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German Energy Giant Succumb to Russian Rouble Demand

M.Cby M.C
April 28, 2022
Reading Time: 4 mins read
M.Cby M.C
in Europe
0
German Energy Giant Succumb to Russian Rouble Demand

One of Germany’s biggest energy firms, Uniper, has announced that it is preparing to buy Russian gas using a payment system that critics cautioned of undermining EU sanctions.

According to Uniper, 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. Reports have also suggested that other European energy firms are preparing to do the same amid concerns about supply cuts. Uniper said there was no choice, however, it pointed out that it is still abiding by EU sanctions.

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

A Uniper Spokesman

Last month (March 2022), Russia demanded “unfriendly countries” to pay for oil and gas in Roubles to prop up the country’s depreciating currency after Western allies froze billions of dollars it held in foreign currencies overseas. This is in breach of many European Union (EU) countries’ contracts which were signed in euros. However, Russia offered an apparent workaround whereby countries set up both foreign currency and Rouble bank accounts with Gazprombank, the Swiss-based trading arm of Gazprom, to pay for their supplies.

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What EU said Earlier

Last week, the EU disclosed 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, on Wednesday, April 27, 2022, European Commission Chief, Ursula von der Leyen averred suggested companies doing so may be breaching sanctions after all.

“If this is not foreseen in the contract, to pay in roubles is a breach of our sanctions. Companies with such contracts should not accede to the Russian demands. This would be a breach of the sanctions, so a high risk for the companies.”

European Commission Chief, Ursula von der Leyen

No Negotiation for Poland and Bulgaria

On Tuesday, April 26, 2022, Poland and Bulgaria both refused to pay for gas in Roubles leading to the Russian state gas firm, Gazprom, suspending supplies. Both countries already planned not to renew their contracts with Gazprom when they expire later this year (2022).

Poland, one of the firmest advocates for tougher sanctions on Russia, said the EU should penalise countries that used Roubles to pay for Russian gas,

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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,” Moskwa said.

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 to the ongoing Ukraine invasion.

Hungary and Slovakia have both openly said they will use the method, while German Economy Minister, Robert Habeck, said on Wednesday, April 27, 2022, that it is “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, most EU countries are taking this approach.”

German Economy Minister, Robert Habeck

Europe’s Dependence on Russian Energy

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

Nathan Piper, an Energy Analyst at Investec, said “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. But there are two sides of this – those firms need to supply gas to consumers and in Germany, there is no other alternative to supplies of Russian gas right now.”

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

Eni declined to comment while OMV denied it was opening a Swiss account with Gazprom. In an interview with the media, OMV said “We have analysed the Gazprom request about payment methods in light of the EU sanctions and are now working on a sanctions-compliant solution”.

READ ALSO: Labor Issues Must Be Dealt With Fair And Square- Christian Adinkra

Tags: BulgariaEnergygasPolandUkraineUniper
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