(Bloomberg) -- The European Union is pressing the US to explore ways to mitigate US sanctions on Russia’s Gazprombank, a financial institution key for keeping Russian natural gas flowing into the bloc.
The discussions are ongoing even after President Vladimir Putin dropped a requirement that foreign buyers use only that bank when buying Russian gas, a move aimed at averting the impact of US the restrictions.
The EU and US are discussing the type and scope of mitigation measures after some European governments and companies warned that the sanctions would pose a risk to the region’s security of supply, according to people with knowledge of the matter.
Options under consideration in the talks include whether payments can be legally made via a Luxembourg-based subsidiary of Gazprombank, or whether it’s better to use other channels of payments, according to the people, who requested not to be identified as the talks are private.
While Putin’s decree to lift the requirement to pay directly via Gazprombank helped soothe the European gas market, it further complicated the payment system and left financial institutions still uncertain about the legal risks.
Last month, the US imposed sanctions on the Russian bank as it intensified efforts to punish Moscow for its war in Ukraine.
Under pressure from Europe as it faced a severe gas shortage after the invasion of Ukraine, the US had held off on sanctioning Gazprombank earlier. In the meantime, the EU worked to bolster alternative supplies, including liquefied natural gas from the US.
The share of Russia’s pipeline gas in EU imports fell from more than 40% in 2021 to around 8% last year. For pipeline gas and LNG combined, Russia accounted for less than 15% of imports. It was behind Norway, which become the bloc’s top supplier with a 30% share, and the US, which provided 19% of Europe’s gas.
Under Putin’s latest decree, foreign buyers are now allowed to use other banks to convert money into rubles before a transfer. But Gazprombank remains the sole authorized institution for payments. Banks will want to be comfortable with any solution to ensure they’re not inadvertently falling in foul of US sanctions, according to the people.
In 2022, Gazprom changed how it accepted payments from European buyers, demanding rubles via Gazprombank. Poland and Bulgaria were cut off in 2022 for refusing to comply but Slovakia and Hungary still get Russian pipeline gas. The government in Budapest submitted a request to the US earlier this week for a waiver.
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