It is known that the European Union (EU) countries are going to face a crucial energy crisis in the upcoming winter due to Russian-Ukrainian War. That’s why, different measures were taken by the EU officials to escape from this crisis. The middle and long-term measures is on the agenda of the EU; however, short-term measures are more important at that point. The leak of energy due to the sabotages in the Nord Stream I Pipeline on September 26, 2022 showed that the energy security is in danger.
On the other hand, the EU does not want to give Russia any compromises. Under these conditions, some of the EU countries demanded price cap on energy from the European Commission (EC) for lifting the effects of crises on their economies. Especially Greece showed a significant effort for that issue. However, some of the EU countries keep at a distance on that issue with different reasons. However, on September 30, 2022, after Extraordinary Energy Commission meeting held in the European Commission, the President of the Commission Ursula von der Leyen has announced that a temporary price cap will be applied.
Price cap on energy, especially on gas, firstly discussed at the beginning of September 2022. On September 9, 2022 in the meeting of Extraordinary Energy Commission, that the Ministers of Energy of the countries participated, it is announced that there will be measures on electricity savings and price cap will be applies. The details, on the other hand, were left to the Brussels. Since, there are divergence within the member of the EC.
It is expressed that price cap is demanded due to prevent the unfair competition. According to the states defending price cap, if there is not a limit, the energy firms, especially based on Russia, will sell out the gas to the European countries with the price that they desire. Against the states who try to protect their economies, the actors such as Austria, Hungary, Germany and the Netherlands expressed that, this approach will jeopardize the energy security. In addition to these states, Kadri Simson, European Commissioner for Energy has indicated that she also has the same concerns.[1]
After the meeting of September 9, 15 EU member states, who desire to this issue become visible, has delivered their demands with a document of September 27, 2022 to the European Commission. Within these 15 countries, Belgium, Bulgaria, Croatia, France, Greece, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, and Spain take place. The signatory states have clarified price cap “to lessen the inflationist pressure, handle the expectations, provide a framework in a possible supply cut, and limit the extra profits in the sector”.
After the demand was submitted, Germany started to remonstrate. Berlin believes that price cap on gas prices will negatively affect the energy supply. Therefore, the Berlin administration put forward that, such a price cap will cause the suppliers of gas to direct the gas resources to other countries and caused a scarcity in Europe.[2] In fact, the other countries objecting to that decision have similar concerns.
At that point, since there is a duality in the Union, countries defending price cap, especially Greece, has increased diplomatic connections with the Commission. As a matter of fact, Prime Minister of Greece Kyriakos Mitsotakis has held a meeting with the EC President in Sofia, after the opening ceremony of Interconnector Greece-Bulgaria on October 1, 2022.[3]
Right after, Mitsotakis continued his activities on that issue. For instance, on October 3, 2022, in Bloomberg’s website, the Greek leader has published an article titled “Europe Can Fight Putin by Capping Gas Prices.” In this article, Mitsotakis has claimed that Russia is using the energy as a weapon and in that kind of extraordinary situations, control on the markets is needed. In that sense, Mitsotakis expressed in the following:[4]
“A cap on prices carries risks, of course. But as we move into winter, the dangers of inertia compound. We cannot afford to sit back and watch as Russia uses our market institutions against us… Imposing a cap on gas prices is an inevitable step in that process.”
Furthermore, in the declaration of Ministry of Energy of Greece on October 3, 2022, they will submit a demand on price cap on gas to the Commission.[5] The insistent attitude of the Athens administration show that Greece will be negatively affected, if the price cap is not applied. Because Greek economy is still not that powerful even though it is in the process of recovery. On the other hand, it is known that the relations between Russia and Greece worsen as time goes by. Therefore, it can be predicted that Moscow will submit high prices on energy. However, that kind of insistence has given some results. Since, on October 5, 2022, the Commission has announced that there will be provisional price cap until a new price index will be applied on gas.[6]
As a result, price cap on gas is both preventive and risky step. The 15 EU countries defending that policy tried to prevent the negative effects of unfair competition and protect their economies. In contrary, including Germany, other EU countries also had drawbacks for their national interests. However, it should be noted that, provisional price cap decision tries to please the all countries of the EU at once. Yet, it is just a retardation of the problem. Therefore, the European countries, who are not willing to give concession to Russia face a serious dilemma.
[1] Kiro Taylor, “EU Countries Call On Brussels to Cap Gas Prices, But Leave Out Details”, Euractiv, https://www.euractiv.com/section/energy/news/eu-countries-call-on-brussels-to-cap-gas-prices-but-leave-out-details/, (Date of Accession: 06.10.2022).
[2] Hans Von Der Burchard, “Germany Opposes EU Price Cap on All Gas Imports”, Politico, https://www.politico.eu/article/germany-oppose-eu-gas-price-cap-domestic-price-limit/, (Date of Accession: 06.10.2022).
[3] “Prime Minister Kyriakos Mitsotakis met with the President of the European Commission Ursula von der Leyen”, Helen Cumhuriyeti Başbakanlığı, https://primeminister.gr/en/2022/10/01/30332, (Date of Accession: 06.10.2022).
[4] Kyriakos Mitsotakis, “Europe Can Fight Putin by Capping Gas Prices”, Bloomberg, https://www.bloomberg.com/opinion/articles/2022-10-03/greece-pm-mitsotakis-europe-must-put-a-cap-on-natural-gas-prices, (Date of Accession: 06.10.2022).
[5] “Greece to Present Proposal on EU Gas Price Cap This Week”, Reuters, https://www.reuters.com/business/energy/greece-present-proposal-eu-gas-price-cap-this-week-energy-minister-2022-10-03/, (Date of Accession: 06.10.2022).
[6] “EU Executive Chief Proposes Temporary Gas Price Cap”, e-Kathimerini, https://www.ekathimerini.com/news/1194884/eu-executive-chief-proposes-temporary-gas-price-cap/, (Date of Accession: 06.10.2022).
