Poland, Austria, And Russia: Ruble Payments Agreed?

On 27 April 2022, Austrian Chancellor Karl Nehammer announced that his government, along with Austrian oil company OMV, had agreed to pay for Russian gas imports in rubles. This decision came after Russia cut off gas supplies to Poland and Bulgaria for not complying with its demands for payment in rubles. Nehammer previously stated that it was “not possible for the European Union to impose sanctions on Russian gas. Poland, on the other hand, has refused to pay for Russian gas in rubles and has called for penalties for countries that do so.

Austria agreed to pay for Russian gas in rubles

On 27 April 2022, Austrian Chancellor Karl Nehammer announced that his government, along with Austrian oil company OMV, had agreed to pay for Russian gas imports in rubles. This decision came after the Russian energy company Gazprom cut off gas supplies to Poland and Bulgaria due to their non-compliance with Russia's demands for paying for gas in rubles.

Nehammer stated that Austria and Germany had accepted the terms of the gas payments as they were "found to be in line with the terms of the sanctions." He also previously commented that it was "not possible" for the European Union to impose sanctions on Russian gas.

Austria's decision to pay in rubles contrasts with the European Commission's insistence that payment for gas in rubles "is a breach of our sanctions." Commission President Ursula von der Leyen stated that "if this is not foreseen in the contract, to pay in rubles is a breach of our sanctions."

However, there appears to be ambiguity in the Commission's guidance. Earlier in April, the Commission stated that companies could open an account with Gazprombank, as requested by Moscow, to make payments in euros or dollars and then issue a declaration that their payment obligation ends with the deposit of funds. The final currency conversion into rubles would then be handled by Russia.

Austria's agreement to pay for Russian gas in rubles highlights the challenges faced by European countries in balancing their energy needs with adherence to sanctions against Russia.

Poland refused to pay for gas in rubles

Poland has refused to pay for Russian gas in rubles, with Polish Government Plenipotentiary for Strategic Energy Infrastructure Piotr Naimski stating that "We will not pay". This comes after Russian President Vladimir Putin signed a decree in March 2022 demanding that all gas payments be made in rubles. Putin's decree also required contractors to open accounts in rubles in Russian banks, from which payments for gas supplied from April 1 would be made.

Poland's refusal to pay in rubles led to Russian energy giant Gazprom cutting off gas supplies to the country. This was the first suspension since Russia insisted that foreign buyers pay for gas in rubles. Gazprom stated that it had completely suspended gas supplies to... PGNiG [Poland] due to absence of payments in rubles.

The European Commission has insisted that payment to Russia in rubles is forbidden as it undermines sanctions imposed after Russia's invasion of Ukraine. Commission President Ursula von der Leyen stated that "If this is not foreseen in the contract, to pay in rubles is a breach of our sanctions".

Despite the risk of gas shutoff, Poland has stood firm in its refusal to pay in rubles. Polish Prime Minister Mateusz Morawiecki said that Poland had prepared for this situation by diversifying its energy sources, and noted that gas storage facilities were 76% full. Polish Climate Minister Anna Moskwa also assured that "there will be no shortage of gas in Polish homes".

Following the suspension of gas supplies, Morawiecki stated that "Today Poland has become gas independent from Russia. We are not threatened by any blackmail".

Austria's chancellor initially said it was impossible to impose sanctions on Russian gas

Austrian Chancellor Karl Nehammer initially said it was "impossible" to impose sanctions on Russian gas. On May 31, 2022, he stated that the EU would not discuss a gas embargo as part of the next round of sanctions against Russia for its war in Ukraine. He argued that Russian oil was much easier to compensate for, whereas gas was a different matter, and that Germany's Chancellor Olaf Scholz shared this view. Nehammer also expressed his belief that 'smart sanctions', such as restrictions on electronic components, would be more effective.

Austria's heavy reliance on Russian gas, which made up 98% of its natural gas supply in December 2023, was a key factor in Nehammer's stance. He warned that an embargo would lead to industry collapse and mass unemployment in Austria, as well as in Germany. However, following Russia's demand that all gas payments be made in rubles, Austria found itself in a difficult position.

