Europe decries 'blackmail' after Russia cuts gas to Poland, Bulgaria

Europe decries 'blackmail' after Russia cuts gas to Poland, Bulgaria

SOFIA/WARSAW--Russia's Gazprom cut Poland and Bulgaria off from its gas on Wednesday for refusing to pay in roubles, and threatened to do the same to others, cranking up retaliation for Western sanctions imposed for Moscow's invasion of Ukraine.


Gas prices soared on fears that more states could be hit, notably Germany, Europe's biggest economy, which last year bought more than half its gas from Russia.
President Vladimir Putin's demand for payment in roubles is designed to soften the effect of Western sanctions that include freezing hundreds of billions of dollars of Russian assets. Russia's top lawmaker said other "unfriendly" countries might also be cut off.
European Union energy ministers will hold an emergency meeting on Monday to discuss the situation, France said.
The European Commission has accused Moscow of blackmail - but issued an advisory document to EU countries last week outlining options that might allow EU buyers to continue paying for Russian gas without breaching sanctions. Uniper, Germany's main importer, said it could pay without violations.
However, EU Energy Commissioner Kadri Simson said on Wednesday that Brussels was still advising companies to stick to the terms of their contracts, which usually specify payment in euros or dollars, and avoid paying in roubles. At a meeting on Wednesday, member state ambassadors asked the Commission for clearer guidance, four EU diplomats said.
Gazprom, the state-controlled energy giant that supplies Europe with about 40% of its gas needs, said transit via Poland and Bulgaria - whose pipelines supply Germany, Hungary and Serbia - would be cut if fuel was siphoned off illegally. With global supply extremely tight, Europe is unlikely to be able to replace its Russian gas fully in the short term.
The Kremlin, which casts sanctions by the United States and Europe as acts of economic war, said on Tuesday that Gazprom was implementing Putin's decree and halting supplies to Bulgaria's Bulgargaz and Poland's PGNiG "due to absence of payments in roubles".
Poland, at the forefront of efforts to supply Ukraine's military with equipment to fight invading Russian forces, and Bulgaria both said Gazprom was in breach of contract. "We will not succumb to such blackmail," Bulgarian Prime Minister Kiril Petkov said.
Russia’s gas payments system, involving opening accounts at Gazprombank, where payments in euros or dollars will be converted to roubles, does offer some wiggle room that might allow gas purchases to continue. In its advisory note, the Commission said that if buyers of Russian gas confirmed payment was complete once they had deposited euros, as opposed to later when the euros were converted to roubles, that would not breach sanctions.
Germany said companies could pay in euros under the system, warning that it could go into recession if it were cut off from all Russian energy. Hungary, which has taken a similar line to Berlin, said this month that EU authorities had "no role" to play in its gas deal.
"Today’s events can work as an added incentive for the EU, especially Germany, to find a way to work out a rouble payment mechanism given the significant economic toll a halt in gas flows would have in the region," said analysts at Goldman Sachs.

The Daily Herald

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