Price Cap for 3 Months During Energy Crisis
Gazprom CEO: "Existing Contract Breach, Supply Suspension"
US and Middle East May Also Hesitate to Export Gas...Opposition Growing
[Asia Economy Reporter Hyunwoo Lee] The European Union (EU) has presented a draft gas price cap to its member states aimed at stabilizing all gas prices within Europe, including Russian gas. This measure is intended for active response in the event of an energy security crisis in the EU. However, opposition is significant as there are concerns that not only Russia but also alternative gas exporters such as the United States and Middle Eastern countries might reduce their gas exports.
According to Bloomberg on the 16th (local time), the EU Commission presented the draft gas price cap to member states on the same day. The draft focuses on the EU directly intervening in the market to set a maximum price ceiling for gas traded in Europe if a price surge severe enough to cause an energy security crisis occurs.
The EU Commission plans to set a maximum price cap on the gas trading price at the Netherlands TTF exchange, the European natural gas price benchmark, and limit price fluctuations to about 5% around that cap. However, Bloomberg reported that the price cap would only be maintained for three months after activation.
The EU is scheduled to discuss the gas price cap at the summit meeting from the 20th to the 21st and is reportedly planning to implement it as early as the end of this year. However, there are significant disagreements among countries regarding gas used for power generation, and since this issue is directly linked to national security, it is said that it was not included in the current draft.
Nonetheless, opposition among member states within the EU is strong, making it uncertain whether the price cap will be implemented as planned by the end of the year. In particular, since the price cap applies to all gas imported into Europe, not just Russian gas, there are concerns that current alternative natural gas suppliers such as the United States and Middle Eastern countries may be reluctant to export. Countries with a high proportion of natural gas, such as Germany and Poland, oppose the price cap measure citing worsening energy crises.
Meanwhile, Russia has strongly opposed the measure. According to TASS news agency, Alexey Miller, CEO of Gazprom, stated in an interview with state TV on the same day, "If a unilateral price cap is imposed on Russian gas, it will naturally violate existing contracts and inevitably lead to a suspension of gas supplies."
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