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EU countries paying for Russian gas in roubles may face legal action, warns Dombrovskis

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By Shona Murray  & Jorge Liboreiro
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EVP Dombrovskis said Brussels could launch legal action against those who breach EU sanctions.
EVP Dombrovskis said Brussels could launch legal action against those who breach EU sanctions.   -   Copyright  AP Photo/Olivier Matthys

Brussels is willing to launch legal action against EU countries that allow their energy companies to pay for Russian gas in roubles, violating EU sanctions.

"It's a relatively complex setting," European Commission's Executive Vice-President Valdis Dombrovskis told Euronews on Thursday afternoon. 

"So on the one hand, it's member states which are monitoring the implementation of sanctions by concrete companies in their territory. But on the other hand, as European Commission, we are monitoring whether member states are actually enforcing sanctions," 

"If we see that this is not the case, there is also a possibility for the European Commission to start infringement procedures in this regard," he warned.

The vice-president's comments come a day after Russia's state-controlled energy multinational Gazprom decided to cut off gas supplies to Poland and Bulgaria.

The two countries had refused to abide by a decree issued by President Vladimir Putin that forces "unfriendly" foreign buyers, including the 27 member states of the European Union, to set up a second bank account to convert the euros into roubles and then pay for Russian fossil fuels.

The decree is meant to prop up the national currency, which experienced a dramatic freefall in early March and gradually recovered to pre-war levels.

Dependency on Russian gas remains key issue

The Commission says around 97% of EU gas contracts signed with Russia explicitly estipulate payments must be carried out in either euros or dollars.

"Companies with such contracts should not accede to the Russian demands," said Commission President Ursula von der Leyen in reaction to Gazprom's decision. "This would be a breach of the EU sanctions and therefore a high risk for the companies."

The executive says that, by setting a second bank account, Russia's Central Bank, which is under strict Western sanctions, will have direct access to euros and be able to build up its foreign reserves.

But despite the insistence from Brussels, capitals seem confused about how to handle Putin's decree, given the high degree of dependency that many have on Russian gas.

Bloomberg reported this week that ten European energy companies, which the outlet did not name, have opened bank accounts in roubles and four of them have already paid in the Russian currency.

Uniper, one of Germany's biggest energy firms, confirmed to the BBC its euro payments will be converted into roubles, arguing "it is not possible to do without Russian gas in the short term."

Hungarian Prime Minister Viktor Orbán has also suggested his country would be prepared to pay in roubles if it were asked to do so in order to obtain energy supplies.

Dombrovskis avoided mentioning Hungary by name and stressed the EU "has been united" in its response against Russia over the invasion of Ukraine, which is now entering its third month.

The trade chief added the next package of EU sanctions will introduce measures to curb the imports of Russian oil but refused to provide details as political consultations between capitals and the Commission are "ongoing".

Oil is the fossil fuel for which the EU pays the largest amount of money (about €70 billion in 2021) but that, in the event of a EU-wide embargo, would be easier to replace than gas.

EU Moscow's top energy client

Asked about the possibility of Gazprom suspending supplies to other gas-dependent EU countries, like Germany or Austria, Dombrovskis said the bloc has for weeks been drafting contingency plans to deal with this extreme scenario and will be ready to weather the storm.

"The assessment is that not without problems, but we are able to cope with this situation. And we are already, for some time, very intensively working on diversifying gas supplies," the vice-president explained, listing the US and Norway as alternative suppliers to fill in the Russian gap.

"It's clear that we cannot give in to this Russia's blackmail," he added. "Even regardless of this development in these days, we had strategically decided that we will be moving away from Russia's fossil energy."

The Commission has put forward an ambitious roadmap to slash imports of Russian gas by two thirds before the end of the year, mainly through the purchase of liquified gas (LNG), a more expensive and in-demand product.

For the time being, the EU continues to be Moscow's top energy client: in the first two months of the Ukraine war, the 27 member states spent over €44 billion on Russian fossil fuels, according to a new report by the Centre for Research on Energy and Clean Air.

Soaring energy prices are enabling Russian companies to reap windfall profits from European buyers and, by extension, help the Kremlin sustain the impact of the hard-hitting Western sanctions.

Nevertheless, the Russian economy is expected to suffer the worst recession since the end of the Cold War, while the World Bank has said Ukraine's GDP will shrink by 45% or even more as a result of the war.

The Commission announced this week it will grant "zero-tariff, zero-quota trade" to Ukraine in a bid to cushion the economic fallout.

The EU is also set to suffer: the conflict will "clearly slow economic growth in the EU this year," Dombrovskis said, "but it will not stall it."