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Eni Moves to Open Ruble Accounts as EU’s Unity Starts to Fray

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(Bloomberg) -- Italian energy giant Eni SpA is preparing to open ruble accounts at Gazprombank JSC, the latest sign that Europe’s united front against Moscow is splintering.

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Eni’s move, which would potentially allow it to comply with Vladimir Putin’s demand that gas must now be bought in local currency, is a precautionary measure, according to people familiar with the matter.

European Commission President Ursula von der Leyen warned companies on Wednesday not to bend to Russia’s demands, saying that doing so would breach sanctions. But companies are seeking workarounds, and the bloc’s own guidance issued last week appears to be encouraging them to do so.

Eni is making preparations as the company continues to seek clarity from Italian and European authorities on what it’s allowed to do, the people said. Germany’s Uniper SE, a massive buyer of Russian gas, has also said it believes it can keep buying gas without breaching sanctions.

Hours after Gazprom PJSC cut off flows to Poland and Bulgaria for failure to accede to the new terms, Bloomberg reported that four European buyers have already paid in rubles and 10 have opened the accounts at Gazprombank needed to meet the new rules. Von der Leyen was clear in her response.

“Companies with such contracts should not accede to the Russian demands,” von der Leyen said. “This would be a breach of the sanctions so a high risk for the companies.”

But as payment deadlines fall due, companies and governments need to decide whether to accept Russian demands -- strengthening Moscow in its war in Ukraine -- or risk the prospect of rationing gas at home.

Behind closed doors on Wednesday, several EU nations were pushing for clearer guidance from the bloc, saying the current advice is too ambiguous, according to people familiar with the discussions. A number of countries want the commission to clarify that buyers don’t have any workarounds to acquiesce to the Kremlin’s demands. Poland said the selective interpretation of the Russian decree was a tool for Russia to break EU solidarity.

Poland has refused to accept the new terms and Gazprom halted gas flows on Wednesday in response. Since before the war in Ukraine, the bloc has been divided between countries such as Poland taking a more hawkish line against Russia and those keener to protect energy supplies.

Gas prices eased on Thursday as traders reassessed the risk of the cutoff spreading to the rest of Europe.

The EU has said that paying in rubles would breach sanctions -- and strengthen Russia’s hand. But a Q&A issued last week noted that the Russian decree didn’t preclude exemptions. It told companies to seek confirmation from Moscow that paying in euros was still possible, and advised them to keep paying in euros. It also makes clear they can engage with Gazprombank.

Eni is also seeking more clarity on the guidelines and will comply with sanctions. The Italian company hasn’t used the new mechanism, and has so far only paid in euros, the people said. The next round of payments isn’t due until the second half of May.

Italy gets about 40% of its gas from Russia, though Prime Minister Mario Draghi has been scouring the globe for replacements and has secured new agreements with suppliers particularly in North Africa.

A spokesman for Eni declined to comment.

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