Gazprom, which operates the Nord Stream 1 (NS1) natural gas pipeline, announced the stoppage of gas supply to Latvia on July 30. In a short statement, the Russian firm accused its smaller neighbor of breaking "terms for extraction of gas." These "terms" are believed to pertain to Moscow's requirement of fuel payments in the form of rubles, Russia's official currency, which Riga refused to comply with.
Gazprom's announcement followed an earlier notice by Latvian energy company Latvijas Gaze that it was buying gas from Russia, but paying in euros. A spokesperson for Latvijas Gaze said on July 29 that it was not purchasing gas from Gazprom – but from a different company which was not named due to business confidentiality reasons. The Latvian company did not immediately respond to a request for comment following the announcement of its Russian counterpart.
Latvian Deputy State Secretary on Energy Policy Edijs Saicans, meanwhile, brushed off the Gazprom announcement. He remarked that the Russian gas company's decision would have little effect, given that Riga has already decided to ban gas imports from its bigger neighbor from Jan. 1, 2023.
"We do not see any major impacts from such a move," said the official at the Latvian Ministry of Economics.
The gas-for-rubles scheme arose as a consequence of sanctions imposed by the West on Russia for invading Ukraine in late February. Russian President Vladimir Putin said the following month that "unfriendly foreign buyers" must deal with Gazprom in the Russian currency instead of dollars and euros. (Related: Russia's Gazprom HALTS gas flows to Poland and Germany; Europe in PANIC as rolling blackouts are inevitable unless Europe finds RUBLES.)
UK unable to pay for gas following sanctions on Gazprombank
According to the Kremlin, potential gas buyers must open two accounts at Gazprombank, Russia's third-largest bank. The first account must be either in euros or dollars, while the second account must be in rubles. Payments for gas deliveries would then be paid in the two foreign currencies and exchanged for rubles in turn.
"In a situation where the financial system of Western countries is used as a weapon; when companies from these states refuse to fulfill contracts with Russian banks, enterprises [and] individuals; [and] when assets in dollars and euros are frozen, it makes no sense to use the currencies of these countries," Putin said during the March 31 announcement of the gas-for-rubles scheme.
"We supplied European customers with our resources – in this case, gas – and they received it. [They] paid us in euros, which they then froze themselves. In this regard, there is every reason to believe that we have supplied … Europe virtually free of charge. This, of course, cannot continue."
However, many countries have refused to adhere to the scheme as they want to maintain sanctions on Moscow. The European Commission has warned that complying with Putin's demand could breach the bloc's sanctions, urging companies to keep paying in the currency agreed upon in their contracts with Gazprom.
Among the many Western nations that sanctioned Russia, the U.K. is the only one to have imposed sanctions on Gazprombank. However, the bank plays a key role in Putin's gas-for-rubles order. Downing Street opted out of this arrangement, subsequently causing gas prices in the U.K. to rise by a whopping 81 percent.
Kremlin Press Secretary Dmitry Peskov pointed out the repercussions of the British government's decisions made under its former Prime Minister Boris Johnson.
"London wants to be the leader of everything anti-Russian. It even wants to be ahead of Washington. That's the cost," he said.
Visit FuelSupply.news for more stories about Russia cutting off natural gas supplies to Europe.
Watch Russian President Vladimir Putin confirming the gas-for-rubles scheme below.
This video is from the Countess Erzsebet Bathory channel on Brighteon.com.
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President Putin's full remarks at the oil for ruble announcement.
UK unable to pay for Russian gas after imposing sanctions on Russia's Gazprombank.
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