Global Gas Sanctions Against The Russian Federation Are Cracking

For the last four days, Italian companies such as Eni and several German companies have been looking for loopholes from their governments to open accounts with Gazprom, the Russian state owned energy company, to buy gas but not violate sanctions.

The primary demand of the Russian Federation is that all payments for Russian gas be made in their currency, Rubles. This order from President Putin would require a foreign buyer to now transfer foreign currency to one special, so called “K”, account at the lender. Gazprombank would then buy roubles on behalf of the gas buyer to transfer roubles to another special “K” account, significantly boosting the economic impact for Russia.

However, the European Union has provided no clear guidance to their member states on how to approach these demands. Countries like Finland, Poland and Bulgaria have flat out refused and advised their companies that buying in Rubles would violate sanctions. In fact, Finland has taken the most productive measures in ending reliance on Russian gas by directing Gasgrid Finland and Excelerate Energy to sign 10 years leases of LNG floating terminal vessels to increased off shore supply. According to the contract: “Under the time charter party agreement, Excelerate will deploy its FSRU Exemplar to provide regasification services in Southern Finland. The Exemplar has storage capacity of 150,900 m3 of LNG and can provide more than 5 billion cubic meters per year (bcm/y) of regasification capacity.”

However, both the German and Italian governments have advised their energy firms that such purchases would not violate sanctions. Eni is scheduled to begin payments in Rubles by the end of May. Eni purchased 22.5 billion cubic metres (bcm) of Russian gas in 2020, so it is not impossible for that same amount to flow to Italy once the contracts are in place. This would effectively nullify European Union energy sanctions against Russia for their invasion of Ukraine. It is important to understand that approximately 40% of the European Unions has comes from Russia.

Worse still is reporting that China is increasing its oil purchases from Russian at bargain prices , with seaborne importers expected to jump to near record 1.1M bpd by the end of May.

Both the crumbling of a solid European Union sanction bloc and Chinese enthusiasm to buy high supply, low demand Russian oil, means that the Federation will be able to circumvent much more economic pain than the West, with regards to gas, while still financing their war in Ukraine.

In a related note, starting this Sunday, none of the Baltic Nations (Lithuania, Estonia, and Latvia) will import Russian electricity. In an announcement earlier today, Litgrid, Lithuanias electrical grid operator announced the last holdout, Nord Pool, is ending its transmissions from the Russian power grid. The Baltic States will rely on Polish transmission networks and NordBalt, which are underwater power cables to Sweden, as well as domestic power production.

United States Military Academy and American Military University Alumni. Victor covers flash military, intelligence, and geo-political updates.


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