EU says to pay Russian gas in euros to avoid violating sanctions

European Union flags flutter outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman/File Photo

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BRUSSELS, April 22 (Reuters) – EU companies may be able to circumvent Russia’s requirement to receive gas payments in rubles without violating sanctions if they pay in euros or dollars that are then converted into Russian currency, the European Commission said on Friday.

The companies should also seek additional terms for the transactions, such as a statement that they consider their contractual obligations complete once they deposit the non-Russian currencies.

Moscow has warned Europe that it risks stopping gas supplies unless it pays in rubles. In March, it issued a decree proposing that energy buyers open accounts with Gazprombank to make payments in euros or dollars, which would then be converted into rubles.

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The Commission said companies must continue to pay the currency agreed in their contracts with Gazprom – 97% of which are in euros or dollars.

“Companies with contracts that stipulate payments in euros or dollars are not allowed to comply with Russian demands. This would be in violation of the applicable sanctions,” said a spokesperson for the Commission.

In an advisory paper sent to member states on Thursday, the Commission said Russia’s proposal would violate EU sanctions as it leaves the actual completion of the purchase – once payments have been converted into rubles – in the hands of the Russian authorities.

However, Moscow’s decree does not necessarily prevent a payment process that would comply with EU sanctions against Russia over the conflict in Ukraine, the Commission said.

Brussels said in the document that there were options that would allow companies to continue to pay for gas legally.

“EU companies can ask their Russian counterparts to fulfill their contractual obligations in the same way as before the adoption of the decree, namely by depositing the amount due in euros or dollars,” the document said.

However, the procedure for obtaining exemptions from the decree’s requirements is not yet clear, it said.

Before making payments, EU operators could also make a clear statement that they consider their contractual obligations fulfilled when depositing euros or dollars into Gazprombank – as opposed to later, after the payment has been converted to rubles, the document said.

“It would be advisable to obtain confirmation from the Russian side that this procedure is possible under the rules of the decree,” the document reads.

The Commission’s opinion is not legally binding, but is an attempt to steer discussion as member states figure out how to continue to pay for Russian gas.

The EU’s sanctions regime does not prohibit companies from opening accounts with Gazprombank or from working with the bank to seek a solution, the document said.

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Reporting by Kate Abnett; Editing by John Chalmers and Ros Russell

Our Standards: The Thomson Reuters Trust Principles.

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