Gazprom confirms halting gas supplies to Denmark's Orsted, Shell in Germany because of non-payment in rubles

MOSCOW. June 1 (Interfax) - Gazprom has confirmed halting gas supplies to Denmark's Orsted, as well as to Shell (SPB: RDS.A) in Germany, because of non-payment in rubles, Gazprom said in a statement.

"Gazprom has fully halted gas supplies to Orsted Salg & Service A/S, Denmark, owing to non-payment in rubles. As at the close of business on May 31, Gazprom Export had not received payment from Orsted Salg & Service for gas supplies in April as per Russian presidential decree No. 172, dated March 31, 2022. Payments for gas supplied as of April 1 must be remitted in rubles using the latest payment details that were communicated to the counterparties in a timely manner," the company said in the statement.

Gazprom has also fully ceased supplying gas to Shell Energy Europe Limited because of non-payment in rubles.

"As at the close of business on May 31, Gazprom Export had not received payment from Shell Energy Europe Limited for gas supplies in April as per Russian presidential decree No. 172, dated March 31, 2022. Payments for gas supplied as of April 1 must be remitted in rubles using the latest payment details that were communicated to the counterparties in a timely manner," Gazprom said.

The contract between Gazprom Export and Shell Energy Europe Limited stipulates supplying 1.2 billion cubic meters of gas per year to Germany.

Gazprom Export supplied 1.97 bcm of gas to Orsted Salg & Service in 2021, which was around two-thirds of the total gas consumption in Denmark.

NEW PAYMENT SYSTEM

Russian President Vladimir Putin signed decree No. 172 on March 31 on a "special procedure for foreign buyers to fulfill obligations to Russian suppliers of natural gas," according to which payment for Russian pipeline gas supplied after April 1 to foreign counterparties specified in the decree must be remitted in rubles only.

Under the 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 buyers fulfilling obligations not related to payment on contracts to supply natural gas. Foreign buyers pay for gas in the currency of the contract, which the bank sells on the Moscow Exchange and then transfers the rubles to Gazprom, at which point payment for the gas is considered to be completed.

If the condition is not met, then gas supplies are suspended. Further gas supplies are prohibited if the payment deadline for gas supplied under a contract has expired and the foreign buyer has not remitted the payment, or has rendered it in a foreign currency, neither in the full amount nor to the account of the authorized bank.

Russia has suspended gas supplies to Poland, Bulgaria, Finland, and the Netherlands because they have refused to comply with the new payment system.