European brands of Russian gas stop “blackmail” and work to respond

BRUSSELS (Reuters) – The European Union chief executive on Wednesday called Russia’s giant Gazprom’s move to halt supplies to some European customers a “blackmail”, but said the bloc was working on a coordinated response to Moscow’s escalation.

Gazprom (GAZP.MM) It said it had cut supplies to Poland and Bulgaria for failing to pay for gas in rubles, Moscow’s strongest response yet to Western sanctions over the conflict in Ukraine. Read more

European Commission President Ursula von der Leyen said: “Gazprom’s unilateral announcement to stop gas deliveries to customers in Europe is yet another attempt by Russia to use gas as a tool for blackmail.”

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“This is unjustified and unacceptable. It shows once again the unreliability of Russia as a gas supplier,” it said in a statement.

Von der Leyen said the EU was prepared for this scenario, and would continue to work to ensure alternative gas supplies and to mobilize gas stocks. EU rules require all countries to have a contingency plan to deal with a gas supply shock. Gas storage in the EU is currently 32% full.

Von der Leyen said the EU was working on a coordinated response to the Russian escalation, and a “gas coordination group” was meeting in the bloc made up of representatives from national governments and the gas industry on Wednesday morning.

Poland’s Climate Ministry said on Tuesday its energy supply was safe and there was no need to limit supplies to consumers.

European Commission President Ursula von der Leyen speaks as she participates in the global event “Stand up for Ukraine” at the palace on the island at Royal Lazienki Park in Warsaw, Poland, April 9, 2022. REUTERS/Kacper Pembel

Brussels has sought a joint response from EU countries to Russia’s demand for ruble payments, after Moscow in March issued a decree proposing that energy buyers open accounts at Gazprombank for payments in euros or dollars, which would then be converted into rubles.

The commission said companies must continue to pay the currency agreed upon in their contracts with Gazprom – 97% of which is in euros or dollars – and that paying in rubles could breach EU sanctions against Russia.

However, Brussels said that EU companies may legally be able to pay for gas under the Russian decree, for example, if companies can confirm that their contractual obligations have been completed when depositing euros in Gazprombank, as opposed to later, after the Russia converted the payment into rubles.

Austrian Chancellor Karl Nehammer said on Wednesday that Poland and Bulgaria had refused to use the payment system provided for in the Russian decree – by depositing euros through Gazprombank. Read more

Analysts said that the issue of ruble payments threatens to split the united front of the bloc against Russia over its invasion of Ukraine, if some countries are willing to pay the ruble.

It was also not immediately clear whether companies sending euros to Gazprombank, to convert them into rubles, had received confirmation that their deposit in euros would be the completion of the transaction, as the European Union suggested to them.

“The EU collectively needs to refuse to play Russia’s game,” said Phuc-Vinh Nguyen, an energy expert at the Jacques Delors Institute, adding that if a country sent rubles, other countries could follow, in an effort to avoid an interruption of gas supplies.

“The biggest risk I see now is a fragmentation of the European Union, in the event that some buyers comply with Russia’s request, while others do not,” said Simon Tagliapitra, a senior researcher at the Brussels-based Bruegel Research Centre.

Nguyen said European countries should focus on urgent measures to reduce gas use, such as limiting the use of heating and air conditioners, to maintain supplies before winter.

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Additional reporting by Kate Abnett, Philip Blinkensop and Marina Strauss. Editing by Emilia Sithole Mataris and David Evans

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