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EU Can Pay for Russian Gas Without Violation Sanctions

Companies in the EU may have discovered a way to pay for Russia’s gas in rubles without violating sanctions, the European Commission said on Friday.

The companies would need to pay in euros or dollars, which would then be converted into rubles, although the transactions would also have to be accompanied by a statement explaining how the companies consider their contractual obligations to be complete once they submitted the euros or dollars.

Russia had set a March 31 deadline for “unfriendly” or “hostile” nations to start paying in rubles for natural gas, although the EU initially balked at such a demand, arguing that such a demand would be a breach of contract on Russia’s behalf, and that paying in rubles would violate sanctions. Russia also muddied the waters in the days that followed the initial rubles demand, injecting a fair amount of confusion over how the scheme would work.

But Russia clarified the complicated rubles for gas scheme earlier this week for those unfriendly nations, which include EU members as well as the U.S., among others. Under the scheme, these nations would not be able to pay for gas using Gazprom’s bank accounts abroad because the funds would be susceptible to freezing by sanctions. Instead, these nations would have to pay in euros or dollars using a special account that they would have to open at Gazprombank, which would convert the payment into rubles.

Gazprom would then have access to the sanctions-protected funds in rubles.

 The news that the EU has found a way to pay without violating sanctions comes as the White House on Friday said that the EU was determined to ban imports of Russian oil and gas, although Germany has been opposed to a full and immediate ban due to its significant reliance on Russian energy imports.

By Julianne Geiger for Oilprice.com

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