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EU states prepare for emergency talks on Russian gas price cap

·4-min read
FILE PHOTO: European Union flags flutter outside the EU Commission headquarters in Brussels

By Kate Abnett

BRUSSELS (Reuters) - European Union countries were poring over a range of proposals from Brussels ahead of emergency talks on Friday aimed at finding bloc-wide measures to cut rocketing energy costs before winter.

European Commission President Ursula von der Leyen has put forward plans including a price cap on Russian gas which has raised concerns in some capitals, a bloc-wide cut in electricity demand and a windfall levy on non-gas generators.

Ministers are not expected to approve any policies at their meeting on Friday, but should make clear which options have strongest support and what should make it into final proposals.

The Baltic states, long time supporters of curbing gas imports to cut revenue to Russia, favour a price cap on its gas, alongside countries that do not rely on Moscow for fuel, including Portugal, which mainly imports liquefied natural gas.

Portugal's environment minister said on Wednesday that a price cap would help curb market speculation, which would also help countries that do not buy Russian gas.

Others have warmed to the idea after Russia further slashed gas deliveries to the 27-member bloc last month, but warned that unity among EU members would be needed.

"If there will be unity around this point, we will support this. If, on the other hand, it's something which is difficult to stomach for some, we'll have to look at it carefully," a senior diplomat from one EU country said.

Brussels has not specified the design of a Russian gas price cap, but certain types of EU laws require approval from all EU countries.

Some central and eastern European countries are wary, however, fearing the measure could cut them off entirely from already dwindling gas supplies.

President Vladimir Putin said on Wednesday that Russia will stop supplying gas to Europe if it imposes a price cap.

Given the low volumes Moscow currently sends, some countries suggested a price cap would not accomplish much and have little impact on gas prices within the bloc.

"It wouldn't solve anything," one EU diplomat said.

Russian gas pipeline deliveries via the three main routes to Europe have fallen by almost 90% in a year, Refinitiv data show.

European leaders have accused Russia of "weaponising" its energy supplies, while Moscow has blamed technical problems caused by Western sanctions over its invasion of Ukraine.

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EU governments are considering numerous other options, as they hunt for measures that all states can support.

Italy and Belgium want an EU price cap on all gas. In a document setting out its position, seen by Reuters on Thursday, Belgium proposed a "dynamic" price cap on gas trades on European exchange platforms, with the price limit pegged to Asia's JKM price for liquefied natural gas.

Germany and the Netherlands are among those wary of bloc-wide caps, and among a group that has warned hasty interventions in energy markets could have unexpected consequences.

Meanwhile, the European Commission has suggested a levy on revenues for electricity generators that do not use gas, to raise revenues governments can spend on curbing bills.

European power prices are typically set by gas plants, so the cap would aim to reduce the cost of electricity produced by wind farms and nuclear plants that have lower running costs because they are not exposed to surging gas prices.

A draft of the Commission proposal, seen by Reuters, said the cap would be 200 euros per megawatt hour and apply after power transactions are settled so exchange trading is not affected.

EU ministers will also consider emergency liquidity support for energy companies, some of whom are facing soaring collateral needs to meet "margin calls" triggered by high power prices.

The Czech Republic, which holds the rotating EU presidency and will chair Friday's meeting, said governments' first task would be to improve liquidity in Europe's energy markets.

"That means that if electricity producers do not have enough money for cash deposits, to provide them liquidity, be it in the form of loans by member states or some intervention fund," Industry Minister Jozef Sikela told Czech Television.

(Reporting by Kate Abnett, Gabriela Baczynska and Jan Lopatka; Editing by Tomasz Janowski and Alexander Smit)