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Italy requests clarification of the Commission's ruble-for-gas regulations

Italy's green transition minister, Roberto Cingolani, desires a transition in which utilities may pay in Russian currency without breaching sanctions.

Italy wants the European Commission to explain out clearly how firms may pay for Russian gas without violating sanctions imposed during Ukraine's invasion, Italian Prime Minister Mario Draghi said Monday.

"It’s very important that the Commission expresses a clear legal opinion on whether paying in rubles is a breach of sanctions or not," Draghi said after a Cabinet meeting. "‘Because if there is not clarity or a line of conduct then it is clear that each company or each country will do as it believes fit.”

His remarks were in response to Italian Minister of Energy Security Roberto Cingolani's statement that European energy firms should be permitted to temporarily comply with Russian requests to pay for gas in rubles.

“I think at the moment the understanding is not complete from the point of view of legal issues and implications. I think it would be good for a few months, at least, to allow companies to go ahead and pay in rubles, while we understand the legal framework and implications," he said, adding that he wants “a speedy and very clear pronouncement from the European Commission” confirming that oil and gas companies can pay in rubles for the time being.

Draghi clarified that Italy's position "is that of Germany, France and everyone else. We will follow the indications of the European Commission in this regard, there is no distinction between Italy and the others."

Meanwhile, Rome is preparing for a probable Russian gas shutdown by implementing energy-saving measures and perhaps extending the life of coal-fired power stations.

The Kremlin has asked that energy businesses from "hostile nations" — which includes all EU members — pay for gas in rubles to support the Russian currency's value.

Businesses are required to open euro and ruble accounts with Russia's Gazprombank, and the Russians will consider the gas payment complete only when the rubles are deposited.

The European Commission has advised businesses against opening ruble-denominated accounts, claiming that doing so would violate Russia's sanctions for invading Ukraine. According to its guidance, utilities can pay in euros — which would be considered final under existing contracts — and then Russia can convert them to rubles later.

For the time being, the Kremlin is insisting that businesses adhere to its system. Last week, Russia's state-controlled Gazprom cut off gas supplies to Poland and Bulgaria for refusing to comply with Moscow's demand.

However, Cingolani, Italy's minister for the green transition, stated that it might take months to fully grasp the legal ramifications, putting oil and gas corporations in a pickle.

“I believe oil and gas companies cannot risk paying and then being accused of having broken sanctions, but at the same time they cannot risk ... not paying in rubles,” he said. “These are long-term contracts, the costs would be extremely high.”

His proposed workaround is similar to the Commission's. The EU energy company would regard the euro payment as the final transaction while Russia could instead consider the ruble payment after conversion. But he acknowledged such an approach might be “optimistic.”

“In this process there are gray areas, which could constitute a breach of sanctions. However you do it there is a problem.”

European Energy Commissioner Kadri Simson on Monday confirmed that the Commission will "issue more detailed guidance on what companies can and cannot do within our sanctions framework."

Contingency plans

Meanwhile, Cingolani's government is developing contingency preparations in the event that Russia suspends gas deliveries to Italy. Russia supplies the country with around 29 billion cubic meters of gas per year, or 40% of its total demand.