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Leaked doc reveals EU unlikely to cap price of Russian gas: Guardian

  • By Al Mayadeen English
  • Source: The Guardian
  • 13 Sep 2022 13:33
  • 1 Shares
4 Min Read

The Guardian obtains a draft regulation that does not include a price ceiling on Russian or imported gas.

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  • European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. REUTERS/Yves Herman/File Photo.
    EU flags flying outside the European Commission headquarters in Brussels, Belgium, April 10, 2019 (Reuters)

The EU executive is reconsidering slapping a price restriction on Russian gas while pushing ahead with windfall taxes on energy business "surplus" earnings, according to a leaked document.

After member states were unable to agree on limits last week, The Guardian obtained a draft regulation on the "electricity emergency tool" that does not include a price ceiling on Russian or imported gas. The EU is anticipated to slap windfall taxes on fossil fuel corporations' large profits, with a separate cap on revenues of low-carbon electricity generators.

When she delivers her annual state of the union statement on Wednesday, European Commission President Ursula von der Leyen is likely to announce Europe's plan for coping with rising electricity prices.

The final text is still subject to modification, but the draft reflects the Commission's concerns about garnering enough support from EU member states for its preferred option of restricting Russian gas in response to what it has dubbed the Kremlin's weaponization of supplies.

Read next: EU unions: Low-income Europeans cannot afford energy bills

EU member states that import a substantial amount of gas from Russia, such as Hungary, Slovakia, and Austria, have spoken out against a ceiling on Russian gas because they are concerned that the Kremlin will cease all gas deliveries, throwing their economies into recession.

Russian President Vladimir Putin has already threatened to restrict energy shipments to Europe if such a plan is approved.

A dozen countries, including France and Poland, want to impose a price restriction on all imported gas as a better method to control rising prices. The Commission is skeptical of this proposal because it thinks that the EU will lose out to countries willing to pay more in the extremely competitive market for liquefied natural gas.

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Read next: Buying Russian oil above price cap to result in sanctions: US Treasury

The Netherlands and Denmark are leery of any price cap, while Germany is concerned that a price cap on Russian gas will cause division.

With member states divided, the Commission, which is in charge of formulating EU law proposals, is looking for ways to bring the 27-member club together. The majority of EU states support restricting the price of electricity generated by low-carbon sources, such as renewables or nuclear, and reusing the proceeds for needy households and companies.

Oil and gas corporations will be subject to a special windfall tax known as a "solidarity contribution". According to the leaked paper, the commission expects oil, gas, and coal corporations' revenues to climb fivefold by 2022.

According to the commission, these "surplus" and "unexpected" gains are the consequence of "unpredictable changes in the energy markets as a result of the ongoing illegal conflict in Ukraine." The windfall tax rate is not specified in the text.

Member states are also urged to set a binding objective for reducing electricity consumption during peak hours, though no figure has been offered.

Read next: France to turn off Eiffel Tower projectors earlier to save energy

Even before the Ukraine war, Europe was dealing with rising gas prices. Supply constraints have been exacerbated by the record-breaking dry summer of 2022, which has increased demand for air cooling while limiting hydropower from rivers and reservoirs.

To make matters worse, half of France's outdated fleet of nuclear reactors has been ordered offline due to safety concerns, inverting the country's historic role as an electricity exporter to its neighbors.

  • Energy crisis
  • Russia
  • Russian Gas
  • Price cap
  • European Union

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