EU Backs Off Russian Energy Price Cap

At least 10 EU countries expressed opposition to the price cap plan which would have sent energy prices skyrocketing

The European Union is backing off its sharply divisive plan to implement a price cap on Russian gas, according to Reuters. There were major concerns leading up to an emergency meeting of EU energy ministers in Brussels on Friday, but the overriding fear was Moscow would respond by cutting all gas exports to the continent. This comes ahead of winter with energy prices already soaring as a result of the Washington-led sanctions campaign intended to isolate and cripple Russia’s economy. The campaign has backfired with the ruble rallying against the dollar and mounting inflation plaguing the United States and Europe.

The G7 recently announced a plan to impose a maximum price on Russian oil by early December. This policy has been pushed heavily by US Treasury Secretary Janet Yellen. Analysts have warned it could see Moscow cut production in response, possibly raising global oil prices to a "stratospheric" $380 per barrel. The Kremlin responded to the G7’s announcement by indefinitely closing the Nord Stream 1 pipeline which brings natural gas from Russia to Germany. Moscow said it would cut exports to any country attempting to implement the restrictions. Natural gas prices in Europe are already ten times what they were last year.

On Wednesday, the EU said it would be making a proposal to cap the price of Russian gas. European Commission President Ursula von der Leyen said the provocative measure was necessary to punish Moscow and deprive it of further revenue to fund its war in Ukraine. Russian President Vladimir Putin then threatened to cut gas exports to Europe completely if the policy was adopted.

However, a minimum of 10 EU states opposed the plan including Germany, Italy, Poland, and Greece. The Czech Republic was advocating that the plan not even be discussed at the ministerial meeting. This month, Prague saw massive demonstrations of 70,000 people, across the political spectrum, protesting against NATO’s proxy war in Ukraine and rising energy prices caused by the anti-Russian sanctions blitz. As the cold winter approaches, such anti-government protests are expected to become more frequent. At any rate, the bloc sanction would have required unanimous approval which appeared highly unlikely.

There is now talk of a generalized price cap on gas which would not single out Moscow. Since February the Kremlin has cut 80% of gas exports to Europe. This alternative plan hopes to prevent further Russian retaliations. As the Financial Timesreported, the "general gas price cap could be passed with a qualified majority. Hungary, Austria and the Netherlands are opposed to any kind of cap. Proponents of a limit on the price of all gas imports suggest setting it above current prices in Asia and the US to ensure international traders have an incentive to send shipments to Europe."

Next week, the ministers are expected to discuss a "windfall plan" whereby governments skim "excess profits" from energy producers operating wind, nuclear, and coal-fired power plants and "recycle" the funds into households. The argument is these producers have been able sell their energy at record prices as a result of sky-high gas costs, and these "windfalls" could be used to reduce consumer bills.

“Taking some of those excess profits and recycling them back into the households makes sense,” Irish Environment Minister Eamon Ryan said on Friday.

Connor Freeman is the assistant editor and a writer at the Libertarian Institute, primarily covering foreign policy. He is a co-host on the Conflicts of Interest podcast. His writing has been featured in media outlets such as, Counterpunch, and the Ron Paul Institute for Peace and Prosperity. He has also appeared on Liberty Weekly, Around the Empire, and Parallax Views. You can follow him on Twitter @FreemansMind96.