Germany and Austria Seek to Meet Putin’s Terms for Gas Payments

European energy companies are scrambling to find a workaround that allows them to pay for Russian gas without falling foul of EU sanctions, amid political chaos sparked by the Kremlin’s decision to cut off supplies to Poland and Bulgaria.

Big gas distributors in Germany and Austria confirmed they were exploring ways to continue to make payments after Putin signed a decree at the end of March calling for a “special procedure for foreign buyers’ fulfillment of obligations to Russian suppliers of natural gas”.

The decree stipulates that non-Russian buyers of gas must pay in roubles, opening special “K” type rouble and foreign currency accounts at Gazprombank, the third-largest bank in Russia. Gazprombank was set up to be a service provider to Gazprom, the state-owned gas producer that has a monopoly on exports via gas pipelines to Europe.

Germany’s economy minister, Robert Habeck, suggested on Thursday that Berlin could comply. “The payments will be made in euros and then transferred by Gazprombank into a so-called K account,” he said, insisting this was “compatible with sanctions”.

But hours later, a spokesperson for the European Commission said: “Complying with the decree is a breach of sanctions. If companies pay in euros, they are not in breach of the sanctions. What we cannot accept is that companies are obliged to open a second account in roubles and that the payment is complete only when payment is converted into roubles.”

EU energy ministers are due to meet on Monday, where the capitals will try to forge a common line for companies to follow.

On Thursday the German distributor Uniper and Austria’s OMV confirmed they were examining methods of complying with both the decree and the sanctions regime.

Firms could turn to legal guidance issued by the EU last week, which said it “appears possible” to send money to Gazprombank without breaching sanctions.

The guidance states that this would rely on a declaration from one or both signatories to the gas purchase contract that the transaction is completed once the initial euro or dollar payment has been made and before any conversion of the cash into roubles.

In theory, this would avoid a European state or private energy company being complicit in a currency conversion involving Russia’s central bank, which is subject to sanctions. However, the EU advised gas companies to “seek confirmation from the Russian side” that this was allowable under Putin’s decree 172, the order that requires “unfriendly” foreign powers to pay for their gas in roubles.

A spokesperson for Uniper, one of Germany’s main buyers of gas from Russia, confirmed on Thursday it was in talks with Gazprom “in close coordination with the German government” over “concrete payment modalities”, but said it would continue to pay in euros for now.

“Uniper can say for its contracts, we consider a payment conversion compliant with sanctions law and the Russian decree to be possible,” the spokesperson said. “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.”

OMV, an Austrian oil and gas company, is also looking at ways to pay for gas without contravening EU sanctions. In a statement 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.”

The Financial Times reported that companies in Hungary and Slovakia, as well as Italy’s Eni, were also considering signing up for Russian accounts in the hope of securing continued supplies.

Poland and Bulgaria have taken a defiant position, refusing to sign up to Putin’s preferred arrangement under any conditions. Poland’s prime minister, Mateusz Morawiecki, described Russia’s retaliatory suspension of gas supplies as a “direct attack”.

However, Germany, Europe’s largest economy and largest Russian gas user, has adopted a more emollient tone amid fears – disputed by some analysts – that an embargo would be impossible without crashing its economy.

Anna Moskwa, Poland’s climate and environment minister, said “full sanctions on gas” would put to bed the question of whether firms could still buy Russian gas.

The main EU member states resisting tougher gas sanctions on Russia were Austria, Germany and Hungary, she added. “We are counting on there being consequences for these countries [which seek to comply with Putin’s rouble payment decree] and that as a result they will cease paying in roubles.”

The European Commission president, Ursula von der Leyen, said on Wednesday that the Kremlin was using “fossil fuels to try to blackmail us”, and that the EU was seeking to reduce its reliance on Russian gas by importing more from the US. However, the EU has not attempted to impose sanctions on Gazprom or Gazprombank.