Germany, Austria Against Price Cap on Russian Gas

Germany, Austria Against Price Cap on Russian Gas

Europe’s energy ministers meeting in Brussels Friday are under pressure to quickly agree measures to prevent the energy crisis triggering a financial meltdown.

Comments by the Belgian Prime Minister Alexander De Croo on Thursday put a spotlight on the problem, as he warned that Europe faces “de-industrialization and severe risk of fundamental social unrest” because of the energy crisis.

Gas prices, about eight times higher that their average levels for this time of the year, have been volatile this week as traders assess deep supply concerns against government efforts to contain the crisis. They dropped as much as 8.2% on Friday, wiping out a weekly gain.

The European Central Bank is intensifying discussions with bank executives over their readiness for a potential surge in company defaults and a drying-up of energy-market liquidity.

The Frankfurt-based bank watchdog wrote to lenders last month, telling them to analyze the impact of a gas stoppage on their businesses, according to people familiar with the matter. Responses are due in mid-September, and follow-up conversations are to come by the end of this month, said the people.

Germany doesn’t support a price cap on Russia gas because some countries are still dependent on those supplies, Economy Minister Robert Habeck told reporters in Brussels. “These countries still have dependencies which force them to use this gas,” he said. “So it would be inappropriate to say that Germany always calls for understanding, but other states don’t get any.”

Austria, which is still reliant on gas supplies from Moscow even though the dependence has eased, also doesn’t back a price limit, Energy Minister Leonore Gewessler said.

Poland doesn’t see the need for a bilateral gas solidarity agreement with Germany, according to Climate Minister Anna Moskwa. Germany’s economy minister said earlier this week that neighboring Belgium, Luxembourg, the Netherlands and Poland refuse to engage in “constructive negotiations” about such deals, a move that could exacerbate the gas crunch in Germany.

“Solutions that we have on the table for now are sufficient,” Moskwa said, referring to existing cooperation between Polish and German gas system operators. It’s obvious that if we have surpluses on our gas or power market we share them but based on our own national security and our national interest and not based on some forced mechanisms.”

Irish Environment Minister Eamon Ryan said the EU needs to deliver concrete ideas on how to deal with the energy crisis as soon as possible.

Current energy prices are not acceptable for all EU states and members need to react quickly to protect households and businesses, Poland’s Climate Minister Anna Moskwa said. Friday’s meeting of ministers will have no votes, but the discussions will be key for future decisions on what solutions to approve.

EU Energy Commissioner Kadri Simson said she will present ministers with five proposals. She said the European Commission needs to offer governments tools for addressing the current emergency. “This is not only about prices. Also about security of supply,” she said, adding the market needs extraordinary intervention. The EU is also planning to revive dialogue with Algeria on gas supply, she said.

Source: Bloomberg



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