Win for Putin as Italy Defies Europe and Opens Ruble Account to Pay for Gas

·3 min read
Sputnik/Alexei Druzhinin/Kremlin via Reuters
Sputnik/Alexei Druzhinin/Kremlin via Reuters

ROME—At the beginning of Vladimir Putin’s savage war in Ukraine, the European Union put up a unified front to boycott all things Russian. Despite initial hesitancy from Italy, Germany, and Hungary “disgracing themselves” over ties to the Kremlin, pressure led to even these holdouts joining forces and seizing oligarch yachts and villas, and stopping exports of Gucci and Prada to rich Russian customers.

But as the war wears on—and energy prices skyrocket—many of Europe’s energy giants are growing weary and finding ways to keep buying Russian gas without pissing off Putin, who demanded on March 31 that payments from “unfriendly” countries must be made in the Russian currency. Reverberations were felt all across Europe last month when Russia abruptly stopped supplies to Poland and Bulgaria after they refused to pay in rubles.

These Countries Have ‘Disgraced Themselves’ in Blocking Russian Sanctions

Italy’s Eni company confirmed late Tuesday that it would in fact be opening a ruble account with Russian energy company Gazprom’s bank Gazprombank (which has somehow not fallen under sanctions) to meet Moscow’s demands for payments in Russian currency. To get around sanctions, Eni —which previously paid by transferring euro directly to Russian energy company Gazprom—will also open a euro account with the bank and let the bank make the transfer to ruble on their behalf.

Nearly half of the 90 percent of all gas Italy imports comes from Russia. The country does not yet have a viable backup plan if the Kremlin turns off the spigot. “There is no official pronouncement of what it means to breach sanctions,” Italian Prime Minister Mario Draghi said Tuesday when pressed about the payments. “Nobody has ever said anything about whether ruble payment breach sanctions.”

With many countries, including Italy, counting down to elections next year, voters’ utility bills are taking priority. Germany’s Uniper S.E. and Austria’s OMV AG are also reportedly stretching the same EU loophole that allows Italy to pay in rubles without breaking any sanctions. The EU Commission, which hardly has a reputation for being tough, is as much to blame by never laying out guidance on how countries can pay Gazprom for fuel.

On Monday, gas prices fell slightly in Europe after EU Commission spokesman Eric Mamer said that opening ruble accounts wasn’t technically against any rules. “Anything that goes beyond opening an account in the currency of the contract with Gazprombank and making a payment to that account, and then issuing a statement saying that, with that you consider you have finalized the payment, contravenes the sanctions,” he said, leaving the issue to interpretation.

On Tuesday, he backtracked and said indeed that opening bank accounts in rubles “goes beyond the recommendations and constitute a breach of sanctions.” But by then Italy’s Eni had already opened the account.

Some critics now say that European countries are turning a blind eye to the bodies of tortured Ukrainian citizens piling up in Mariupol and other areas besieged by Russian forces, while at the same time patting themselves on the back for welcoming refugees without the usual push back people fleeing war often face.

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