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Gazprom will cut gas supplies to Shell Energy in Germany, after becoming the latest company to refuse to use the Kremlin’s rouble payment mechanism.

The Russian state-owned gas exporter said supplies to Shell Energy would stop from June 1, with an annual contract of 1.2bn cubic meters — or roughly 2.5 per cent of Germany’s gas imports from Russia last year — affected by the move.

The cut represents the first formal reduction in gas supplies to Germany by Russia, where the majority of larger homegrown gas buyers like Uniper and RWE have agreed to the Kremlin’s rouble payment mechanism.

Under the arrangement, Russian gas buyers must open two bank accounts with Gazprombank, one to make payments in euros and the other to be converted to roubles.

The EU has not sanctioned Gazprombank, but the UK has targeted the Russian state-backed bank. Shell moved to the UK earlier this year from the Netherlands.

Shell will continue supplying its customers in Europe and will work on a “phased withdrawal” from Russian hydrocarbons, said a spokesperson for the company.

The European Commission has raised concerns that transacting in roubles could breach European sanctions, though many companies believe they can continue buying Russian gas as long as their contractual obligation ends once they have deposited payment in euros.

A number of other European companies have also declined to use the rouble payment mechanism, saying it is a breach of contract and a sanctions risk.

Gazprom this week cut supplies to the Netherlands’ GasTerra and confirmed on Tuesday it would also stop supplies to Denmark’s Orsted.

Shell did not immediately comment on whether its decision to stop payment was related to UK sanctions, EU sanctions, or another reason.

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