Hungary and Slovakia's Gas Payment Dilemma

BUDAPEST (Reuters) – Hungary and Slovakia are seeking ways to make payments for Russian gas which were thrown into uncertainty by new U.S. sanctions on Russia's Gazprombank, officials said on Wednesday.

Hungarian Foreign Minister Peter Szijjarto stated he would hold talks with Russian Deputy Prime Minister Alexander Novak later on Wednesday to work out a legal solution regarding future payments for shipments.

The U.S. imposed new sanctions on Russia's Gazprombank on Nov. 21, creating obstacles for European buyers of Russian gas. Buyers have used Gazprombank to make payments, including a scheme for currency conversion to roubles.

A source close to the Slovak state-owned gas company SPP, which has a long-term contract with the Russian supplier Gazprom (MCX:GAZP) and supplies most of the Slovak market, indicated that the problem was acute as a monthly payment was coming up. There is currently no known way to make it.

Failure to pay could prompt Gazprom to suspend shipments, according to the source.

Russian President Vladimir Putin issued a decree last week cancelling the option for buyers of Russian gas to convert currency into roubles at Gazprombank. The lender stated it remained the only bank authorized to process payments for Russian gas by foreign buyers but will only receive payments in roubles.

The source close to SPP mentioned that the issue also affected other buyers in Europe, including countries in the Balkans, as banks were unwilling to send payments to Gazprombank with no grace period for the U.S. sanctions.

A spokesman for SPP stated the company is still analyzing the situation.

Slovakia and Hungary have been keen to continue buying Russian gas; however, shipments to Slovakia face suspension from January as Ukraine does not plan to extend a transit agreement with Gazprom. Slovakia has been attempting to find a workaround to allow the shipments to continue.