Energy crisis: 15 countries call for EU-wide price cap on all gas imports

The European Union must impose a broad price cap on all gas imports entering the bloc in order to bring soaring energy bills under control, a group of 15 member states has said in a joint letter.

“The price cap (…) is the one measure that will help every member state to mitigate the inflationary pressure, manage expectations and provide a framework in case of potential supply disruptions, and limit the extra profits in the sector,” the letter said. “This cap is the priority.”

The document, seen by Euronews, marks the first time the supporters of the gas cap join forces in an on-the-record declaration of intent.

It was signed by Belgium, Bulgaria, Croatia, France, Greece, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain, and sent on Tuesday evening to European Commissioner for Energy Kadri Simson.

The document comes in the lead-up to Friday’s meeting of EU energy ministers, who are expected to endorse an initial package of three emergency measures.

The calls for an EU-wide price cap on gas imports have gained traction in recent weeks after the record-breaking prices in August reached an all-time high of €346 per megawatt-hour.

Prices gradually decreased since that peak and currently hover just below the €200 mark — almost five times the levels a year ago.

The countries supporting the move believe the EU — using its leverage as the world’s largest single market — should impose a limit on the price it is willing to pay for gas imports.

The bloc’s tight energy market, which suffers from a supply-demand mismatch, is seeing higher fees than its Asian and American counterparts.

As the most expensive fuel to meet all power demands, gas sets the final price of electricity, even where cheaper and greener sources contribute to the total mix.

By capping gas prices, electricity bills could be artificially contained, the signatories believe.

“The energy crisis that started last fall has gotten worse over time and is now causing untenable inflationary pressures which are hitting our households and our businesses hard,” the letter says.

Germany opposes gas cap as European Commission shows hesitance

The 15 countries urged the European Commission to put forward an initial proposal for the gas cap at Friday’s ministerial meeting and later develop a formal legal text for negotiation and approval.

Yet, the European Commission is hesitant about the EU-wide gas cap and is still studying its potential risks.

The executive fears the unprecedented measure might scare shippers away at a time when the bloc is desperately looking for non-Russian supplies, particularly of liquefied natural gas (LNG), to make it through the winter without major blackouts or rationing.

Competition for LNG tankers is expected to heat up once temperatures begin falling and could increase even further if the Chinese economy picks up after a slowdown period.

Germany, the EU’s largest gas consumer, has raised similar concerns and remains opposed.

“If you introduce a price cap, as the EU unilaterally, and all the other consumers around the world don’t do it, then the gas will go to other consumers and thus we might have a shortage in gas supplies,” Germany’s Minister of State for Europe and Climate Anna Lührmann said last week.

Norway, which this year replaced Russia as the EU’s leading gas supplier, has said it is open to discussing lower fees but is “sceptical” about a wide ceiling.

So far, the European Commission has only suggested a price cap on Russian pipeline gas in order to deprive the Kremlin of revenues that can be possibly funnelled into the ongoing full-scale invasion of Ukraine that has proven to be very costly for Moscow so far. 

“The approach towards Russia and other partners has to be different,” Commissioner Simson told Euronews last week.

Price limit not meant to target Moscow exclusively, letter says

But in their joint call, the 15 countries unambiguously rejected the idea of a price limit exclusively designed against Russian gas. 

In turn, their proposal is indiscriminate, targeting all gas imports irrespective of geographical origin.

“The cap should be applied to all wholesale natural gas transactions, and not limited to import from specific jurisdictions,” the letter says.

“It can be designed in such a way as to ensure security of supply and the free flow of gas within Europe, while achieving our shared objective to reduce gas demand.”

The one-page letter does not provide technical details, such as how high the cap should be.

It is understood, however, that the cap would have to be somehow higher than the price paid in Asian and American markets in order to ensure Europe remains an attractive destination.

As a market instrument, the gas cap would require a qualified majority of member states to be approved and introduced.

As things stand now, the 15 signatories would fall short of the necessary votes, although they could recruit some countries that are seen as undecided, such as Sweden, Ireland and Cyprus.

The endorsement of coastal countries such as Spain, Italy, France and Belgium is crucial because they are the ones who receive the majority of LNG imports.

The Czech Republic — the current holder of the EU Council’s rotating presidency — did not add its name to the letter to maintain its position of impartial moderator.