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Unprepared for the Crisis: Europe’s Ruble-for-Gas Challenge - Erkin Sancarbaba


Ensuring a stable energy supply despite the current turbulent political conditions is one of the most important achievements that can make governments' energy policies successful. The decisions and choices of policymakers regarding the establishment of energy supply security will have long-term effects, especially when developments in the field of energy are at the center of the multidimensional international crisis. It can be said that Russia's decision for "unfriendly countries" to make gas payments to Russia in Rubles has also driven European decision-makers to a crossroads. On the other hand, it has been understood that carrying out the necessary legal assessment in line with the sanctions imposed on Russia by the European Union and instituting a legal infrastructure that meets the needs are vital for establishing energy supply security.


To understand the importance of the decree put into effect by Russia for European states and companies, it is necessary to examine the content of the decision taken first. According to the decree signed by Russian President Vladimir Putin on March 31, 2022, the payment procedures for the natural gas purchased from Russia by the previously determined unfriendly countries and companies located in these countries have changed. Within the scope of the decree, a payment mechanism was envisaged in which companies from the countries mentioned above would open two bank accounts at Gazprombank. Companies must first transfer the payments to the first bank account in the currency stipulated by their existing contracts with Gazprom and authorize Gazprombank to exchange these funds in Rubles on the Moscow Exchange. The payment transaction is accepted when Gazprombank transfers the amount in Ruble equivalent to the amount transferred to the first account.


European Union authorities state that Russia's new payment mechanism will be against the sanctions. Although Gazprombank is not included in the scope of the European Union sanctions applied to Russia, it is stated that the sanctions may be breached because the payment to be made in Ruble by opening a double account may include the Central Bank of Russia in the payment mechanism. In addition, it is interpreted by the European authorities that the sanctions will be breached because paying in rubles is against the sanctions provisions.


While it is known that most natural gas supply contracts are confidential, companies usually make payments in a specified currency under the contract. According to the data of the European Commission, 97% of the existing contracts of European companies with Gazprom require payment in Euros or US Dollars. Considering the ratio in question, it is seen that the decree enacted by Russia forced European companies to make decisions directly. In this direction, companies and governments request the European Union institutions to prepare a detailed guideline that gives clear answers to the questions regarding the payment mechanism.


Although the European Commission has published a guideline regarding this decree and tried to answer frequently asked questions, criticism has been made that the language of the published directive is not clear and does not offer a constructive solution to the complications that exist. As stated in the guideline, as an alternative to the payment mechanism determined by Russia, companies can open a Euro or Dollar account at Gazprombank and pay the payments stipulated in their contracts in Euro or Dollar currencies and submit a declaration to Russia that they have fulfilled their payment obligations. After this payment, it was stated in the European Commission's guideline that they should receive approval from the Russian side that the procedure was completed.


It is not difficult to say that the European Commission guideline does not solve the current energy supply problems. Because Russia has announced that it has stopped supplying natural gas to Poland and Bulgaria, the Bulgarian Energy Minister stated that they paid Russia in the currency determined in the current contract in line with the instructions in the guideline. The Russian authorities conveyed that the payment was deemed invalid because the transaction was not made in Ruble and returned the paid amount.


It can be stated that Russia's announcement that it has stopped supplying natural gas to Poland and Bulgaria is a warning to other European companies and governments. It is obvious that there is a serious divergence between European Union governments and European companies. The inability to establish the legal infrastructure of the European Union sanctions imposed on Russia forces countries and companies to take the initiative and make quick decisions. Hungarian authorities stated that there is no problem paying in rubles for the natural gas purchased from Russia. In contrast, Italian government officials stated that Italian companies could pay in rubles to prevent a possible interruption in natural gas supply. In this direction, the Italian energy giant Eni has prepared to pay in Rubles.


The necessity of the governments to place energy supply security among the priority interests in the decisions to be taken in line with the political developments and to prepare a roadmap in this direction has emerged in the current process. Provisions that can endanger energy security should be evaluated while making sanction decisions and other arrangements to be made. The success of energy policies is directly related to the cooperation of legislators, institutions, and the private sector by determining the comprehensive strategies of the countries. In addition, the planning of the legal infrastructure, which is complementary to the sanctions packages and regulations that are planned to come into force, is vital for establishing and maintaining legal security and legal certainty.

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