On April 27, 2022, Nehammer announced that his government and the Austrian oil company OMV had agreed to pay for Russian gas imports in rubles. He justified this decision by stating that such payments were in line with the terms of Western sanctions against Moscow. This shift in Austria's position came after Russia's energy giant Gazprom cut off gas supplies to Poland and Bulgaria for their refusal to comply with the new payment requirements.

The issue of paying for Russian gas in rubles has divided EU member states, with Poland advocating for stricter sanctions and calling for penalties for countries that use rubles to pay for gas. Austria, Germany, and Hungary have been identified as the main EU member states resisting tougher gas sanctions on Russia. Despite Austria's initial reluctance to impose sanctions on Russian gas, the country's relationship with its main gas supplier has since been strained. In November 2024, Gazprom ended its natural gas deliveries to Austria, with OMV citing an arbitration ruling by the International Chamber of Commerce in a contractual dispute.

Poland wants EU countries paying in rubles to be penalised

Poland has been one of the EU's most vocal proponents of punitive sanctions against Moscow, and has called for penalties to be imposed on EU countries that pay for Russian gas in rubles. This comes after Moscow cut off gas supplies to Poland and Bulgaria due to their refusal to comply with Russia's requirement that payments be made in rubles.

Following Russia's decision to cut off gas supplies to Poland and Bulgaria, Anna Moskwa, Poland's climate minister, stated that the EU should penalise countries that use rubles to pay for Russian gas. Moskwa emphasised that Poland expects full sanctions on gas, which would solve the problem with Gazprom and ensure compliance with sanctions. She identified Austria, Germany, and Hungary as the main EU member states resisting tougher gas sanctions on Russia. Moskwa expressed hope that there would be consequences for countries paying in rubles, leading them to cease this practice. However, she did not specify the nature of the penalties Poland wanted to see.

Poland's stance on this issue highlights its commitment to supporting Ukraine and imposing punitive measures on Russia. It remains to be seen what specific actions Poland will take to push for penalties against EU countries paying in rubles and how this will impact the dynamics within the EU and its response to the Ukraine crisis.

Austria initially stated that it would continue to pay for Russian gas in euros, adhering to EU sanctions. However, Austrian Chancellor Karl Nehammer later announced that his government and the Austrian oil company OMV had agreed to pay for Russian gas imports in rubles. This decision was made after Gazprom cut off gas supplies to Poland and Bulgaria for their non-compliance with the requirement to pay in rubles. Nehammer also stated that Austria and Germany had accepted the terms of payment for Russian gas, considering them in line with Western sanctions against Moscow.

Austria and Germany accepted the terms of the gas payments

Austrian Chancellor Karl Nehammer announced that his government, along with Austrian oil company OMV, has agreed to pay for Russian gas imports in rubles. This decision comes after Russia cut off gas supplies to Poland and Bulgaria for their refusal to comply with the same demand.

Nehammer stated that Austria and Germany have accepted the terms of the gas payments as they were "found to be in line with the terms of the sanctions." He also previously mentioned that it is "not possible" for the European Union to impose sanctions on Russian gas.

Austria and Germany's decision to accept the terms of the gas payments in rubles is a significant development in the ongoing energy dispute between Russia and the European Union. This decision may have been influenced by the fact that both countries are heavily reliant on Russian gas, with Germany being Russia's largest gas customer by volume.

While Austria and Germany have accepted the terms, other countries such as Poland, one of the EU's staunchest proponents of punitive sanctions against Russia, have refused to comply. Poland's climate minister has even called for the EU to penalize countries that use rubles to pay for Russian gas.

The European Commission, however, has insisted that payment for gas in rubles is a breach of sanctions and has advised companies to follow a specific payment process to avoid breaching sanctions. Despite this, the decision by Austria and Germany to accept the terms highlights the divide within the EU on how to handle the situation.

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