EU leaders have exposed their differences over how to respond to the energy price shock at a summit dedicated to the war in Ukraine and its consequences.
The leaders are meeting for the second time in two weeks to discuss the fraught issue of capping energy prices, amid a clamour for action over spiking gas prices in the wake of Russia’s invasion of Ukraine.
Under heavy pressure from Paris, Rome and Madrid, the European Commission has proposed a mechanism to prevent “extreme volatility and excessive prices” by blocking gas transactions above a certain level. But the EU executive said this “correction mechanism” was only a last resort “when needed”, falling short of the cap on prices 15 member states have been demanding.
Inspired by the common purchase of vaccines during the Covid crisis, the commission wants countries to club together to buy gas, increasing their leverage over sellers.
While the proposals for common gas purchasing have received broad support, the plans for a price cap are deeply divisive.
Germany, Europe’s largest economy and biggest gas consumer, backed by the Netherlands, fears that any attempt to cap prices could backfire, if tankers laden with liquified natural gas sail to Asia instead.
“The LNG tankers currently sitting off the shore of Spain would sail on to Japan and Korea,” German government sources have said. The commission’s idea to set a “dynamic” price cap, which would set European prices ahead of Asian prices, has also led these countries to worry about alienating allies such as Japan and South Korea.
Arriving at the summit, the German chancellor, Olaf Scholz, struck a conciliatory note: “It is clear that the prices for gas, for oil and for coal must go down. Electricity prices must go down. And this is something that demands a common effort of us all in Europe.”
Diplomats have downplayed expectations of price cap deal emerging at the summit, pointing to the technical complexities, as well as the political challenge of devising a common policy for 27 countries with very different energy mixes.
Before Vladimir Putin’s invasion of Ukraine, the EU got 40% of its gas imports from Russia, but today that has fallen to 7.5%. Some central European member states still receive relatively large amounts of Russian gas, while others, Cyprus and Sweden, use no or very little gas at all in their energy mix.
France, Italy, Spain and Poland are among 15 member states that have been pushing for some form of price cap, and have accused the commission of being too slow in responding to the crisis.
The standoff over the price cap is worsening relations between Berlin and Paris, with a regular Franco-German ministerial council scheduled for next week postponed until January. Emmanuel Macron played down the decision to delay the meeting, saying he wanted always to “preserve European unity” and the Franco-German alliance. But he made plain his dissatisfaction with Berlin, saying: “It is not good either for Germany or Europe that it isolates itself.”
The French president said he had “two very simple objectives”, to lower the price of gas and “absolutely preserve our unity”.
Since the EU launched a series of emergency plans to save energy, European gas prices have fallen from summertime highs. But many EU insiders fear that winter 2023-24 could be even more testing, raising political pressure for action on prices.
Latvia’s prime minister, Krišjānis Kariņš, a supporter of the cap, said: “If we can get the cost of imported cost of energy down it helps the poor and the rich countries.” Although he added the best solution would have been “if we had never had a dependence on Russia”.
The Dutch prime minister, Mark Rutte, who predicted a long night ahead, suggested there was little hope of a breakthrough on the price cap. He said: “It will probably be about asking the commission to further assess a few options and generally agreeing on things like joint purchasing.”
But even the joint purchasing plan has provoked criticism from rightwing nationalist governments in Poland and Hungary, which are allergic to strong EU oversight. Both Warsaw and Budapest are resisting the idea of making participation in common procurement mandatory, which EU officials say is essential if the scheme is to work.
Poland’s prime minister, Mateusz Morawiecki, renewed his government’s long-running criticism of Germany, saying: “In theory, the cheap Russian gas was supposed to be a blessing for the German economy. In practice it has become a curse for all of Europe.”
Ahead of the meeting, Hungary’s prime minister, Viktor Orbán, tweeted: “Brussels’ latest plan on joint gas procurement reminds me of the time we bought vaccines together. Slow and expensive,” he said, forecasting a “huge debate” at the summit.
Meanwhile, Germany was facing a backlash from environmentalists when a leaked document emerged showing that Berlin favoured developing new gas fields. The EU should “work together with countries that have the capacity to develop new gas fields, as part of the Paris climate agreement commitments”, said the leaked paper seen by the Guardian.
Greenpeace called the idea ludicrous. “Deepening Europe’s long-term gas dependence won’t help people heat their homes this winter, it’ll only worsen the climate crisis,” the NGO said.
The fraught debate follows bitter criticism of Berlin’s planned €200bn (£174bn) “energy shield” that will subsidise electricity for households and business to ease the loss of cheap Russian gas.
EU critics say the plan is unfair and risks distorting the EU’s single market, because member states without such deep coffers cannot support their consumers in the same way.
German officials think critics were not always familiar with the details and argue the actions are similar to those taken by other countries, such as France and the Netherlands.
