Russia warns against capping oil and gas prices

European Commission President Ursula von der Leyen says the area is dealing with a rare scenario.

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European Union power ministers on Friday gathered in Brussels for emergency talks on how you can shield households and companies from runaway gas and electrical energy prices forward of winter.

European Commission President Ursula von der Leyen sought to put the groundwork for Friday’s assembly with a five-point plan. This features a worth cap on Russian gas, a windfall tax on fossil gas income, a compulsory goal for decreasing electrical energy use and emergency credit score strains for energy corporations.

Russian President Vladimir Putin responded to the proposals by threatening to tear up present provide contracts if a cap on Russian power exports is imposed, warning that he was ready to let Europe “freeze” through the colder months.

Russian Foreign Ministry spokeswoman Maria Zakharova on Friday reportedly warned that the West failed to know how power worth caps may affect their very own nations. “The collective West does not understand: the introduction of a cap on prices for Russian energy resources will lead to a slippery floor under its own feet,” Zakharova stated, in line with Reuters.

It shouldn’t be anticipated that EU member states will attain a choice on Friday relating to the proposed coverage concepts.

EU lawmakers have repeatedly accused Russia of weaponizing power exports to drive up commodity prices and sow uncertainty throughout the bloc. Moscow denies utilizing power as a weapon.

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The 27-nation bloc has endured a pointy drop in gas exports from Russia, historically its largest power provider, amid the standoff over the Kremlin’s onslaught in Ukraine.

Imported Russian gas to Europe at the moment stands at 9%, representing a considerable fall from roughly 40% earlier than the warfare.

The bitter power dispute between Brussels and Moscow has not too long ago seen Russia utterly halt gas flows through a significant provide path to Europe, exacerbating the chance of recession and a winter scarcity.

Speaking in Brussels forward of the talks, EU Energy Commissioner Kadri Simson instructed reporters that Friday’s assembly was crucial to supply governments with the suitable instruments to deal with the deepening power disaster.

“This is not only about prices,” Simson stated. “It is also a challenge on the aspect of the security of supply.”

Energy payments have skyrocketed since Russia invaded Ukraine in late February and the West responded with a barrage of punitive financial measures.

Renewables wanted ‘sooner than ever’

“We are facing an extraordinary situation, not only because Russia is an unreliable supplier, as we have witnessed over the last days, weeks, months, but also because Russia is actively manipulating the gas market,” von der Leyen stated in an announcement on Wednesday.

“I am deeply convinced that with our unity, our determination, our solidarity, we will prevail,” she added.

EU lawmakers have repeatedly accused Russia of weaponizing power exports to drive up commodity prices and sow uncertainty throughout the bloc. Moscow denies utilizing power as a weapon.

Last week, Russia’s state-owned power large Gazprom cited an oil leak for the indefinite shutdown of the Nord Stream 1 gas pipeline, which connects Russia to Germany through the Baltic Sea.

However, the Kremlin has since stated that the resumption of gas provides to Europe is totally depending on the EU lifting its financial sanctions against Moscow.

“I think what this energy crisis has shown is that we need renewables and the green energy transition faster than ever,” Deepa Venkateswaran, senior analyst of European Utilities at Bernstein, instructed CNBC’s “Squawk Box Europe” on Friday.

“At this point, renewables have never ever been [this much] cheaper than wholesale prices, which are driven by gas and fossil fuel prices,” she added.

Oil worth cap

Speaking alongside French Finance Minister Bruno Le Maire forward of a separate assembly of EU finance ministers within the Czech Republic, German Finance Minister Christian Lindner referred to as for solidarity throughout the bloc within the seek for options to assist households and companies.

“It is a signal that France and Germany starts this meeting together, it is a signal that we are standing shoulder to shoulder not only here but policy-wise as well,” Linder stated, jovially nudging France’s Le Maire.

Linder stated he would invite all EU member states to assist the thought of a worth cap on Russian oil.

The G-7 financial powers issued a joint assertion final week backing the initiative, though power analysts stay extremely skeptical concerning the integrity of the proposal.

The Kremlin has warned it will cease promoting oil to nations that impose worth caps on Russian power exports.

“We want to avoid higher revenues for Russia and we want to maintain the price level for our economies and one favorable means is the oil price cap. It is more effective when more member states of the European Union support this idea,” Lindner stated.

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