No agreements were reached


Note: this is a machine translation from the original Russian text

The European Union could not accept the mechanism of the gas purchase price limit.

A lot was expected from this meeting of EU energy ministers, but the heads of departments could not come to an agreement. A month ago, the leaders of the 27 EU countries demanded that the European Commission come up with a "temporary" mechanism that sets a ceiling on gas prices, but make sure that, firstly, the energy supply is not interrupted, and secondly, the market situation would not force the burning of existing stocks in the absence of new ones.

Such a thing was invented and put forward for discussion by ministers. In addition, there were two other documents on the table. The first is about joint purchases of gas and fuel exchange technology in emergency cases, and the second is about simplifying the procedures for issuing licenses for the production of "green" energy components, for example, heat pumps and solar panels. There are no questions about these two proposals, but the package will be adopted together with the third and main document – just about the upper price limit.

The Commission proposed from January 1, 2023 to introduce a mechanism that sets a ceiling on gas prices, if suddenly they soar to this ceiling. Monthly contracts are frozen for a year if prices at the gas hub in Rotterdam, which is where gas for the EU is traded, reach 275 euros per MW-hour and stay at this level for 10 consecutive days for two weeks.

Explanation. In Europe, it is customary to consider the volume of gas in Megawatts per hour. For understanding, 1000 cubic meters is 10.49 MW-hour, or 1 MW-hour is 95.31 cubic meters. In Russia, everything is counted in cubes. By simple steps, we calculate that the proposed price ceiling is 2,885. 32 euros per 1,000 cubic meters. For example: now the price for 1,000 cubic meters is 1,154 euros. And no one will remember such ceilings to be 2.5 times higher than the current price.

What started here! Belgian Energy Minister Tinne Van der Straten said: "We actually need a mechanism that would have a positive effect. Especially on the bills of our citizens for electricity, but it is unlikely that such a mechanism will have such an effect. Imagine if such a system existed in August, during the period of the maximum jump in prices, it would not even work."

Her colleague from Spain called the commission's proposal a "stupid joke." The Polish minister with the speaking surname Anna Moscow complained: "We have minus 10, and we don't want to discuss fuel solidarity and renewable energy here. The EU Executive body should submit a new text within a few days."

Even at the project stage, Germany, Austria, Luxembourg and the Netherlands opposed the idea itself. The last three are the main virtual participants in gas purchases for the EU. Germany is very sensitive about its industry and everything connected with it. "We cannot allow our gas storage facilities to start emptying," said Sven Gigold, state Secretary of the German Ministry of Economic Affairs and Climate Protection. "If the threshold is raised too high, there will be no help from this system."

Germany generally does not like interference in the gas market and, in principle, no regulatory mechanisms will suit it. The main concern of the Germans is that when prices are limited, its main suppliers do not leave the market, since Asian buyers are now ready to pay them such a high price. At the same time, the German industry will remain without gas. And although now its storages are filled to the brim, it will be necessary to burn stocks in case of a supply stoppage.

The proposal of the European Commission, however, provides that in case of withdrawal from the market of the main suppliers, the mechanism of ceiling prices stops. This will be one of the main areas of discussion of the new EC draft, which is to be presented at a new meeting in Brussels in mid-December. Without a clear study of the topic of how to retain suppliers, it will not be realistic to agree.

Another fuse in the European Commission's proposal is that the gas price should be 58 euros higher than the price of liquefied natural gas for two consecutive weeks. Only then does the notorious mechanism turn on. But it is clear that as soon as this happens, American and Saudi gas tankers will give a "full turn" from European ports. By the way, American liquefied gas production is not growing as fast as expected.

Now, in order for the decision to pass, such EU heavyweights as France should put pressure on Germany to agree to accept conditions that are strange for her, based on purely political considerations. Just so that such a system exists.

Moreover, its establishment is required by the countries of "Young Europe". By the way, it is on their proposal that all three projects should be adopted only as a single package in order to spur the "old people" to adopt, among other things, the mechanism of gas regulation. The Czech Republic currently holds the presidency of the European Union. Its Minister of Industry and Trade, Josef Sikela, said: "In any case, we must continue discussions so that the economies of our countries work. Otherwise we will not be able to support Ukrainians."

In reality, as the expert of the European Commission explained, this mechanism of gas regulation is rather a deterrent. "Ideally, it should not turn on at all, because the market will understand that Europe is not ready to pay any price at any time." And suppliers will turn in the other direction. And then it will turn off. Then why all this?