Hungary, Slovakia seek to overcome US sanctions impact on Russian gas payments

Hungary and Slovakia face challenges in paying for Russian gas due to new U.S. sanctions on Gazprombank, risking supply disruptions without a legal solution.

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

Hungarian Foreign Minister Peter Szijjarto said 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 an obstacle for European buyers of Russian gas. Buyers have been using Gazprombank to make the 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 and supplies most of the Slovak market, said the problem was acute as a monthly payment was coming up and there was currently no known way how to make it.

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

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 said separately in a statement it remained the only bank authorised to process payments for Russian gas by foreign buyers, but it will receive payments only in roubles.

The source close to SPP said the issue affected other buyers in Europe as well, including countries in the Balkans, as banks were not willing to send payments to Gazprombank, and there was no grace period for the U.S. sanctions.

A spokesman for SPP said the company was still analysing the situation.

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