EU faces ‘unprecedented energy crisis’ despite stopping Putin funds

European Parliament President calls for EU wide gas cap

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The EU has still not wrangled free from the devastating impacts of the energy crisis and still has a big choice on its hands, campaigners and experts have warned. They need to decide between suffering from an “unprecedented” situation or funding repressive regimes, despite striking a deal that will be a blow to Russia, they say. EU negotiators struck a landmark deal on Monday night after hours of negotiations in Brussels, which saw them agree to cap gas prices following months of furious disputes as nations locked horns over the proposed measure. 

The measure could see the energy-gripping Kremlin’s revenues plummet with Moscow lashing out at the deal, calling it a “violation”. But Alexander Kirk, a campaigner at Global Witness, warned that the deal does not address the “root problem” of the European energy crisis.

Russia supplied 40 percent of the EU’s gas before the Ukraine war, but slashed its deliveries to the bloc and sent wholesale prices soaring, triggering the energy crisis. This has had a knock-on impact on billpayers across the continent, including the UK. The issue was also exacerbated by the war in Ukraine, which sparked supply chain issues. 

Mr Kirk told “There is no ‘good’ way to source fossil gas, as Europe has found out painfully this year. For decades, the gas industry has worked hard to lock the EU into fossil gas dependence.

“We are now seeing the results: Europe is forced to choose between an unprecedented energy crisis or the funding of repressive regimes, such as Russia or Qatar. The EU-Price Cap will not solve the root problem of this.”

The EU has been racing to replace Russian gas with supplies from alternative producers, such as Qatar. However, its reliance on such high volumes of Russian gas meant it was still handing Putin billions for energy imports amid the brutal war in Ukraine, despite efforts to phase out the fossil fuel.”

The price cap measure will help to deprive Moscow of extra cash, although Russia’s gas exports to Europe have already plunged and are expected to plummet further. Under the measure, a gas price cap will kick in if prices on the main European gas exchange, the Dutch Title Transfer Facility (TTF), surpass €180 (£157) a megawatt-hour for three working days in a row.

But instead of focusing on limiting price spirals, Mr Kirk argues that the bloc should be placing all its efforts on the green energy switch to prevent authoritarian states from having any influence over Europe’s power supplies. 

He said: “It is crucial that the EU and its allies take decisive action to further invest in and develop its green infrastructure, not only to protect the planet but also to safeguard the well-being and interests of its citizens against autocratic governments that seek to exploit and undermine them through the use of fossil fuel diplomacy.”

According to Prof Simone Tagliapietra, an energy and climate expert and senior fellow at Bruegel, it is hard to tell what kind of impact the measure might have.

He told Bloomberg TV: “The ultimate impact of this measure is very difficult to be understood because there are so many safeguards in there that we shall see if and how these will be activated. If activated, for how long can it remain activated before countries close it off in order not to compromise security of supply.”

Countries that were wary of a price cap warned that it could turn away other energy suppliers, which could risk them sending their gas supplies to alternative buyers like China.

To convince the nations that were sceptical of the measure, the imposed cap, which can be triggered from February 15, 2023 is far lower than the one originally set by the European Commission – €275 (£240) a MWh. 

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But Prof Tagliapietra, similar to Mr Kirk, has also said that a cap may not be the best way to address the European energy crisis. He told Politico:”The gas price cap is perceived in several member states as a silver bullet, but it will not magically solve all our problems — and it would be a really big mistake to think so.” 

However, Polish Prime Minister Mateusz Morawiecki argues that the cap “spells the end of Russia and Gazprom’s ability to manipulate the market”. And Moscow appears to be concerned by this, with Kremlin spokesman Dmitry Peskov warning that the measure “is a violation of the market price-setting, an infringement on market processes, any reference to a [price] cap is unacceptable”. 

Gazprom’s CEO Alexei Miller has previously said that the Kremlin-controlled energy giant would consider an energy price cap as a violation of existing contracts, warning that it would end supplies flowing into Europe if it rolled out such a measure. 

He said back in October: “Such a one-sided decision is of course a violation of existing contracts, which would lead to a termination of supplies.” And the Russian President himself sent a similar warning.”

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