Gazprom fully ends gas supplies to Finland on May 21 due to its refusal to pay in rubles
MOSCOW. May 23 (Interfax) - Supplies of Russian gas to Finland have ended in the morning of May 21, as confirmed by Finland's Gasum state gas company and Gazprom on Saturday morning.
"As of the end of the working day on May 20, Gazprom Export did not receive the payment for gas supplies in April from Finland's Gasum company in accordance with the Russian Presidential Decree No. 172 of March 31, 2022. The payments for gas supplied since April 1 should be made in rubles using new details, about which the contract parties were appropriately informed," Gazprom said.
Gasum said earlier that it had rejected Russia's requirement to switch to payment for gas in rubles and decided to take the disputes regarding the supply contract to arbitration in accordance with the contract.
Gasum said that starting from May 21, during the upcoming summer season, it would supply natural gas to its customers from other sources through the Balticconnector pipeline.
In 2021, Gazprom Export supplied 1.49 billion cubic meters of Gas to Gasum, which made up two thirds of the total amount of Finland's gas consumption.
Finnish Minister for European Affairs Tytti Tuppurainen told the Helsingin Sanomat newspaper earlier that Finland made the decision to refuse the switch to ruble payments back in early April and communicated it to Gasum's management. According to Tuppurainen, the new system of payments would be a breach of sanctions. The Finnish official also saw this as an attempt to split the EU: "We do not agree with the payment in rubles, it can be seen as blackmail of Russia and as part of Russia's geopolitical efforts."
In November 2021, Gazprom and Gasum celebrated the half-century anniversary of the first contract to supply Russian gas to Finland. It was signed on November 19, 1971. Deliveries through the Leningrad - Vyborg - State Border gas pipeline began in 1974 and marked the start of the use of this environmentally friendly fuel in the country's energy system.
Finland became the third Western European country to receive Russian natural gas. During half a century of cooperation, the country imported about 130 billion cubic meters of gas.
It is noteworthy that Gazprom was previously a co-owner of Gasum. The latter was established in 1994 by Fortum and Gazprom. Gasum undertook obligations to import and sell gas, as well as to operate and develop the Finnish gas transportation system. In 2016, Gazprom sold its stake and the Finnish government became the company's sole shareholder.
On March 31, Russian President Vladimir Putin signed a decree No. 172 on a "special procedure for foreign buyers' fulfilment of obligations to Russian suppliers of natural gas," under which payment for Russian pipeline gas supplied after April 1 to foreign counterparties specified in the decree must be made only in rubles.
Under this procedure, special "K" type ruble and foreign currency accounts are opened at the authorized financial institution, Gazprombank (GPB), for foreign buyers. These accounts prohibit the suspension of transactions, freezing or debit of funds as part of foreign buyer's fulfillment of obligations that are not related to payment on contracts to supply natural gas. Foreign buyers pay for gas in the currency of the contract, which the bank then sells on the Moscow Exchange and transfers rubles to Gazprom. This is the point at which payment for the gas is considered to be completed.
If this condition is not met, gas supplies will be suspended. Further gas supplies are prohibited if the payment deadline for gas supplied under a contract has expired but the foreign buyer did not make the payment or made it in foreign currency, not in the full amount or not to the account at the authorized bank.