The European Commission has asked countries to consider five immediate moves, including a plan to redistribute some energy producers’ windfall to businesses and households, a price cap on Russian natural gas and mandatory targets to reduce peak-hour electricity use, among other possible steps. The potential plan underscores the widespread sense of alarm across Europe as the fallout from the war continues to weigh on European economies. It comes days after energy giant Gazprom suspended the flow of natural gas through a key pipeline – a move initially blamed on technical issues until the Kremlin stepped in saying it was actually Western sanctions. Putin, in a provocative speech, threatens Western supplies of gas and grain “We are facing an extraordinary situation because Russia is an unreliable supplier and is manipulating our energy markets,” European Commission President Ursula von der Leyen said Wednesday, outlining the commission’s plan. “Our unity and our solidarity will ensure that we prevail.” But for all the talk of solidarity, the EU remains divided on the details, with some countries expressing skepticism about the tax windfall and others worried about the idea of a cap on the price of natural gas. Some would like to tweak the bloc’s electricity market, while others want an overhaul, including a complete decoupling of gas and electricity prices. “The devil is in the details,” said a senior EU diplomat, speaking on condition of anonymity to discuss the behind-the-scenes talks. As Europe searches for common ground in the coming days and weeks, Russian President Vladimir Putin will try to exploit differences in position by playing off countries with different levels of dependence on Russian energy to weaken the West’s response, Simone Tagliapietra said. . energy expert at Bruegel, a think tank based in Brussels. “For Russia, this is about divide and rule,” he said. In the more than six months since Russia launched its full-scale invasion, the EU has been trying to weaken Russia’s energy leverage — with mixed results. Russian pipeline gas now makes up 9% of EU gas imports, von der Leyen said on Wednesday, not the 40% it was at the start of the war. The EU last week met its target of increasing natural gas reserves to 80% well before the weather turns in November. As Europe’s dependence on Russian fossil fuels declines, EU officials say, Putin is losing his grip. For now, energy markets remain in crisis and EU countries are spending billions to subsidize electricity bills. Germany on Sunday announced plans for an aid package of almost $65 billion, with Chancellor Olaf Scholz pledging to crack down on energy providers that make “excessive profits”. Revenue from windfall taxes on these producers will be used to lower consumer prices for natural gas, oil and coal. Russia’s Gazprom says it won’t reopen Nord Stream gas pipeline to Europe as planned The Commission, the EU’s executive body, would like to see similar moves at EU level, according to a document they presented ahead of the summit. Von der Leyen on Wednesday outlined plans for what she called a cap on the revenue of companies that generate electricity at relatively low cost but sell it at high prices allowed by European market rules. Wholesale electricity prices have soared because they are currently tied to the cost of natural gas, which has risen exponentially since the Russian invasion of Ukraine. The current system inflates the cost of many other types of energy, such as solar energy or electricity generated from waste-to-gas plants. The commission aims to equalize costs and bring some consistency to electricity prices across Europe. It would create a de facto windfall tax on power producers who are making record profits due to high gas prices, using the proceeds to lower consumers’ energy bills. The plan is bold but also carries significant risk. The main problem in Europe is that demand for energy far outstrips supply. Addressing this problem without substantially reducing demand or bringing more energy into Europe threatens to create market distortions that could ultimately exacerbate shortages. The windfall tax, for example, could discourage companies from making new investments in desperately needed energy infrastructure. Price caps that reduce the cost of energy may induce consumers to use more of it, exacerbating the supply problem. The plan addresses these issues by also including a provision that sets mandatory reduction targets for peak-hour energy use. However, implementing such cuts is a heavy push, which would require countries to pay subsidies to offset the losses incurred as companies are forced to cut production. The plan is vague about exactly how these reductions will be imposed, leaving individual countries to “determine the best means of reducing overall consumption.” Another provision of the plan would attempt to cap the price of natural gas flowing to Europe from Russia. This would allow countries to continue buying Russian natural gas as long as the price does not exceed a certain threshold. The idea would be to set the price cap above the cost of production but below current prices, encouraging Russia to keep gas flowing but cut profits. “We need to cut the Russian revenue that Putin is using to finance this horrible war in Ukraine,” von der Leyen said on Wednesday. However, some countries and analysts are wary of how effective this would be, given that Russia already has the upper hand in natural gas supplies and is using it as an economic weapon against Europe. Russia could use the measure to justify further disruptions or to cut off the flow of natural gas to Europe. Putin, for his part, has made it abundantly clear that any new measures will not go unanswered. In a speech on Wednesday, he opposed the Group of Seven’s price cap on Russian oil and warned of additional cuts to come. “We will not supply natural gas, oil, coal, heating oil,” he said, “We will not supply anything.” Halper reported from Washington. Kate Brady in Berlin contributed to this report.
War in Ukraine: What you need to know
The last: Grain shipments from Ukraine are being accelerated under the agreement reached by Ukraine, Russia, Turkey and the United Nations in July. Russia’s blockade of Ukraine’s Black Sea ports had sent food prices skyrocketing and raised fears of more famine in the Middle East and Africa. At least 18 ships, including cargoes of wheat, corn and sunflower oil, have departed. The battle: The conflict on the ground continues as Russia uses its heavy artillery advantage to pound Ukrainian forces, which have at times managed to put up stiff resistance. In the south, Ukraine’s hopes rest on the liberation of the Russian-held Kherson region, and eventually Crimea, which Russia seized in 2014. Fears of disaster at the Zaporizhzhia nuclear power plant remain as both sides accuse each other of bombing it. . The weapons: Western arms supplies are helping Ukraine slow Russian advances. US-supplied High Mobility Artillery Missile Systems (HIMARS) allow Ukrainian forces to strike further behind Russian lines against Russian artillery. Russia has used a range of weapons against Ukraine, some of which have drawn the attention and concern of analysts. Photos: Washington Post photographers have been on the ground since the start of the war — here are some of their strongest works. How you can help: Here are ways those in the US can help support the Ukrainian people as well as the donations people have made around the world. Read his full coverage Russia-Ukraine crisis. Are you on Telegram? Subscribe to our channel for updates and exclusive video.
