Russia plans to cut off Dutch and Danish land over gas payments dispute

Denmark and the Netherlands have become the latest countries to reject Russia’s demands on how to pay for gas, further highlighting divisions in the European Union over dependence on Russian energy supplies.

GasTerra, the partially state-owned Dutch gas trading company, said Gazprom, Russia’s largest gas exporter, would cut supplies on Tuesday after it decided not to comply with Moscow’s “unilateral” payment requirements, which include a demand for payments in rubles. .

Ørsted, Denmark’s largest gas supplier, also warned on Monday that there was “a risk” that Gazprom would stop supplying gas due to its decision to continue paying in euros before the month-end payment deadline.

Denmark and the Netherlands will join Finland, Poland and Bulgaria in cutting gas supplies via Russia. Countries account for 16 percent of the volumes that Russia was contracted to deliver to Europe at the start of the year and now need to get them elsewhere.

Termination of the GasTerra contract means that 2 billion cubic meters of gas will not be delivered between now and October.

The company, half owned by the Dutch state and the rest by Shell and ExxonMobil, said it was impossible to predict “whether the European market could absorb this loss of supply without serious consequences.”

Rob Getten, the Dutch energy minister, said homes and industry would not be affected because GasTerra had bought additional gas in anticipation of the move. “However, the government will continue to closely monitor the situation in the coming period,” he said.

At the end of March, President Vladimir Putin signed a decree requiring buyers from “unfriendly countries” to open accounts in euros and rubles with Gazprombank in Russia. The counterparty to the deal was later changed to limit the participation of the Russian Central Bank, which is subject to European Union sanctions.

The largest buyers of EU gas in Germany and Italy – whose payment deadlines are approaching – have suggested that they see the payment method as compliant with EU sanctions and contract terms for long-term supply agreements, which usually specify the currency and method of payment. .

The European Union has gradually sharpened its guidance, warning that using a ruble bank account may violate sanctions and warning companies about exchange rate risks. Despite the warnings, Italy’s Eni opened a bank account in rubles in a sign that it was ready if necessary to comply with the Moscow payment mechanism in order to keep gas flowing.

GasTerra said compliance with the Russian payment mechanism would risk breaching EU sanctions and pose “a lot of financial and operational risks”, in large part due to opening accounts in Russia that would be under Moscow’s control.

“Gazprom’s share of the European market will take another hit with GasTerra and Ørsted refusing to change the payment method,” said Tom Marzik Manser of ICIS, a consultancy. “While the market has largely been expecting the two companies to cut, this development will make the balance between supply and demand even tighter.”

The split in approach to Putin’s demands for payment comes as the European Union tries to agree on a softened embargo on Russian oil, including a temporary exemption for supplies coming through the Druzhba pipeline to appease reluctant Hungary.

Additional reporting by Andy Bounds in Brussels