RUSSIA-UKRAINE WAR: German energy firm Uniper ready to meet Russian pay demand … in roubles

By Daniel Thomas – Business reporter, BBC News

Russia imports nearly half of its gas from Russia

One of Germany’s biggest energy firms has said it is preparing to buy Russian gas using a payment system that critics say will undermine EU sanctions.

Uniper says it will pay in euros which will be converted into roubles, meeting a Kremlin demand for all transactions to be made in the Russian currency.

Other European energy firms are reportedly preparing to do the same amid concerns about supply cuts.

Uniper said it had no choice but said it was still abiding by EU sanctions.

“We consider a payment conversion compliant with sanctions law and the Russian decree to be possible,” a spokesman told the BBC.

“For our company and for Germany as a whole, it is not possible to do without Russian gas in the short term; this would have dramatic consequences for our economy.”

GERMAN ECONOMY WOULD CRUMBLE

Germany’s biggest energy supplier RWE declined to comment on how it would pay for Russian gas.

In late March, Russia said “unfriendly countries” would have to start paying for its oil and gas in roubles to prop up its currency after Western allies froze billions of dollars it held in foreign currencies overseas.

Under the decree, European importers must pay euros or dollars into an account at Gazprombank, the Swiss-based trading arm of Gazprom, and then convert this into roubles in a second account in Russia.

The European Commission said last week that if buyers of Russian gas could complete payments in euros and get confirmation of this before any conversion into roubles took place, that would not breach sanctions.

However there are different views among countries on how to interpret its initial guidance, and this week EC boss Ursula von der Leyen sparked confusion when she said firms could still be breaking the rules.

On Thursday, an EU official confirmed that any attempt to convert cash into roubles in Russia would be a “clear circumvention of sanctions” as the transaction would involve Russia’s central bank.

“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.”
GAS CUT for POLAND and BULGARIA

On Tuesday, Poland and Bulgaria both refused to pay for gas in roubles leading to Russian state gas firm Gazprom shutting off supplies.

Both countries had already planned not to renew their contracts with Gazprom when they expired later in 2022.

Poland – one of the staunchest advocates of tougher sanctions on Russia – said the EU should penalise countries that used roubles to pay for Russian gas.

Climate minister Anna Moskwa singled out Germany, Hungary and Austria as resisting a gas embargo.

“We are counting on there being consequences for these countries [which pay in roubles] and that as a result they will cease paying in roubles,” she said.

Russia gas exports
The move by Russia – which has not given countries the same deadline to begin paying in roubles – is seen as an attempt to divide Western allies in their response over Ukraine The majority – 97% – of EU companies’ gas supply contracts with Gazprom stipulate payment in euros or dollars.

Hungary and Slovakia have both said they will use Russia’s conversion payment method, while German economy minister Robert Habeck said on Wednesday that it was “the path that the EU marked out for us”.

“It’s the path that is compatible with sanctions, and as far as I understand the German companies that are doing it this way are in compliance with their contracts,” he said. “Most EU countries are taking this approach.”

Europe gets about 40% of its natural gas from Russia, but it is much higher for some countries and sudden supply cuts could have a huge economic impact.

“A lot of European companies will say OK, we’ll pay into a euro-denominated bank account and there will be a back-to-back trade so they stay within the limits of the EU sanctions,” said Nathan Piper, an energy analyst at Investec.

“But there are two sides of this – those firms need to supply gas to consumers and in Germany there is no alternative to supplies of Russian gas right now.”

According to the Financial Times, Austrian energy giant OMV is also planning to adopt the mechanism while Italy’s Eni is considering the move.

Eni declined to comment while OMV denied it was opening a Swiss account with Gazprom. It told the BBC: “We have analysed the Gazprom request about payment methods in light of the EU-sanctions and are now working on a sanctions-compliant solution.”

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  • Clyde Duncan  On 04/30/2022 at 12:19 pm

    Putin Has Now Made His Fourth Calamitous Error

    This time, the Kremlin miscalculated how Europe would react to its oil and gas blackmail threats

    Jeremy Warner | The Telegraph

    IT IS USUALLY A MISTAKE TO CALL A WINNER MIDWAY THROUGH A WAR; FORTUNE CAN BE A CRUEL TASKMASTER. Yet it is already clear that Vladimir Putin has made at least four catastrophic miscalculations in his murderous assault on Ukraine.

