European Union President Ursula von der Leyen proposed Wednesday that the bloc cap the price of Russian-imported gas, among other measures, as the continent deals with a worsening energy crisis while it seeks to punish the Kremlin for its invasion of Ukraine.
Facing a cut-off of Russian oil and natural gas as colder weather approaches, the EU also intends to “flatten the curve” of electricity usage during peak hours with mandatory usage targets; channel profits from low-cost energy sources and impose a tax on fossil fuel companies profits so they “can support vulnerable households and vulnerable communities;” and set up a temporary aid program to provide funds for new renewable-energy companies.
According to a draft of the proposal obtained by Politico Europe, EU officials intend to tax the “unexpected profits” from low-cost energy sources if prices rise above about $200 per megawatt hour. Germany, which serves as the EU benchmark, had prices at $443 on Wednesday, Politico reported.
But it was the proposed cap on Russian gas that caused the most waves at the Wednesday afternoon briefing in the EU’s Brussels headquarters.
”We all know that our sanctions are deeply grinding into the Russian economy with a heavy negative impact, but [President Vladimir] Putin is partially buffering [the costs] through fossil fuel revenues,” Ms. von der Leyen said. “The objective is we must cut Russia’s revenues which Putin uses to finance his atrocious war in Ukraine.”
Ms. von der Leyen said that the bloc now imports 9% of its gas from Russia, down from 40% at the start of the war.
Mr. Putin responded in kind while attending an economic forum in the eastern Russian city of Vladivostok Wednesday.
“This is yet another stupidity, another non-market decision that has no future. All administrative restrictions in global trade only lead to disproportions and higher prices,” Mr. Putin said, according to Russian news agency TASS.
The Russian leader threatened a complete cut-off of energy sales to Europe if the price cap plan were instituted.
“We will not supply gas, oil, coal, heating oil — we will not supply anything,” he vowed, if it went against Russia’s interests.
Kremlin spokesperson Dmitry Peskov said Tuesday that Russia shut off gas imports from its Nord Stream 1 pipeline to Europe earlier this week in response to the EU and Britain’s aggressive sanctions over the Ukraine invasion, according to state news agency Interfax.
“Problems in pumping arose because of the sanctions imposed against our country and against a number of companies by Western states, including Germany and the U.K.,” Mr. Peskov said. He added that the sanctions prevent maintenance to the pipeline, which subsequently makes them illegal to operate.
The pipeline was originally shut off for scheduled maintenance on Aug. 31, but Russian-owned gas company Gazprom said Friday that an oil leak would cause the pipeline to be shut down indefinitely, according to CNBC.
Gas prices in Europe have spiked 28% on Monday, reaching $272 per megawatt hour.