The US is obliged to provide Energy to the EU if sanctions are retaliated by Russia

As a soft and initial reaction, Russia demands payments of its Gas in Rubles. After the EU imposed sanctions on Russia over the Ukraine crisis, Moscow demanded that it be paid in rubles for shipments starting April 1. But the bloc told member states that the mechanism the Kremlin proposed, which required opening euro and ruble accounts with state-controlled Gazprombank, would violate the sanctions. Four European gas buyers have already paid for supplies in rubles as President Vladimir Putin demanded, according to a person close to Russian gas giant Gazprom PJSC. Even if the other buyers reject the Kremlin’s terms, more cutoffs after the halt in the gas flow to Poland and Bulgaria Wednesday aren’t likely until the second half of May when the next payments are due, the person said, speaking on condition of anonymity to discuss confidential matters. Almost Ten European companies have already opened the accounts at Gazprombank needed to meet Russia’s payment demands, the person said.

Supplies to Poland and Bulgaria were cut off after they refused Gazprom’s proposed mechanism for ruble payments, which the gas giant says does not violate European Union sanctions, according to the person. Russia supplies gas via pipelines to 23 European countries.

As a matter of fact, the whole of Europe depends on Russian Oil and Gas, as a source of much-needed energy. Some of the European countries have already explored other options, but, with very little success. Without Russian Oil and Gas, their economy may suffer heavily. If they follow the American imposed sanction, they will suffer more than Russia.

European Union countries are scrambling to make sense of Russia’s decision to cut gas flows to Poland and Bulgaria, and are eager to maintain their own supplies from Russia while steering clear of violating trade sanctions imposed against Moscow. As Russia’s energy giant Gazprom announced it would be halting gas supplies to both countries after not receiving payment in Russian rubles from the two EU member states. Gazprom said the countries had violated an order by Russian President Vladimir Putin that payments for Russian gas must be made only in Russia’s currency and not United States dollars or euros.

Russia has ordered that energy companies from “unfriendly countries” make their payments in rubles at Gazprombank, a request that some in the EU, including Germany – which is hugely dependent on Russian gas – said did not break sanctions rules. “The payments will be made in euros and then transferred by Gazprombank into a so-called K account,” said Germany’s Climate and Economy Minister Robert Habeck. “That’s the path that we’re taking, that’s the path that Europe has shown, that is the path that’s compatible with sanctions,” he said. The payment process basically requires buyers to open a ruble account at Gazprombank into which their euro or dollar payments would be deposited after conversion into the Russian currency via authorization from the buyer. But others, including the European Commission, which drafts the sanctions on Russia for the EU, warned that the transfer could constitute a violation, putting gas importers in legal danger. The commission has said the process would breach EU sanctions on Russia as the currency conversion would involve a transaction through Russia’s central bank, which is subject to EU sanctions.

It is a very complex and complicated situation. Most of the EU countries are in a state of confusion and need clarification from the EU commission.

As a matter of fact, the sanctions were imposed by the US and the EU endorsed them. It is the sole responsibility of the US to provide alternatives to the EU for their energy needs. The US was never dependent on Russian Energy, nor will sanctions-hit America. Unfortunately, the victim will be the EU. Either the US provide them the energy required or compensate for the losses that occurred due to sanctions. The US economy is not in such a healthy shape to share such a heavy burden. But, the EU should have thought well before endorsing the American imposed sanctions. Only a few rich countries in the EU may survive, yet, most EU countries may collapse or face severe challenges.

Prof. Engr. Zamir Ahmed Awan
Prof. Engr. Zamir Ahmed Awan
Prof. Engr. Zamir Ahmed Awan, Sinologist (ex-Diplomat), Non-Resident Fellow of CCG (Center for China and Globalization), National University of Sciences and Technology (NUST), Islamabad, Pakistan.