EU considers Russian gas price cap to curb energy surge

With the devastating energy crisis in Europe caused by Russia’s invasion of Ukraine, the European Commission said on Wednesday that it would ask countries to pass a broad cap on the price of Russian gas. It is also proposing measures such as mandatory cuts in electricity use, a tax on oil and gas companies and a tax on the price of electricity generated from renewable sources.

The measures, which were presented by the commission’s chair, Ursula von der Leyen, set the stage for a period of intense and urgent debate in the European Union to tackle the unprecedented energy crisis engulfing the region, as Russia cuts off its gas supplies. for many EU member countries, putting gas and related electricity markets on a sharp upward spiral.

Russia has been turning on and off the gas tap to punish European countries, notably Germany, for supporting Ukraine, blaming the widespread outages on technical and maintenance issues.

EU energy ministers will meet on Friday (9) in Brussels to discuss the bloc’s proposals. European governments from Germany to Greece are spending billions of euros a month to subsidize the electricity bills of consumers and businesses, which in some cases are five times higher than last year.

Managing electricity prices is not just an economic and social goal, but also a political imperative in Europe. With memories of France’s yellow vest protests over energy prices still fresh, and new movements bubbling up to denounce the rising cost of living and, in some cases, continued support for Ukraine against Russia’s invasion, politicians Europeans have little choice but to take unorthodox and expensive measures to calm outraged consumers.

“We are facing an extraordinary situation because Russia is not a reliable supplier and is manipulating our energy markets,” von der Leyen said in a statement on Wednesday.

She added that the block’s natural gas storage facilities are already 82% full and that Russian gas imports have declined from 40% of the block’s total to just 9%. Thirteen of the EU’s 27 members are facing partial or complete shutdowns of Russian gas, with the biggest effect felt in Germany, the bloc’s biggest economy and the most dependent by far on Russian gas.

Russian President Vladimir Putin has defied the threat of a price cap, calling it yet another example of “stupidity”.

“All administrative restrictions on global trade only lead to imbalances and higher prices,” he told a news conference on Wednesday in the Russian city of Vladivostok.

In his speech on Wednesday, Von der Leyen said governments urgently needed to intervene in the gas and electricity markets – an idea most EU countries agree with, although there is disagreement over how best to apply it.

“We are faced with astronomical electricity prices for homes and businesses, and enormous market volatility,” she said.

In July, the commission secured support for voluntary cuts in energy use of 15% by next summer. On Wednesday, Von der Leyen said he would propose mandatory cuts in electricity use during peak hours.

As the European electricity market links the price of electricity to the price of the most expensive fuel used to generate it – currently gas – Von der Leyen also said he will ask EU countries to effectively tax companies that generate electricity. from other sources.

Following a model already in place in Greece, Von der Leyen said governments should use these funds to “help vulnerable people and businesses adapt”.

She also suggested that oil and gas companies, which are making big profits, should pay a “solidarity contribution” and that governments should be able to subsidize national utility companies that face high input costs to continue generating electricity.

Translated by Luiz Roberto M. Gonçalves