Page 6 - FSUOGM Week 36 2022

FSUOGM COMMENTARY FSUOGM

Proposed gas price cap prompts EU

discord and Russian threats

The EU is seeking to expand efforts to deprive
Russia of revenues to fund its war in Ukraine.

EU THE EU has proposed capping the price of Rus- concern about retaliatory measures by Moscow.
sian natural gas, as Brussels doubles down on “If price restrictions were to be imposed
WHAT: efforts to hamper Moscow’s ability to finance its exclusively on Russian gas, that would evidently
Brussels has proposed war in Ukraine. lead to an immediate cut-off in Russian gas sup-
imposing a price cap on It is among several proposals that the Euro- plies,” Hungary Foreign Minister Peter Szijarto
Russian gas, following a pean Commission made on September 7 to ease said, according to Reuters. “It does not take a
similar move by the West the impact of the energy crisis on the EU econ- Nobel Prize to recognise that.”
regarding Russian crude. omy that will be discussed by energy ministers Greece has expressed similar sentiment, and
at an informal meeting on September 9. But wants a general cap to be applied to all gas trans-
WHY: the proposal has already met with opposition actions with delivery at European hubs and not
The move is aimed at from some member states, and the Kremlin has just imports from Russia. Italy is also in favour
depriving the Kremlin of responded with a threat to cut off energy supply of an energy cap. Czech Industry Minister Jozef
revenues and easing the to the bloc entirely. Sikela also told Czech lawmakers on September
energy crisis in Europe, “We must cut Russia’s revenues which Putin 7 that the cap on Russian gas was not a solution
but some member states uses to finance this atrocious war,” European Com- for the current crisis, dismissing it instead as
oppose it and others want mission President Ursula von der Leyen said. She “as unconstructive proposal.” Germany too has
to extend it to all gas said that while Western sanctions had crippled the expressed scepticism.
supplies. Russian economy, Moscow had been able to buffer “We remain sceptical when it comes to issues
the impact through oil and gas revenues, taking surrounding a gas price cap, but we are generally
WHAT NEXT: advantage of soaring global prices. ready for talks in the European framework,” a
The European The president noted that the EU had already spokesperson for Germany’s economy ministry
Commission is discussing reduced its intake of Russian gas substantially was quoted as saying by Politico.
the proposal with since the war in Ukraine began, with the share of Von der Leyen also called for member states
member state energy Russian supplies in the bloc’s gas imports falling to expand efforts to cut electricity use, and
ministers. from 40% to only 9% at present. This has largely impose a cap on the revenues that are produc-
been the result of Russian actions, however. Gaz- ing power at a low cost. This mostly applies to
prom cut off supply to a number of buyers in the renewable energy producers, which benefit from
spring for refusing to pay in rubles, and it also low costs compared to conventional energy gen-
began curtailing gas flow via the Nord Stream 1 erators, but sell that energy at the same sky-high
pipeline in June. The pipeline was closed com- market prices.
pletely at the start of this month, with Gazprom “The low-carbon energy sources are making
citing problems with repairing equipment as a in these times – because they have low costs but
result of sanctions. they have high prices on the market – enormous
“Will there be any political decisions that revenues. Revenues they never calculated with;
contradict the contracts? Yes, we just won’t ful- revenues they never dreamt of; and revenues
fil them. We will not supply anything at all if it they cannot reinvest to that extent,” the president
contradicts our interests,” Russian President explained. “So, it is now time for the consum-
Vladimir Putin said at the Eastern Economic ers to benefit from the low costs of low-carbon
Forum in Russia’s Far East on September 7. “We energy sources like, for example, the renewables.”
will not supply gas, oil, coal, heating oil – we will Funds raised from the revenue cap would be
not supply anything.” used to support vulnerable households and com-
Moscow would leave Europe to freeze this panies, she said.
winter, he said. Likewise, there will also be a cap on the profits
Russian gas supplies to Europe have already of fossil fuel companies, with the funds raised to
slumped to an all-time low, amounting to just be used not only to support vulnerable consum-
3.4bn cubic metres in August, according to ers but also for additional investments in domes-
transmission data, down 7% month on month. tic clean energy supply.
A further decline is expected in September, in Lastly, the EU president said there should
light of Nord Stream’s closure. be liquidity support for energy utilities, to help
Several member states have already voiced them cope with the market volatility. ™

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