    FIRST, he hugely underestimated the resolve and strength of the Ukrainian resistance. SECONDLY, he was seemingly unaware of the incompetence and ill-disciplined thuggishness of his own military. Their war crimes have so offended Western sensitivities that even Russlandversteher Germany has now swung fully behind the democratic alliance. THIRDLY, he thought the war would divide a declining and morally bankrupt West; instead, it has united and breathed new life into it. AND LASTLY, he overestimated the leverage of his hold over oil and gas supplies.

    In the event, Europe is adapting with previously unimaginable speed to the prospect of a world without Russian hydrocarbons. Berlin this week said it could end its dependence on Russian oil, if not yet gas, within “DAYS”, threatening to ruinously deprive Russia of the mainstay of its economy.

    Putin’s miscalculations might be put down to failures in Russian intelligence, but there is also a more pervasive explanation. AUTOCRACIES ARE VERY BAD AT UNDERSTANDING THEIR OWN LIMITATIONS. Regimes that punish dissent fast invariably fall victim to delusional self-belief and therefore error.

    THIS IS NOT TO ARGUE THAT, ULTIMATELY, THEY POSE LITTLE THREAT TO THE LIBERAL ORDER. As we are now seeing, they can inflict enormous damage and suffering. Desperate autocracies armed with nukes, moreover, are particularly dangerous, for they might actually use them, as Russia’s foreign affairs minister Sergei Lavrov threatened this week.

    RUSSIA’S NUCLEAR SABRE-RATTLING IS MORE A SIGN OF WEAKNESS THAN STRENGTH. The latest miscalculation is the decision to cut off gas supplies to Poland and Bulgaria. This is presumably meant as a warning shot to much larger buyers of Russian hydrocarbons such as Germany and Italy – as in, “YOU WILL BE NEXT”. But in threatening as much, Putin only further shoots himself in the foot.

    AS EVERY BUSINESS EXECUTIVE KNOWS, if a supplier lets you down, particularly in circumstances that amount to a breach of contract, immediate steps need to be taken to end the relationship and find alternatives. That’s precisely the response that Putin has provoked. The immediate source of complaint is Russian insistence that Europe pays for gas in roubles, rather than euros or dollars, as stipulated in contracts. For Putin, this seemingly serves the purpose both of forcing European buyers to effectively breach sanctions, and of helping to prop up the rouble, decimated as it initially was by the West’s response to Russia’s aggression.

    A somewhat curious and unintended consequence of pariah status, however, is that with Western companies boycotting Russian markets, and imports collapsing accordingly, the rouble has actually strengthened of late, so much so that Moscow has been able to lift some of the capital controls designed to protect their currency.

    The only purpose of continuing to insist on rouble payment therefore becomes that of using it as a pretext for cutting off supplies. Some European buyers have found workarounds. Russian banks that have not been sanctioned are paid in euros or dollars, and then using back-to-back accounts in the payee’s name convert them into roubles. Apparently approved by the European Commission, this is just a ruse that breaches the spirit, if not the letter, of sanctions. PUTIN MIGHT THEREFORE COUNT IT AS SOME SORT OF VICTORY.

    Yet the Kremlin has also been completely wrong-footed by the speed at which even the Germans are moving to escape Russia’s embrace. In cutting off supplies, there is a sense in which Putin is using his main economic weapon while he still can; soon it will be obsolete.

    AS IT HAPPENS, THE BIG FOREIGN EXCHANGE EARNER FOR RUSSIA IS NOT GAS, BUT OIL. This can easily be exported and will always find alternative takers, even after Europe and America stop buying it. But gas is a different matter; it can only be transported via pipeline or in liquid form, both of which require complex infrastructure. As it is, the pipelines needed to switch from Europe to China do not yet exist.

    Putin gambled on Europe not being willing to take the economic pain of cutting itself off from his gas, but the blackmail isn’t working. RUSSIA NEEDS EUROPE’S MARKETS FAR MORE THAN EUROPE NEEDS RUSSIA’S ENERGY.

