Brussels weighs a cap on the price of Russian gas only for Germany and its eastern partners

Image of the Nord Stream gas pipeline in Lumbin, Germany. DPA via Europa Press (DPA via Europa Press)

The latest cut of Russian gas to Europe through the closure of the Nord Stream gas pipeline does nothing more than confirm the worst omens of Brussels and all European partners.

The contingency plans already in place, such as reducing gas consumption in Europe by 15% until spring, are clearly not going to be enough.

It is time to go further and propose more drastic measures, even if they involve a risky confrontation with the Kremlin.

The European Commission already has measures on the table that were considered taboo until recently, according to two internal documents of the body to which EL PAÍS has had access.

One of them is even weighing the possibility of intervening in the price of gas in the countries potentially most affected by the Russian cut, including Germany.

The measure would mean putting a cap on the price of gas consumed in those countries, not only for the generation of electricity —as in the case of the Iberian exception—, but for all purposes, from industrial production to households.

Brussels recognizes that this cap could raise suspicions in the non-benefited countries (Spain among them) because it would give a significant competitive advantage to German companies or companies from Central and Eastern Europe.

For now, these are options considered by the technicians who still have to pass the filter of the European authorities before being officially presented to the countries – something that, according to the drafts, should happen this week.

But that Brussels is serious about its demands on Moscow was confirmed by the president of the European Commission, Ursula von der Leyen, on Friday, when she said that "the time has come to limit the price of gas from the Russian pipeline to Europe."

This is precisely what the first of the options points to, practically unthinkable until recently, but which are now part of the European toolbox: introduce a limit price for Russian gas imports, above which the Twenty-seven would not buy from Moscow.

Among the pros of this measure, the draft values ​​the fact that it would limit Russian income from the sale of gas to Europe, in line with the cap on Russian oil also agreed on Friday by the G-7.

In addition, the experts consider, "it would make it less attractive for Russia to provoke price increases through interruptions or manipulations of the market", which in turn "would help to limit the volatility and uncertainty of the gas market".

But beyond the clear intentions and objectives, the way to achieve it implies multiple risks, both internal —especially achieving the agreement of all the Member States, at a time when the unity of the first months after the start of the war in Ukraine begins to crack—as externals, if Russia steadfastly refuses to accept the terms.

In fact, experts warn that the option of limiting the import price is a real ordeal that "should only be considered if the EU is willing to accept a total interruption of Russian gas supply."

European Economy Commissioner Paolo Gentiloni said on Saturday that Europe is "well prepared to resist Russia's extreme use of gas as a weapon."

If it were decided to take this step, the experts see two paths (with their own pros and cons).

The quickest thing to do would be to introduce legislation to set a maximum price limit.

But this, which would be equivalent to the sanctions route, would require the unanimity of the Twenty-seven, something that is not clear can be achieved.

Another possibility would be to create a “single purchasing entity that negotiates specific volumes at specific prices with Russia”.

This would be easier to approve, but would take longer to get up and running, a “con” when looking for solutions against the clock.

A “red zone” with administrative prices

The second option considered in the working document goes even further: it foresees dividing the EU into two zones, the "green" one, less dependent on Russian gas (like Spain and Portugal), and the "red" one, which according to a map included in the draft it goes from the countries of central and eastern Europe to Germany (or even Italy, if the interruption were even more serious), which are much more vulnerable to the Kremlin due to their high dependence on Russian gas.

The technicians focus on this "red zone", for which they propose, in case of emergency, a single and agreed administrative price for the entire region for wholesale transactions.

It would be a "dynamic price" and above the TTF, the gas reference index at present, that is, a price somewhat higher than the market price, but which, in any case,

This measure would allow "sharing the available gas with total solidarity" and prevent "the contagion of wholesale electricity prices" and the "inflationary effects", while "distributing the weight" among all the Member States and, therefore, "it allows a better economic result at the EU level", for example in the forecasts of the International Monetary Fund (IMF), experts value.

But they recognize at the same time that it is a "complex to administer" measure.

And, perhaps, difficult to assume for the countries of the “green zone”.

One of the challenges, they point out, would be "ensuring that the gas goes where it is most needed."

For this, what would be needed is an entity that distributes it and guarantees that the cheapest gas has an "essential use" and is not resold.

Also,

Brussels wants more transparency in the gas market

In another

, as this type of technical document is known in Brussels jargon and serves as the basis for subsequent political decision-making, the experts look at the TTF, the Dutch gas index that serves as a reference for setting the price in Europe.

A system that was considered reliable until Russian gas cuts have disrupted all schemes.

Now, the disparity of the TTF with other reference indices in other areas of the world raises doubts about whether it is not being preyed upon by speculators and Brussels is looking at options to either make the Dutch index more "transparent", or even look for alternatives or complements to set reference prices.

The TTF is distorted by speculation and is not reflecting the reality of prices, sources in Brussels familiar with this document and the market situation agree.

Hence, the draft proposes, on the one hand, to give a wake-up call to the TTF by demanding more “transparency”.

"It could be explored whether it makes sense to subject the TTF to financial supervision, to avoid any possible speculative maneuver," they point out.

As a second option, they are considering the possibility of studying the creation of a "parallel or complementary" European reference market that provides an "alternative to long-term indexation".

Finally, they point out, there would be a third possibility, whose legal feasibility would require further analysis, they warn, which would be to temporarily link the TTF to the JKM, the benchmark index in Asia, with a price of the TTF at a "slightly higher volume" than the JKM.

This would be a measure "of last resort in case of interruption of supply in Europe and prices skyrocket due to its link between a disparity between supply and demand."

The wave of

—there are already at least three, in a few days, after the leak by this newspaper of another document focused on ways to reduce the cost of electricity, among others, limiting the price of renewables—, is a a sign of the urgency with which Brussels is looking for alternatives to a possible total closure of the Russian gas tap.

The ministers of the branch will meet this Friday in the Belgian capital in an informal Council to analyze the alternatives and begin to agree on the way forward.

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