The Russian Ruble Decree-Crisis: Can European Gas Buyers "Pay in Rubles without Paying in Rubles"? What May Be the Consequences if Not?
Abstract
The Russian aggression in Ukraine has not only brought immense human tragedy, but also unprecedented uncertainty upon the European energy markets. Gas supply has emerged as a particularly weak spot of the entire European economy, being massively overdependent on Russian supplies. When Russian President Vladimir Putin issued the infamous Presidential Decree No. 172 of 31 March, requiring payments for the delivery of gas to be made in Rubles (the "Ruble Decree"), the situation grew even more complex. Not only is the Russian demand contrary to the payment terms of existing Gas Supply Agreements ("GSAs"), but it is also at variance with EU sanctions. Securing continued gas flows from Russia may, hence, require buyers to square a circle.
In this post, we will attempt to untangle some of the legal issues buyers face at this critical time, the resolution of which may have implications beyond the gas sector.1) Events are quickly unfolding as we write, with many European GSAs currently at a watershed moment: Whilst the Russian Gazprom Export has already halted supplies to Poland and Bulgaria in late April, and lately also to Finland, payment is due under many European contracts these days. At this turning point, we may see gas supply contracts - including the arbitration of disputes - evolve into an extended battlefield of economic warfare.