The Netherlands rejects the new mechanism... and Germany is evaluating the situation

The confrontation between Putin and Europe over the ruble threatens to cut off gas supplies

• The Yamal-Europe gas pipeline is in danger of being interrupted.

  Reuters

• The Yamal-Europe gas pipeline is in danger of being interrupted.

  Reuters

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The European Union faces a dilemma, finding itself caught between Russian President Vladimir Putin's hammer, paying for gas from buyers, the so-called unfriendly countries, in rubles, threatening to cut off supplies unless this is done, and the desperate need for Russian gas.

Given the bloc's dire need for gas, it exempted it from the sanctions it imposed on Moscow for its invasion of Ukraine.

The writers Richard Bravo and Alberto Nardelli, in a report published by the "Bloomberg" news agency, say that the European Union and Russia are in danger of triggering a de facto embargo on Russian gas, after the bloc's lawyers reached a preliminary conclusion that the mechanism by which President Vladimir Putin demands payment for gas in rubles , will violate the sanctions imposed by the bloc.

Evaluation Check

Countries, including Germany, are still scrutinizing an initial EU assessment that Putin's demand for rubles would violate the bloc's sanctions imposed over Russia's invasion of Ukraine.

The Netherlands told its energy companies to reject the new payment system, in light of the EU's legal analysis.

The authors added that Russia can still provide clarifications or make amendments to its decree, which could affect how the European Union and companies move forward in dealing with the gas file.

Russia gets about 1 billion euros a day from Europe from energy purchases, which Moscow has helped shield from the impact of European Union sanctions.

The authors added that if Russia carried out its threat to cut off gas supplies to buyers who did not comply with the ruble payment, this would pose a serious threat to the European Union, which gets 40% of its gas from Russia.

The European Union is striving to find alternative sources of energy while dealing with Moscow's huge impact on its security, but the transition to those sources will take time.

The European Union is preparing its sixth package of sanctions, but moves to target Russian energy are fraught with risks, given the bloc's dependence on this energy.

The authors argue that if gas supplies are cut off immediately, it could cost Germany's GDP 220 billion euros ($238 billion) over the next two years, according to joint projections by economic institutes.

recession

That amount is equivalent to 6.5% of annual GDP, and could push the country into a recession of more than 2% next year.

On March 31, Putin issued a decree requiring that unfriendly countries that buy his country's gas open two accounts, one in foreign currency, and the other in rubles, with Gazprom Bank.

The Russian bank will convert the foreign currency payments into rubles, before transferring them to the state-owned gas company Gazprom BGSC.

A preliminary analysis by lawyers for the European Commission, the European Union's executive arm, found that payments using the system would violate sanctions imposed by the bloc, according to a source familiar with the matter.

Lawyers for the European Council, which includes leaders of the bloc's 27 member states, agreed with the European Commission's assessment, another source said.

The source said that the commission transmitted the analysis to member states last week, adding that governments would need to notify the 150 companies that have gas contracts with Russia.

The European Union also said it intended to provide more guidance on the situation, to help countries and companies.

The Netherlands recently asked its companies to reject the new terms set by Russia to pay for gas.

"The Dutch government agrees with the European Commission's conclusion," a spokesperson for the Dutch Ministry of Economic Affairs and Climate Policy told Bloomberg.

"This means that Dutch companies are not allowed to agree to these terms," ​​he added.

The authors pointed out that Gazprom's gas exports to the Netherlands are relatively low, by regional standards, as supplies to the country accounted for only about 4% of the Russian gas giant's shipments to the European Union and Turkey, in the first half of last year.

German Economy Minister Robert Habeck acknowledged the commission's report, which was published by the American magazine Politico, adding: "We cannot allow any sanctions to be circumvented through the back doors."

However, the German minister did not say whether his government had agreed to the assessment, nor did he provide clarification on the nature of the action that Germany would take.

• Countries, including Germany, are still scrutinizing a preliminary assessment of the European Union, which shows that Putin's request for payment in rubles will violate the sanctions imposed by the bloc due to Russia's invasion of Ukraine.

• If gas supplies are cut off immediately, it could cost Germany's GDP 220 billion euros ($238 billion) over the next two years, according to joint projections by economic institutes.

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