom cut supplies to Poland and Bulgaria on Wednesday after they refused to pay for gas in roubles, Moscow's toughest response yet to sanctions imposed by the West over the conflict in Ukraine.

The cut-off added to confusion and alarm in Europe over a Russian decree that energy buyers must open accounts at Gazprombank to make hard-currency payments that would then be converted to roubles, and paid to Gazprom.

"European companies can pay in euro and can insist, make the statement, that they consider that the payment will be complete. And then the companies... and the member states will have respected the sanctions," a senior European Union official told a news briefing.

The difficulty for European buyers is that the decree requires buyers to also open a rouble account at Gazprombank into which their euro or dollar payments would be deposited after conversion into the Russian currency.

The European Commission has said this would breach EU sanctions on Russia, because it would only fulfil EU buyers' payments after the euros-to-roubles conversion is done. That conversion would involve a transaction through Russia's central bank, which is subject to EU sanctions.

"What we cannot accept is that companies are obliged to open a second account and that between the first and second account, the amount in euros is in the full hands of the Russian authorities and the Russian Central Bank, and that the payment is only complete when it is converted into roubles," the senior EU official said.

"This is absolutely clear circumvention of the sanctions."

If companies declared their payments complete when they deposit euros at Gazprombank, they shouldn't need to open a second roubles account with Gazprombank, the official said.

Opening a roubles account at Gazprombank in itself may breach the EU sanctions, the official added, without providing a conclusive assessment of that.

Some EU gas traders have reportedly opened roubles accounts, but Commission officials said they had not been notified of any gas buyers doing this.

The Commission is not expected to issue an update of the guidance document it shared with EU countries last week on the issue, but is providing additional legal advice upon request of the member states, an EU official said.

Senior EU officials said the EU's 27 member states agree that they will not pay Russia directly in roubles for their imports of gas, and the deadline for next payments was expected to be May 20.

The majority - 97% - of EU companies' gas supply contracts with Gazprom stipulate payment in euros or dollars. The senior official said if EU companies paid roubles directly to Moscow, that could breach the terms of those contracts.

Poland and Bulgaria both used their existing method to pay for Russian gas - which involves making payments into existing accounts, rather than opening new Gazprombank accounts - before Moscow cut their gas supplies on Wednesday, another senior official said.

"According to our information, both have stuck to the original form of payment," the official said.