“We are facing an extraordinary situation because Russia is an untrusted supplier and is manipulating our energy market. We are facing astronomical prices for consumers and companies and enormous market volatility.” With this panorama in the background, he has presented Ursula von der LeyenPresident of the European Commission, her energy action plan in the face of increasingly cold winter prospects.
The proposal of the European Commission will be debated by the 27 Member States in the extraordinary Energy Council next Friday. Among the measures launched this Wednesday by the German stand out cap the price of Russian gas and tax windfall profits of companies hydrocarbon energy. To this is added a limit on the prices of renewable energies, a liquidity mechanism so that electricity producers can survive this storm and the obligation to save electricity at key times.
This is the basis of the meeting at the end of the week. European capitals are expected to hold an open and heated debate to give shape and concreteness to these open measures. For example by setting a threshold that determines when a benefit for gas and oil companies is extraordinaryset a start and end date for this temporary tool or draw the margin of action before new measures that must respect the principles of the Internal Market, fair competition and the ecological transition.
In the community capital they avoid talking about taxes on fossil fuel companies. they call it “a temporary crisis solidarity contribution” whose objective is for these companies to deliver the enormous profits collected since the beginning of the war and that these be redirected with the double objective of alleviating the electricity bill of the most vulnerable consumers and promoting clean energy. Some countries such as Spain or Italy are already taking steps in this direction. The measure is led by the German leader, of the European People’s Party, although in contrast, the Spanish PP has openly criticized it at the national level.
From Oxfam they demand a firmer action with all the companies that have benefited from the current crisis. “In the last two and a half years, large pharmaceutical, energy or food multinationals have reaped huge profits while inflation continues to rise, pushing more and more people into poverty,” says your expert Chiara Putaturo. The NGO estimates that the fortune of millionaires in the energy and food sectors has increased $453 billion in two years, being energy companies like Shell or Exxon, great beneficiaries, aggregating 2,600 dollars of profits every second.
The announcement from Brussels comes days after Russia announced the total closure of the Nord Stream 1 tap, the main pipeline that supplies gas to Europeans and, especially, to Germany. The basic scenario to articulate this measure is that, on the one hand, the EU considers that Moscow is using the gas as a weapon of blackmail and pressure. And, on the other, that the energy giants are accumulating exorbitant and unfair windfall profits. The combination of these factors is causing uncontrollable volatility in the markets.
Two faces of an exceptional situation
In the community capital they celebrate that Gas reserves for winter are already at 82%, two tenths above what was demanded a few months ago. They also welcome the fact that dependence on Russian gas has gone from 40% before the war to 9% today. Norway, for example, has already overtaken Russia as the main supplier.
“Panic is not a good response in any case. We began to face the current crisis by looking for alternative markets. Then with energy savings. And now we are in the process of organizing our market. Everything we have done so far leaves us in a good place. It does not mean that it will be an easy winter, but we are preparing well”, affirm community sources. After a year closing in band to the reform of the European electricity market, the war in Ukraine has forced Brussels to go in the direction that Spain had been asking for months.
On the other side of the coin, capping the price of Russian gas is not without major risks. The EU may arrive prepared for this winter, but the current crisis is fundamental and structural. That is, long haul. Belgium is already warning that the next ten winters will be tough. And the reserves in the coming months and years may arrive less prepared and half gas. The other factor is that this measure can generate the opposite effect and cause an increase in prices throughout the world.
For Brussels, “The biggest challenge is the exorbitant price of energy with fossil fuels”. One of the reasons for the unprecedented increase in electricity is that the current system links the price of any type of energy to the most expensive, in this case gas. For this reason, the other star measure is to stop inframarginal technologies, that is, renewables and nuclear. It is known as a variant of the Iberian exception, but the European Commission avoids, for the time being, betting on the decoupling of gas from electricity prices as Madrid and Lisbon do for fear that this will boost the use of gas by further slowing down the decoupling of fossil fuels.
Shortly before knowing the measure, the Kremlin already warned that it will stop providing energy -coal, oil and gas- if a limit is imposed on the price of its hydrocarbons. The Russian President, Vladimir Putinhas described the European proposal of “nuisance” Y “lack of future”. In a speech at the VII Eastern Economic Forum in Vladivostok he warned that all this will have an impact on global trade and will generate even higher prices. “No one in the world will benefit from isolating Russia,” he said.
The relationship between Brussels and Moscow continues to grow. “People in the EU have to pay with their pockets the price of this belligerent stance”assures in a statement the Russian Foreign Ministry, which this Thursday has contracted the sanctioning order of Brussels by adding high-ranking military ranks to its list of restrictive measures.
All this paves the way for days, weeks and months of high voltage. The main appointment of the EU will arrive next Friday at the hands of the Energy Council. Five days later, von der Leyen will deliver one of his most anticipated State of the Union addresses in Strasbourg with the energy crisis and the six and a half months of war in Ukraine at the epicenter.