Europe felt the chill from soaring energy costs Monday. France said it couldn’t pay all the additional costs for consumers while Britain is at greater risk of falling into recession.
Britain and the European Union are trying to reduce the shock caused by Russia’s “energy war”, as some politicians call it. Russia has cut gas exports to Europe since the West placed sanctions on Russia for its invasion of Ukraine.
On Wednesday, the European Commission will unveil a set of emergency measures for the 27-nation EU. These include a windfall profit tax on energy firms and a rescue plan for power companies facing liquidity problems.
Diplomats stated that there is a disagreement between countries over details and whether or not to impose a price cap on gas prices.
Russia claimed that it was difficult to predict the effects of a new arbitration initiated by Ukraine’s energy firm Naftogaz on gas transit to Europe.
Bruno Le Maire, France’s Finance Minister, stated that consumers would be protected from new price caps for energy when they run out this winter. However, he stressed that households would have to absorb only a small portion of the higher costs.
Le Maire stated that it would be irresponsible to place the burden of these increases solely upon the state budget. He also said there will be a “contained increase in gas prices and power prices.”
The economy grew by 0.2% in Britain in July, compared to June. This was less than the 0.4% expected. The construction sector was hit hard by the sharp rise in energy prices and the corresponding jump in material costs.
Capital Economics’ Paul Dales said that a “disappointingly low rebound in real GDP” in July suggested that the economy is struggling and was likely already in recession.
During the European Commission’s next set of EU, measures are being drafted, and Norway warns it against gas caps.
After a meeting with Ursula von der Leyen, President of the European Commission, Jonas Gahr Stoere stated that “We’re going to the talks with an open mindset but are sceptical towards a maximum gas price.”
He stated that a maximum price would not solve Europe’s fundamental problem of too little gas.
Norway, a close ally of the EU, has been the largest gas supplier to the bloc since Russia cut off its exports following the Ukraine war. This gave Norway record profits from its oil industry, as the prices rose.
Norway wants to be a reliable supplier to Europe with gas, but the Nordic country stated that the terms of trade should be decided by the companies that purchase the hydrocarbons as well as the companies that pump them.
The bloc’s energy ministers requested the European Commission on Friday to include a cap on gas prices in an effort to reduce the soaring energy bills of citizens and businesses.
Diplomats say that there are a variety of options available, including a price cap for all imports, pipeline flows and wholesale gas trading.
The EU’s 27 member countries will have to approve the energy measures. This could be done at an emergency meeting later this month.
The EU ministers eventually rescinded Friday’s price cap that only targeted Russian gas. This was despite warnings from Hungary and Austria that Moscow could cut off its supplies to the west.
Before the invasion of Ukraine, Russia supplied 40% of the EU’s gas. This share has fallen to 9% as Moscow cut supplies. Moscow blames sanctions for the decline.
Naftogaz announced Friday that it had opened a new arbitration against Gazprom. It claimed Gazprom had not paid for its gas transport through Ukraine on time and in full.
Dmitry Peskov, a Kremlin spokesperson, said that there could be many unpredicted things from our Western counterparts and leaders of Ukraine’s natural gas industry.
The flow of natural gas from Russia to Europe along key routes was steady Monday morning while the Nord Stream 1 pipeline remained closed.
