The EU caps the price of gas: “Unacceptable”, denounces Russia

It was expected: the Kremlin takes a dim view of the decision of the Twenty-Seven to cap the wholesale price of gas. The member states of the European Union have indeed reached an agreement on Monday. It consists of a mechanism to cap wholesale gas prices as soon as they exceed 180 euros per megawatt hour (MWh) for three consecutive days.

The subject had given rise to bitter negotiations. Some of the Member States, including Spain, Poland, Greece and Italy, demanded a clear relaxation of the conditions for activating the mechanism. To Conversely, others, like Germany, the Netherlands or Austria, were reluctant to intervene and demanded drastic “safeguards” to prevent a ceiling from threatening European supplies. The risk being that the suppliers of liquefied natural gas (LNG) abandon Europe in favor of Asian customers paying for their gas at more attractive prices.

The EU overcomes its divisions and agrees on a gas price cap

To remedy this, the States have agreed to only activate the cap if the difference between the price of the TTF and the world price of liquefied natural gas (LNG) is equal to or greater than 35 euros. The mechanism can also be deactivated at the request of the European Commission in the event of an emergency. Other provisions also provide for its automatic suspension, in particular if gas demand increases by 15% in one month or 10% in two months, if LNG imports decrease significantly, or even if the volume negotiated on the TTF decreases significantly compared to the same period of the previous year.

“Safeguards” or not, Russia judges this agreement unacceptable”. It is a violation of the market process for price formation”said Kremlin spokesman Dmitry Peskov, quoted by Russian news agencies. Any reference to a “cap” (on prices) is unacceptable”, he insisted.

An oil price cap already in place

Moscow is already suffering the consequences of the cap on oil prices, recently implemented by the Europeans. Only Russian oil sold at a price equal to or lower than 60 dollars a barrel can, in fact, continue to be delivered. Thus, beyond this price, it is prohibited for companies based in EU countries, the G7 and Australia to provide services allowing maritime transport (trading, freight, insurance, shipowners, etc.).

European embargo on Russian oil: the big leap into the unknown of the oil market

In retaliationVladimir Putin threatened the West with reduce production » Russian oil if necessary “ensuring that: the proposed ceiling (at $60) corresponds to the prices at which we are selling today. In that sense, it doesn’t affect us in any way.”. For countries importing Russian oil, “follow this harmful “non-market” solution would be stupid for everyone”, he launched in front of the press. Such a mechanism concerns everyone”he added since if someone agrees once the consumer determines the price, it will lead to the collapse of the (oil) industry, because the consumer will always insist that the price be as low as possible”. And to insist: We will not be losers under any circumstances”.

(With AFP)