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EU Issues Guidance on Russian Gas Payments in Rubles

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Korchagina oil field in Russia. Credt: Pavel Gurenchuk/Wikimedia Commons/ CC BY 3.0

The European Union has softened its stance on the purchase of Russian gas and oil, as it released a series of guidelines for European companies to purchase fuel from the country and avoid breaching sanctions on Monday.

The bloc proposed a total ban on Russian oil imports in a large packet of sanctions on May 4th, but the proposal was blocked by a number of countries, including Hungary, the Czech Republic, Bulgaria, and Slovakia, all of which rely on gas and oil from Russia.

Josep Borrell, EU head of Foreign Affairs and Security Policy, stated that it was not “possible to reach an agreement” on banning Russian oil and gas in the EU due to hesitation from member states that rely on the imports.

While those opposed to the ban, such as Hungary, which receives over 60 percent of its oil and 85 percent of its natural gas from Russia, seem to stand firm in their position, the EU will continue to negotiate the matter.

According to guidelines recently released by the European Union, European companies can continue to purchase Russian oil and gas by opening a bank account even at Russian banks, such as Gazprombank, and paying for the fuel in whatever currency was agreed upon in their contracts.

EU: Companies must pay for Russian fuel in currencies stated in contracts

Putin had previously asserted that foreign companies must pay for oil and gas in rubles as the Russian currency’s value fell due to sanctions. Poland and Bulgaria were cut off from Russian gas in April after refusing to pay in rubles.

Yet, the EU stated that all payments for Russian gas should be made according to the existing contracts, which are largely in dollars and euros, and that companies should clearly state this before agreeing to purchase fuel.

“Operators should make a clear statement that they intend to fulfill their obligations under existing contracts and consider their contractual obligations regarding the payment already fulfilled by paying in euros or dollars, in line with the existing contracts,” the EU released in a statement on Monday.

A number of European companies have already jumped on the opportunity, as the Italian energy company Eni SpA intends to open accounts in both euros and rubles at Gazprombank in order to pay for Russian gas, as reported in Al Jazeera.

Although the newest EU guidelines state that companies should pay in the currency agreed upon in their contracts, it does not ban payments in rubles, which has garnered controversy amongst EU leaders.

Polish Prime Minister Mateusz Morawiecki sharply criticized the EU for not banning transactions in rubles, stating on Sunday: “I am disappointed to see that in the European Union there is consent to pay for gas in rubles…Poland will stick to the rules and will not yield to Putin’s blackmail.”

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