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Tuesday, October 4, 2022

EU Nations Deliberate on Emergency Solutions to Battle Rising Energy Prices

The price cap on Russia garnered approval votes from some nations while others questioned how it would help curb prices given the low volumes of Russian gas exports

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EUROPE/RUSSIA: Amid the ongoing Russia Ukraine crisis which has spurned heavy consequences for surrounding European nations regarding rising oil and fuel prices, the race is on to search for immediate solutions to curb fuel shortages and bring relief to consumers.

European Union countries’ energy ministers met on Friday to search for urgent solutions from a long list of possible measures to shield citizens from escalating energy prices as winter approaches.

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The talks include a set of proposals made by European Commission President Ursula von der Leyen – among them, a price cap on Russian gas, a windfall levy on non-gas power plants, a bloc-wide cut in electricity demand, and emergency credit lines for power firms facing soaring collateral requirements.

EU diplomats said countries appeared more or less supportive of measures to provide liquidity for companies facing threats of insolvency due to fuel shortages, and some had also backed curbing power demand.

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However, other proposals appeared to be more divisive. The price cap on Russia garnered approval votes from some nations while others questioned how it would help curb prices given the low volumes of Russian gas exports.

“Our intention first and foremost is to bring prices down. A cap on only Russian gas won’t bring prices down,” Belgium’s Energy Minister Tinne Van der Straeten told Reuters.

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The Baltic states are among those backing the idea, arguing that the price cap on Russia will have definite positive consequences and deprive Moscow of revenue to fund military activities in Ukraine.

President Vladimir Putin on Wednesday posed threats of discontinuing fuel and oil supplies to Europe if it imposes a strict price cap. Russia blames EU sanctions for causing gas supply glitches, while Europe accuses Moscow of weaponizing and monopolizing gas and fuel.

Perhaps in anticipation of Europe’s price cap on Russian gas, President Putin warned that supply contracts will be nullified, warning the west that Russia will refrain from supplying anything if it contradicts its interests.

We will not supply gas, oil, coal, heating oil, we will not supply anything,” Putin said. Europe usually imports about 40% of its gas and 30% of its oil from Russia.

Under such threatening circumstances, support for the Russian oil cap policy is scarce among central and eastern European states unwilling to lose the dwindling volumes of Russian gas they still receive.

Russian gas pipeline deliveries via the three main routes to Europe have fallen by almost 90% in the last 12 months, Refinitiv data show. Moscow has blamed supply cuts on technical issues caused by Western sanctions over its invasion of Ukraine.

EU countries are not expected to approve any gas policies on Friday, but rather give a signal to Brussels about which options have enough support to be turned into final proposals. Emergency EU laws are passed by a majority of countries, although some may require unanimous approval.

The prospective measure of clawing back revenues from non-gas power generators to spend them on reducing consumer bills has also stirred some resistance in some capitals.

The EU proposal would cap at 200 euros ($199.86) per megawatt hour the price non-gas generators are paid for their power, and apply to wind, nuclear and coal generators, according to a draft seen by Reuters.

European gas prices are usually set by the power plants, and the price cap would aim to reduce the cost of electricity produced by plants that are not subject to rocketing European gas prices – which last struck 12 times their level at the beginning of 2021.

France, home to Europe’s biggest nuclear power fleet – questioned whether the same limit should be applied to all generators. “The fact of having a single revenue ceiling for all ways of producing power and all EU countries is something that we are questioning,” a source at the French energy ministry said.

The source also notified that Paris backed an EU price cap on Russian gas, but alerted that capping liquefied natural gas prices could see the EU lose out to other countries on much-needed supply.

An EU diplomat deliberated on the way the price cap could be implemented as it stated that a “large group” of states was seeking some form of energy price cap to reduce bills, and a gas price used to produce power. Moreover, the diplomat also said that the countries in question wanted an all-around cap on gas imports to be part of the discussion.

“The question is what do you cap and how do you cap. This is the devil in the detail,” the diplomat said.

Also Read: Liz Truss Stands by Europe as It Faces a Crucial Energy Crisis

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