gas price cap

PRO Business MS

Accounting and Finance

gas price cap


EU energy ministers have clashed over a plan to put a price cap on Russian gas, casting doubt on whether the measure will go ahead.

Speaking after emergency talks in Brussels in response to surging gas and electricity prices, the EU’s energy commissioner, Kadri Simson, said “nothing is decided” on proposals to curb Russia’s income.

Vladimir Putin has dismissed the idea as “stupid” and threatened to make Europe “freeze” this winter, if a cap is agreed. Russia has already slashed supplies to Europe and said it will not resume flows at previous volumes until the EU lifts sanctions. Russian supply makes up only 9% of EU gas imports, down from 40% before the invasion of Ukraine.

Simson defended the cap plan as reasonable. “The context of this measure is that Russia is gaining huge profits by manipulating and limiting, artificially, supply to drive up prices. And the cap would reduce these profits,” she told reporters on Friday.

There was more consensus over a proposal to cap the high price of EU-produced electricity from renewable sources, such as wind, solar and nuclear, and to reduce energy consumption across the region. The European Commission favours a mandatory 5% cut in electricity use during peak hours.

Countries that import large volumes from Russia, including Hungary, Slovakia and Austria, have spoken out against the cap proposal because they fear the Kremlin would halt all gas flows, plunging their countries into recession.

“If price restrictions were to be imposed exclusively on Russian gas, that would evidently lead to an immediate cut-off in Russian gas supplies,” said Hungarian foreign minister Péter Szijjártó, who was attending the meeting. “It does not take a Nobel Prize to recognise that.”

Around a dozen countries, including France and Poland, say the price cap should apply to all imported gas, including liquified natural gas. The EU energy commissioner voiced doubts about that approach, saying that a general price cap “could present a security of supply challenge”.

Since the invasion of Ukraine, the EU has been scrambling to secure supplies shipped in from other countries, such as Qatar, Norway and the United States, but it faces stiff competition from Asia. “Right now it is important that we can replace decreasing Russian volumes with alternative suppliers,” Simson said.

Only the Baltic states, who have long argued for sanctions on Russian gas, gave full-throated support to the plan. Riina Sikkut, Estonia’s minister for economic affairs and infrastructure, urged other members to ignore Putin’s threats, saying: “It is blackmail, it is war that is waged outside Ukraine … We have to have the political will to make Ukraine win.”

Ministers were more aligned on dealing with a distortion in the energy market, which has seen renewable and nuclear energy companies reaping huge profits because the price of all electricity is pegged to the price of wholesale gas. The proposals are for a cap on power from wind, solar and nuclear, and the redistribution of revenues to vulnerable consumers and businesses.

Ministers also backed a plan to reduce demand for electricity, although Czech industry minister Jozef Síkela, who chaired the meeting, indicated that member states wanted voluntary targets, rather than a legally-binding obligation.

“EU energy ministers have agreed the EU needs a comprehensive plan to face the ongoing energy crisis,” said Simone Tagliapietra, a senior energy expert at the Bruegel think tank. “As all these measures are extraordinarily complex to be engineered, it will take a great political commitment by member states to quickly adopt them in the coming weeks. Europe is off for a grand bargain on energy.”