EU Commission President Ursula von der Leyen said this latest aggressive move by Russia is another reminder that we need to work with reliable partners, and build our energy independence.
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The European Union is racing to find alternative natural gas suppliers after Russia Gazprom He cut flows to two EU countries, raising fears that others will soon follow.
These developments come at a time when Brussels fears that countries and energy companies are circumventing tough international sanctions against Russia – which were imposed on Moscow in the wake of its unprovoked invasion of Ukraine.
Gazprom, Russia’s state-owned energy company, cut natural gas supplies to Poland and Bulgaria earlier this week, after the two countries refused to pay for the commodity in rubles – an order President Vladimir Putin’s request Amid growing Western support for Ukraine.
The decision places more pressure on the European Union, which imports nearly 40% of its total natural gas from Moscow, to find alternative solutions.
“It helps open the eyes of those who still believe that Russia will not use gas as leverage,” an EU official, who asked not to be named due to the sensitive nature of the situation, told CNBC about Russia’s latest move.
European Commission President Ursula von der Leyen went further on Wednesday, Accusing the Kremlin of blackmail Mass.
Kremlin spokesman Dmitry Peskov denied accusations that Moscow is using its gas supplies to blackmail European countries Poland and Bulgaria, saying Russia is a reliable supplier of energy. He also refused to reveal how many countries have agreed to switch to paying for gas in rubles, Reuters reported.
But pressure could mount if Gazprom chooses to cut supplies to other EU countries. The Kremlin warned on Wednesday that other countries would face the same problem if they did not pay in rubles – something the European Union’s executive arm, the Commission, opposes, as it violates existing sanctions.
“Russia’s move to stop the flow of gas to Poland followed Berlin’s decision – under intense political pressure – to provide Ukraine with air defense weapons. The implicit threat is that Russia will cut off German gas supplies if Berlin continues to ship arms to Ukraine,” say analysts at Gavekal, a company Financial Research, he said in a note on Thursday. “The economic effects will be catastrophic,” they added.
As such, the commission is working to become less dependent on Russian gas. It signed an agreement with the United States, earlier this year, where The European Union will receive at least 15 billion cubic meters LNG this year.
“We are working hand in hand with our member states to secure alternative gas supplies from other partners as well,” von der Leyen said on Wednesday.
Meanwhile, Brussels will have to decide how to continue paying for Russian natural gas without violating the bloc’s own rules. Russia issued a decree In late March he said that European companies would continue to pay for gas in euros to Gazprombank – an institution not part of European sanctions – after which that money would be converted into rubles in a secondary account opened by these energy companies.
The European Union decided to continue to pay for Russian gas in dollars and euros to Gazprombank and then the institution converts it into rubles when sending money to Gazprom. This comes after the Russian Gas Company decided to cut off supplies to Poland and Bulgaria for not paying for the commodity in rubles.
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But this is where UNHCR is concerned. The foundation wants to ensure that once European companies make the down payment in euros, the contractual obligation is actually fulfilled.
The Commission is also concerned that European companies with a second account at Gazprombank and the Russian Central Bank are handling these funds, which could breach European sanctions.
“European and European officials continue to warn companies that making ruble payments to Gazprom would violate sanctions,” analysts at consultancy Eurasia Group said Thursday in a note.
The solution on the table is to have Gazprombank make the transfer into rubles and pay this amount into the Gazprom account.
Hungary, for example, announced Thursday that it would allow gas payments to be transferred from euros and dollars to rubles, as demanded by Putin. Media reports said nine other countries also pay for gas in euros to Gazprombank, which then transfers it.
German Economy Minister Robert Habeck said doing so could be in line with the sanctions imposed. Either way, it is further clouding the deteriorating economic outlook in Europe.
Speaking to CNBC on Thursday, Italy’s central bank governor, Ignazio Visco, said that if Russia cut off all gas supplies, his country would be in recession later this year and the year after, albeit modestly.
Earlier this week, UBS CEO Ralph Hammers also expressed concerns about how changes in natural gas supplies could affect the economy.
“Russian gas is different – a much bigger challenge and that’s really because of a large part of it[s] Many industries depend on gas as an essential commodity for the manufacture of their products… and this is what could cause the impact of the second order specifically in the European economy.”