    Putin hoped to capitalise on weakness, division and growing self-doubt in Western affairs, pitching his invasion as a battle between resurgent autocracy and degenerate liberal democracy. Yet far from further undermining the democratic order, he has succeeded only in highlighting its underlying strengths and attractions.

    Heaven knows, our system of governance is hardly beyond criticism; it too is prone to catastrophic error – witness the mess in Iraq and Afghanistan. But at least the leaders responsible can be ousted, allowing the system to reboot. That’s not possible in Putin’s Russia, or Xi Jinping’s China.

    WHATEVER THE DRAWBACKS OF LIBERAL DEMOCRACY, LOOKING AT THE ALTERNATIVE NOW ON ALL TOO VISIBLE AND UGLY DISPLAY, IT DOESN’T SEEM SO BAD AFTER ALL.

  • Clyde Duncan  On 04/30/2022 at 1:10 pm

    Banning Russian Oil Will Not Wash Away Germany’s Shame

    Berlin has much more to do to restore its international credibility

    Ben Marlow | The Telegraph

    Winston Churchill is quoted as once saying: “You can always count on Americans to do the right thing – after they’ve tried everything else.”

    Today, the same might be said of Germany after Berlin reluctantly caved in and backed an EU ban on Russian oil imports, following weeks of fierce resistance.

    What a U-turn it is. For weeks, the German establishment has been warning about the devastating effects of such a ban, NOT just on Germany but the whole of Europe.

    Martin Brudermüller, boss of chemicals giant BASF, forecast Germany’s “worst crisis since the second world war” in the event of a full-scale embargo.

    And now? “This won’t come without pain but we will no longer experience a national catastrophe,” economic minister Robert Habeck admitted.

    Habeck also claimed a month ago that it would take until the end of the year for Germany to end its reliance on Russian oil.

    IT NOW EMERGES THAT GERMANY HAS REDUCED THE PROPORTION OF IMPORTED OIL IT GETS FROM RUSSIA TO 12PC FROM 35PC IN THE SPACE OF JUST EIGHT WEEKS.

    That leaves the Rosneft-operated refinery in the town of Schwedt as the only remaining consumer of Russian oil but Habeck has pledged “AN ALTERNATIVE” in “THE NEXT FEW DAYS” – MEANING GERMANY COULD BE FREE OF KREMLIN CRUDE BY NEXT WEEK.

    IT IS A PIVOTAL MOMENT THAT COULD DRAMATICALLY SWING THE WAR IN UKRAINE’S FAVOUR, depriving Vladimir Putin’s war machine of tens of billions of euros in fossil fuel revenues and its primary source of funding.

    But the sad reality is that GERMANY HAS BEEN SHAMED INTO DOING THIS, chiefly by Poland but amid mounting pressure from other EU states and harsh criticism from Kyiv too.

    NOR DOES IT GO FAR ENOUGH. The next step has to be ending Germany’s dependency on Moscow’s gas, followed by a full clear-out of Putin cronies from the German establishment for the country’s international credibility to stand a chance of being restored.

    These are the sacrifices that must now be made to help bring about the end of Russia’s villainous invasion and protect the liberal principles of the West, especially in the face of the waning impact of existing sanctions.

    The decision of Russia’s central bank to cut its key interest rate from 17pc to 14pc is further evidence of the ineffectiveness of the West’s attempts to crush the country’s economy.

    Berlin has committed to weaning itself off Russian gas imports by 2024 but the Kremlin’s share of German consumption has already fallen from 55pc to 40pc and the speed of the reversal on oil suggests it could significantly step up efforts to free itself from Russian hydrocarbons entirely.

    WITH EVERY DAY THAT PASSES, GERMANY’S DECISION TO KEEP BUYING RUSSIAN FOSSIL FUELS BECOMES MORE UNSUSTAINABLE. On the same day that Moscow cut off supplies to Poland and Bulgaria, Russian state-backed gas titan Gazprom was boasting of 2 trillion roubles (£22bn) in record annual profits, much of it thanks to EU customers.

    The continent has spent an extraordinary €44bn ($46bn) on Russian oil and gas since the invasion began at the end of February, A FIGURE THAT SHAMES THE ENTIRE WEST, NOT JUST GERMANY.

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