Russia warns towards capping oil and fuel costs

European Union power ministers on Friday gathered in Brussels for emergency talks on the right way to shield households and companies from runaway fuel and electrical energy costs forward of winter.

European Fee President Ursula von der Leyen sought to put the groundwork for Friday’s assembly with a five-point plan. This features a value cap on Russian fuel, a windfall tax on fossil gas earnings, a compulsory goal for decreasing electrical energy use and emergency credit score traces for energy corporations.

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Russian President Vladimir Putin responded to the proposals by threatening to tear up present provide contracts if a cap on Russian power exports is imposed, warning that he was ready to let Europe “freeze” throughout the colder months.

Russian International Ministry spokeswoman Maria Zakharova on Friday reportedly warned that the West failed to know how power value caps may impression their very own nations. “The collective West doesn’t perceive: the introduction of a cap on costs for Russian power assets will result in a slippery ground underneath its personal toes,” Zakharova mentioned, according to Reuters.

It isn’t anticipated that EU member states will attain a call on Friday concerning the proposed coverage concepts.

The 27-nation bloc has endured a pointy drop in fuel exports from Russia, traditionally its largest energy supplier, amid the standoff over the Kremlin’s onslaught in Ukraine.

Imported Russian fuel to Europe currently stands at 9%, representing a considerable fall from roughly 40% earlier than the struggle.

The bitter power dispute between Brussels and Moscow has not too long ago seen Russia completely halt gas flows through a significant provide path to Europe, exacerbating the chance of recession and a winter scarcity.

Talking in Brussels forward of the talks, EU Power Commissioner Kadri Simson advised reporters that Friday’s assembly was crucial to offer governments with the best instruments to deal with the deepening power disaster.

“This isn’t solely about costs,” Simson mentioned. “Additionally it is a problem on the facet of the safety of provide.”

Power payments have skyrocketed since Russia invaded Ukraine in late February and the West responded with a barrage of punitive financial measures.

“We face a rare state of affairs, not solely as a result of Russia is an unreliable provider, as we have now witnessed over the past days, weeks, months, but in addition as a result of Russia is actively manipulating the fuel market,” von der Leyen mentioned in a press release on Wednesday.

“I’m deeply satisfied that with our unity, our dedication, our solidarity, we’ll prevail,” she added.

EU lawmakers have repeatedly accused Russia of weaponizing power exports to drive up commodity costs and sow uncertainty throughout the bloc. Moscow denies utilizing power as a weapon.

Final week, Russia’s state-owned power large Gazprom cited an oil leak for the indefinite shutdown of the Nord Stream 1 fuel pipeline, which connects Russia to Germany through the Baltic Sea.

Nonetheless, the Kremlin has since mentioned that the resumption of fuel provides to Europe is totally depending on the EU lifting its financial sanctions towards Moscow.

“I feel what this power disaster has proven is that we’d like renewables and the inexperienced power transition quicker than ever,” Deepa Venkateswaran, senior analyst of European Utilities at Bernstein, advised CNBC’s “Squawk Field Europe” on Friday.

“At this level, renewables have by no means ever been [this much] cheaper than wholesale costs, that are pushed by fuel and fossil gas costs,” she added.

Talking alongside French Finance Minister Bruno Le Maire forward of a separate assembly of EU finance ministers within the Czech Republic, German Finance Minister Christian Lindner referred to as for solidarity throughout the bloc within the seek for options to assist households and companies.

“It’s a sign that France and Germany begins this assembly collectively, it’s a sign that we’re standing shoulder to shoulder not solely right here however policy-wise as properly,” Linder mentioned, jovially nudging France’s Le Maire.

Linder mentioned he would invite all EU member states to assist the concept of a value cap on Russian oil.

The G-7 financial powers issued a joint statement last week backing the initiative, though power analysts stay extremely skeptical in regards to the integrity of the proposal.

The Kremlin has warned it could cease promoting oil to nations that impose value caps on Russian power exports.

“We wish to keep away from larger revenues for Russia and we wish to keep the worth degree for our economies and one favorable means is the oil value cap. It’s simpler when extra member states of the European Union assist this concept,” Lindner mentioned.