On Friday, energy ministers discussed measures to bring urgent financial relief to European companies and households. While during their emergency meeting an EU-wide price cap for Russian gas imports remained a hot-button issue, a proposed revenue cap for European non-gas energy producers, the income of which would be redistributed, proved more amenable.
EU energy commissioner Kadri Simson, who is a proponent of the price cap for Russia, was more optimistic and said that “nothing is decided.” For Simson, such a price cap would impact Russian profits and bring stability to energy markets. Russia is currently profiting immensely by “manipulating and limiting, artificially, supply to drive up prices,” she told reporters at a press conference.
Days before, Russian President Vladimir Putin had dismissed the notion of a price cap as “stupid” while he threatened to make Europe “freeze” this winter, should it be implemented.
After the closure of gas pipeline Nord Stream 1 for maintenance, Russia said it could not reopen before the EU lifts its sanctions, as these make maintenance impossible. The West, however, took this as a sign that the Kremlin was weaponizing its energy exports instead.
After EU sanctions on Russia—in an attempt to deplete the country’s war chest for Ukraine, as well as in the hope that the economic pain would bring about a regime change—largely backfired, EU leaders have been scrambling to stave off economic disaster. Attempts at securing supplies from alternative sources, such as Qatar, the U.S., and Norway (perhaps soon at discount prices) have brought a measure of hope, yet energy prospects for most of the EU remain less than rosy.
Indeed, while Russian gas supplies to Europe have lessened to a large degree, and are now at 9%, down from 40% before the escalation in Ukraine, some EU countries, including Hungary, Slovakia, and Austria, remain highly dependent on Russian gas. They have protested any cap, in fear of Kremlin reprisals.
“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 present at the emergency meeting. “It does not take a Nobel Prize to recognise that.”
The Baltic states however do want to pursue a price cap. Riina Sikkut, Estonia’s minister for economic affairs and infrastructure, urged other EU members to ignore Putin’s rhetoric, saying: “It is blackmail, it is war that is waged outside Ukraine … We have to have the political will to make Ukraine win.”
Some countries, including Belgium, France, and Poland, propose a price cap but one that will be applied to all the gas that EU member states import, liquified natural gas (LNG) included. EU energy commissioner Simson deems such a course of action unwise, as it risks diverting resources to other regions instead.
Keeping all this in mind, the EU’s energy ministers are backing away from either proposal. Instead, they seek to skim off excess revenues from EU energy companies that use renewable sources, such as wind, solar, and nuclear. Companies in these sectors have seen profits skyrocket, as energy prices are linked to the cost of gas. With the money levied through this measure, EU energy ministers seek to partly redistribute to vulnerable consumers and businesses. According to a summary report of the meeting, fossil fuel companies would also have to pay a “solidarity contribution.”
Clearly signaling that supply is compromised (or soon will be), a general reduction of energy consumption across the region is on the table as well— a controversial idea that EU Commission President Ursula von der Leyen had first advanced in a September 7th speech.
A leaked draft of an EU law envisions a mandatory 5% cut in electricity use during peak price hours. Such an imposed drop in electricity demand is highly controversial; Czech industry minister Jozef Síkela, who chaired the meeting, suggested that it might be prudent to make such targets voluntary, rather than legally binding.
Next Wednesday, von der Leyen is expected to officially set out legal proposals to counteract the EU’s energy crisis. Energy ministers might likely hold another emergency meeting later this month to negotiate and approve the final plans, Czech Industry Minister Jozef Sikela said.
Put in a situation by leaders who perhaps bit off more than they could chew, the bloc’s resolve, as well as its unity, is to be tested like never before.