European leaders laid out their differences over how to respond to the energy price shock at a summit devoted to the war in Ukraine and its aftermath.
Leaders are meeting for the second time in two weeks to discuss the difficult issue of energy price caps, amid demand for action against soaring gas prices following the invasion of Ukraine by Russia.
Under strong pressure from Paris, Rome and Madrid, the European Commission proposed a mechanism to prevent “extreme volatility and excessive prices” by blocking gas transactions above a certain level. But the EU executive said this “correction mechanism” was only a last resort “if needed”, below the price cap demanded by 15 member states.
Inspired by the common purchase of vaccines during the Covid crisis, the commission wants countries to team up to buy gas, increasing their leverage over sellers.
While the joint gas purchase proposals have received broad support, the price cap plans are deeply divisive.
Germany, Europe’s biggest economy and biggest consumer of gas, backed by the Netherlands, fears that any attempt to cap prices could backfire if tankers loaded with liquefied natural gas instead sail to Asia.
“LNG carriers currently sitting off Spain would sail to Japan and Korea,” German government sources said. The commission’s idea of setting a “dynamic” price cap, which would put European prices ahead of Asian prices, has also led these countries to worry about alienating allies like Japan and South Korea.
Arrived at the top, the German chancellor, Olaf Scholz, launched a conciliatory note: “It is clear that the prices of gas, oil and coal must fall. Electricity prices must come down. And this is something that requires a common effort from all of us in Europe.
Diplomats downplayed expectations of a price cap agreement emerging at the summit, pointing to the technical complexities, as well as the political challenge of designing a common policy for 27 countries with vastly different energy mixes.
Before Vladimir Putin’s invasion of Ukraine, the EU got 40% of its gas imports from Russia, but today that figure has fallen to 7.5%. Some Central European Member States still receive relatively large quantities of Russian gas, while others, Cyprus and Sweden, use no or very little gas in their energy mix.
France, Italy, Spain and Poland are among 15 member states that have pushed for some form of price caps and accused the Commission of being too slow to react to the crisis.
The impasse over the price cap is worsening relations between Berlin and Paris, with a regular Franco-German ministerial council scheduled for next week postponed until January. Emmanuel Macron played down the decision to delay the meeting, saying he still wanted to “preserve European unity” and the Franco-German alliance. But he made his displeasure with Berlin clear, saying: “It’s not good for Germany or for Europe that they isolate themselves.”
The French president said he had “two very simple objectives”, lowering the price of gas and “absolutely preserving our unity”.
Since the EU launched a series of emergency plans to save energy, gas prices in Europe have fallen from summer highs. But many EU insiders fear the winter of 2023-24 could be even more trying, increasing political pressure for price action.
Latvian Prime Minister Krišjānis Kariņš, a supporter of the cap, said: “If we can reduce the cost of imported energy, it will help poor and rich countries. Although he added that the best solution would have been “if we had never had a dependency on Russia”.
Dutch Prime Minister Mark Rutte, who predicted a long night ahead, suggested there was little hope for a breakthrough on the price cap. He said: ‘It will probably be about asking the commission to further evaluate a few options and generally agree on things like joint purchases.’
But even the joint procurement plan has drawn criticism from right-wing nationalist governments in Poland and Hungary, which are allergic to strict EU surveillance. Warsaw and Budapest are resisting the idea of making participation in common public procurement mandatory, which EU officials say is essential for the system to work.
Polish Prime Minister Mateusz Morawiecki renewed his government’s longstanding criticism of Germany, saying: “In theory, cheap Russian gas was supposed to be a blessing for the German economy. In practice, it has become a curse for all of Europe.
Ahead of the meeting, Hungarian Prime Minister Viktor Orbán tweeted: “Brussels latest plan on joint gas supply reminds me of the time we bought vaccines together. Slow and expensive,” he said, anticipating a “huge debate” at the top.
Meanwhile, Germany faced a backlash from environmentalists when a leaked document emerged showing Berlin was in favor of developing new gas fields. The EU should “work with countries that have the capacity to develop new gas fields, within the commitments of the Paris climate agreement,” said the leaked document seen by the Guardian.
Greenpeace called the idea ridiculous. “The deepening of Europe’s long-term dependence on gas will not help people heat their homes this winter, it will only make the climate crisis worse,” the NGO said.
The heated debate follows sharp criticism of Berlin’s planned €200bn (£174bn) ‘energy shield’, which will subsidize electricity for households and businesses to mitigate the loss of cheap Russian gas.
EU critics say the plan is unfair and risks distorting the EU’s single market because member states without such deep coffers cannot support their consumers in the same way.
German officials believe critics were not always aware of the details and argue the actions are similar to those taken by other countries, such as France and the Netherlands.