EU leaders plan energy security boost, brush off Russian rouble demand

By Kate Abnett

BRUSSELS (Reuters) -European Union leaders are set to agree at a two-day summit starting on Thursday to jointly buy gas as they seek to cut reliance on Russian fuels, with some saying they would not comply with Moscow's demand to buy oil and gas using roubles.

The invasion of Ukraine by Russia, Europe's top gas supplier, pushed already-high energy prices to records and has prompted the EU to pledge to slash reliance on Russian fossil fuels by hiking imports from other countries and quickly expanding renewable energy.

Moscow on Wednesday said "unfriendly" countries, including EU member states, must start paying in roubles for Russian oil and gas, a demand some EU leaders said was at odds with supply contracts.

"There are fixed contracts everywhere, with the currency in which the deliveries are to be paid being part of these contracts," German chancellor Olaf Scholz said. "In most cases it says euros or dollars, this is the basis we are working on."

"Nobody will pay in roubles," Slovenian Prime Minister Janez Jansa said.

In a draft of their summit conclusions seen by Reuters, the leaders will agree to "work together on the joint purchase of gas, LNG and hydrogen" ahead of next winter, and coordinate measures to fill gas storage - moves aimed at building up a supply buffer of non-Russian gas.

The European Commission has said it is ready to lead negotiations pooling demand and seeking gas, following a similar model to how the bloc bought COVID-19 vaccines.

Leaders will discuss that plan on Friday, when the EU is also expected to announce an agreement with U.S. President Joe Biden, who will attend the summit, on extra U.S. liquefied natural gas (LNG) supplies for the next two winters.

Russia supplies 40% of the EU's collective gas needs - most of which arrives via pipelines - plus 27% of oil imports and 46% of coal imports.

U.S. exporters have shipped record volumes of LNG to Europe for three consecutive months, as prices have jumped to more than 10 times higher than a year ago, with Europe and Asian buyers competing for tight supply.

Countries remain divided, however, on whether to sanction Russian oil and gas directly, a move already taken by the United States. An EU embargo would require unanimous approval from all 27 member states.

Latvia and Poland are among countries seeking to halt the hundreds of millions of euros per day Europe pays Russia for fossil fuels.

"Energy sanctions are a way to stop money flowing into (Russian President Vladimir) Putin's war coffers," Latvian Prime Minister Arturs Karins said. "The most logical place to move forward is in oil and coal."

Germany, which receives 18% of Russia's gas exports, and Hungary are among those opposed, citing the economic damage an oil embargo would unleash.

Soaring energy prices have also leapt onto the EU summit agenda, with Spain, Belgium, Italy, Greece and Portugal proposing price caps and measures to decouple the price of electricity and gas, to rein in consumer bills.

Spanish Prime Minister Pedro Sanchez said he hoped for a "balanced agreement" on Spain's proposals that covered Europe as a whole.

Other countries warn capping wholesale prices would cause problems and undermine efforts to shift to green energy. Some diplomats said any EU-wide decisions on this were likely to be delayed until a report due this month from energy regulators on possible EU electricity market reforms.

EU countries are largely responsible for their own energy policies. Governments have already poured billions into national tax cuts and subsidies to curb soaring energy bills.