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  • The San Juan Daily Star

EU weighs Russian gas price cap and other measures to rein in energy prices

A Gazprom processing plant in the Orenburg region of Russia on Tuesday.

By Matina Stevis-Gridneff

With Russia’s invasion of Ukraine triggering a devastating energy crisis in Europe, the European Commission said Wednesday that it would ask countries to approve 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 by renewables.

The moves, which were outlined by commission President Ursula von der Leyen, set the stage for a period of intensive and urgent debate in the European Union to tackle the unprecedented energy crisis engulfing the region as Russia cuts its supply of natural gas to many EU member states, sending the gas and its linked electricity markets into a sharp spiral.

Russia has turned the gas tap on and off to punish European countries, primarily Germany, for supporting Ukraine, blaming the widespread disruptions on technical problems and maintenance.

EU energy ministers will meet Friday in Brussels to debate the bloc’s proposals. European governments from Germany to Greece are burning through billions of euros a month to subsidize consumers’ and businesses’ electricity bills, which are in some cases five times as high as last year.

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

“We are facing an extraordinary situation because Russia is an unreliable supplier and is manipulating our energy markets,” von der Leyen said in a statement Wednesday.

She added that the bloc’s natural gas storage facilities were already 82% full and that Russian gas imports had dwindled from 40% of the bloc’s total to a mere 9%. Thirteen of the EU’s 27 members are facing partial or total Russian gas shutdowns, with the biggest effect being felt in Germany, the bloc’s biggest economy and the most reliant by far on Russian gas.

President Vladimir Putin of Russia was defiant in the face of the price cap threat, calling it another example of “stupidity.”

“All administrative restrictions in global trade only lead to imbalances and higher prices,” he said Wednesday at an economic news conference in the Russian far-eastern city of Vladivostok.

In her speech Wednesday, von der Leyen said governments needed to intervene urgently in the gas and electricity markets — a concept that most EU countries agree on, although there are disagreements over how to best do that.

“We are confronted with astronomic electricity prices for households and companies and with 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 she would propose mandatory cuts in electricity use during peak hours.

Because the European electricity market links the price of electricity to the price of the most expensive fuel used to generate it — in the current moment, gas — von der Leyen also said she would ask EU countries to effectively tax companies that generate electricity from nongas sources.

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

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

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