Bulgaria warns that Ruble Commissions for gas will not work

Businesses are trying to find a means to pay for gas that appeases Russia and complies with EU sanctions.

The European Union's proposed workarounds, which would allow firms to pay for Russian gas without breaking sanctions, are "probably not really a possibility," senior Bulgarian officials warned Thursday, after Gazprom shut off their gas despite attempts to pay.

The European Commission is attempting to explain precisely what firms must do to comply with sanctions while maintaining access to Russian gas. EU ministers will meet on Monday to address the matter, after some nations expressed confusion over the Commission's recommendations and demanded more explanation.

Russian President Vladimir Putin requested that consumers from "hostile nations" pay for their gas in rubles, a move aimed at supporting the Russian currency's value.

Countries who do not cooperate will be denied gas – as Poland and Bulgaria discovered on Wednesday.

The Commission has made it quite clear that paying Gazprom in rubles would constitute a violation of EU sanctions. Rather than that, it offered a possible evasion that would satisfy Moscow's requests while adhering to the sanctions placed on Russia following its invasion of Ukraine.

Putin's March 31 edict requires Gazprom's EU clients to create two accounts with Gazprombank, deposit payment in the contract currency in the first account, permit Gazprombank to convert the money to rubles, transfer them to the second bank account, and ultimately pay Gazprom. Only then would the monopoly on gas exports acknowledge that payment had been made.

However, the EU stated that this is contrary to the sanctions.

“This payment in double steps could even constitute a loan by the European companies to the Russian Central Bank,” said a senior EU official, adding: “I don't see how this system could be compatible with the sanctions.”

Rather than that, the Commission advised that European gas purchasers create a hard currency account with Gazprombank, deposit the required amount in euros or dollars, and produce a certification that payment requirements have been met.

“If companies open only a bank account and pay in euros, that's it, there's no breach by the company of the sanctions. After that, what the Russians do with the money, it's up to them” said the EU official.

Brussels has ruled out the possibility of businesses opening accounts in rubles.

"What we cannot accept is that companies are obliged to open a second account," said the official, calling such a scheme that leaves control of the cash in Russian hands before the payment is finalized "a clear circumvention of the sanctions."

Several EU member states, particularly Germany — Russia's largest gas customer in Europe — have signaled that they will accept the Commission's recommendation.

However, there is no evidence that Moscow will cooperate.

Bulgaria has firsthand knowledge of what occurs when a buyer fails to comply with Russia's new requirements.

"Putting money in that account does not constitute completion of the acquisition," Asen Vasilev, Bulgaria's Deputy Prime Minister and Finance Minister stated

Bulgargaz, the state-owned utility, got a contract amendment from Gazprom requiring it to relinquish control of its money to a third party in order to complete the currency transfer, without assurances of receiving the gas, according to Vasilev and Energy Minister Alexander Nikolov.

“We don't feel comfortable surrendering taxpayers' money to a third party that we have no control over, especially a third party that is controlled by a country that just puts us on an enemies list,” Vasilev said.

“You're losing all potential legal claims, arbitrage, court cases, everything,” added Nikolov.

Bulgaria chose to put $50,000 into its normal account after requesting answers from Gazprom but not obtaining any – Gazprom returned the money and switched off the gas.

Vasilev stated that Sofia is requesting the Commission to initiate an antitrust investigation into Gazprom and has enlisted the Commission's legal assistance in its pending arbitration dispute against the Russian corporation.

The issue is expected to resurface in the coming weeks as further EU consumer payments become due.

Nikolov called Russia's demands "really close to blackmail. You do whatever we want, and that's it."

By fLEXI tEAM