Gazprom will cut gas supplies to Shell Energy in Germany after becoming the latest company to refuse to use the Kremlin’s ruble payment mechanism.
Russia’s state-owned gas exporter said supplies from Shell Energy would stop from June 1, with an annual contract for 1.2 billion cubic meters – around 2.5% of Germany’s gas imports from of Russia last year – affected by this decision.
The cut represents the first official cut in gas supplies to Germany from Russia, where the majority of large local gas buyers like Uniper and RWE have accepted the Kremlin’s ruble payment mechanism.
Under this agreement, Russian gas buyers must open two bank accounts with Gazprombank, one to make payments in euros and the other to be converted into rubles.
The EU did not sanction Gazprombank, but the UK targeted the state-backed Russian bank. Shell moved to the UK earlier this year from the Netherlands.
Shell will continue to supply customers in Europe and will work towards a “phasing out” of Russian hydrocarbons, a company spokesman said.
The European Commission has raised concerns that ruble transactions could breach European sanctions, although many companies believe they can continue to buy Russian gas as long as their contractual obligation ends once they deposited the payment in euros.
A number of other European companies have also refused to use the ruble payment mechanism, saying it is a breach of contract and risk of penalties.
Gazprom cut off supply from GasTerra in the Netherlands this week and confirmed on Tuesday that it would also cut off supply from Orsted in Denmark.
Shell did not immediately say whether its decision to stop the payment was related to UK sanctions, EU sanctions or another reason.