The Bulgarian government says Bulgaria will cut off Russian gas supplies to Europe via the Turkish Stream pipeline if Russia does not pay for transit.
Gazprom can’t pay for gas delivery due to new sanctions against Gazprombank
After the United States imposed sanctions on Gazprombank, the Russian monopoly Gazprom lost the ability to not only accept payments for its gas but also pay for its delivery, Bloomberg wrote.
Gazprom used to pay Bulgartransgaz, which transports its fuel to Serbia and Hungary, through Gazprombank.
However, this possibility vanished when the bank faced sanctions on November 21. According to Malinov, Bulgartransgaz, the operator of the gas transportation and storage system in Bulgaria, cannot continue to transport gas without December payments.
Historically, these payments have been made through Gazprombank, which is currently under sanctions. Gazprom’s request accounts for most Bulgarian supply, which involves transit costs.
Bulgartransgaz will not allow gas transit if the service is not paid for – Energy Minister
“Bulgartransgaz will strictly fulfill its contractual obligations and will not allow the transit of natural gas if the service is not paid for,” Energy Minister Vladimir Malinov told reporters in Sofia.
“We await the proposal from Gazprom Export. Now there is no decision yet, I am not informed that there is a proposed decision. In response to a question whether if the Russian gas giant would not pay its fees for the volumes transported in December, Bulgartransgaz would stop the transit of Russian gas. Naturally, Bulgartransgaz will strictly implement its contract and will not allow natural gas to be transported if the service is not paid for accordingly,” Malinov said.
It is the responsibility of “the company that booked the capacity and paid through Gazprombank to find a solution if it wants to receive this service,” he added, referring to Gazprom.
Malinov stated that Russia has until December 10 to find a solution after receiving payments for past deliveries.
Bulgaria transfers 18 billion cubic meters of gas to Serbia and Hungary annually
Gazprombank retains the main capacity reserves to continue the Turkish Stream transit through Bulgaria to Serbia until 2039, making its payments critical to Bulgartransgaz’s operations.
However, recent US sanctions against a Russian bank have blocked financial transactions. This development raises uncertainty about the future of the pipeline, a key transit route for Russian natural gas bypassing Ukraine, created after the failure of the previous South Stream project.
Bulgaria annually delivers nearly 18 billion cubic meters of gas to Serbia and Hungary, with a portion of this volume also reaching the Western Balkan countries. Since the launch of the pipeline in early 2022, Bulgaria has received transit fees of more than $750 million.
Hungary has already expressed concern, stating that it threatens Europe’s energy security.
The situation is further complicated by the fact that the transit route through Ukraine, from where gas is delivered to Hungary and Slovakia, will also cease to operate in January. Ukraine has said it won’t extend the agreement, which expires on December 31.
Sanctions against Gazprombank
As reported, on November 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added Gazprombank and more than 50 other Russian banks, more than 40 Russian securities registrars, and 15 officials of the Russian financial sector to the sanctions lists.
“Gazprombank is a conduit for Russia to purchase military materiel for its war effort against Ukraine. The Russian government also uses Gazprombank to pay its soldiers, including for combat bonuses, and to compensate the families of Russian soldiers killed fighting Putin’s brutal war against Ukraine,” the statement said.
Later, new US sanctions against Russia could close the only way for European customers to pay for Russian gas.
Gazprombank, in turn, said that the sanctions would not affect its banking operations but did not answer questions about decisions on gas payments. At the same time, however, the bank warned its customers about difficulties with the operation of UnionPay cards abroad.
Later, reports surfaced that Russia had updated the process for foreign buyers to pay for Russian gas following new US sanctions against Gazprombank, which handled these transactions.
Thus, payments for gas through Gazprombank’s special accounts, introduced in March 2022, will not be made until the sanctions are lifted.
To make settlements, the authorized bank may now open a ruble account for the supplier to credit the payment in rubles from foreign buyers or a ruble and foreign currency account for settlements in case of debt collection in rubles or the currency of the contract by offsetting claims.
Additionally, the amendments stipulate that the Russian supplier may terminate the obligation to pay for supplies by offsetting counterclaims.
At the end of March 2022, Russian ruler Vladimir Putin signed a decree to convert gas payments into rubles with countries that Russia itself defines as “unfriendly.” After that, most European countries said they would not agree to this, and the European Commission warned member states that paying for Russian gas in rubles would violate sanctions imposed on Russia after the invasion of Ukraine.
