Gas Price Drops After Reassurance About Payments by Gazprom
The European gas price fell sharply on Monday. The decline followed Russian gas supplier Gazprom’s attempt to reassure buyers that they could continue to pay for gas without violating Western sanctions.
The large liquefied natural gas (LNG) stocks and the warmer weather in many European countries also resulted in lower gas prices.
Gazprom said in a letter to customers that a new Kremlin decree last week “clarifies” the procedure surrounding a payment in rubles. Moscow wants companies to pay in rubles to support its own currency. In order to buy Russian gas, customers have to open two accounts with Gazprombank, one in euros and one in rubles. After that, the euro payments are converted into rubles by the Russian central bank. However, that transaction violates sanctions against Russia.
Under the new decree, the payment of gas in a foreign currency will be exchanged for rubles through bank accounts that run through Russia’s National Clearing Center, the organization that deals with, among other things, banking transactions. The procedure in the decree does not appear to apply to the Russian central bank, which is subject to sanctions.
It is still unclear whether the new decree will allay the concerns of the European Union. Meanwhile, the United States wants to tackle Russia’s Gazprombank with new sanctions. Gazprombank, which is essential for the payments of the Russian gas supply to Europe, was previously unaffected. But now, the Americans have decided to sanction certain bank directors. However, according to Washington, it is not a complete blockage of the bank and transactions with Gazprombank are not prohibited.