EC to propose price cap on Russian gas

The European Commission (EC) is to propose a price cap on Russian gas, as one of five proposed measures that it will discuss with EU energy ministers when they hold a special meeting on September 9, EC President Ursula von der Leyen said.

Von der Leyen said that the objective of the proposed price cap on Russian gas was very clear.

“We all know that our sanctions are deeply grinding into the Russian economy, with a heavy negative impact,” Von der Leyen told a news conference on September 7.

“But Putin is partially buffering through fossil fuel revenues. So here, the objective is: We must cut Russia’s revenues, which Putin uses to finance his atrocious war in Ukraine.

“And now our work of the last months really pays off. Because, at the beginning of the war, if you looked at the imported gas, 40 per cent of it was Russian gas, since a long time. Today, we are down to nine per cent only,” she said.

Further measures proposed by the EC include a mandatory target for reducing electricity use at peak hours, a cap on the revenues of companies that are producing electricity with low costs, a solidarity contribution for fossil fuel companies, and to facilitate the liquidity support by member states for energy companies.

In a separate statement on September 7, the EC said that it was proposing a further five billion euro in macro-financial assistance (MFA) loans to Ukraine as the second part of the exceptional MFA package of up to nine billion euro announced in the Commission’s communication of May 18 2022 and endorsed by the European Council in June.

The Commission disbursed the first billion euro of this MFA package in early August. The remaining up to three billion euro will be provided as soon as possible, the EC said.

The proposal will complement the support already provided by the EU, including a 1.2 billion emergency euro MFA loan paid out in the first half of the year.

“Taken together, the two strands of the programme would bring the total MFA support to Ukraine since the beginning of the war to 7.2 billion euro, and could reach up to 10 billion euro once the full package of exceptional MFA to Ukraine becomes operational this year,” the EC said.

Under the proposal, MFA funds will be made available to Ukraine in the form of long-term loans on favourable terms, to be disbursed in a small number of instalments.

“In a further expression of solidarity, the EU budget will cover the interest costs and administrative fee payments linked to the loans.”

As for all previous MFA loans, the Commission will borrow the funds on international capital markets and transfer the proceeds on the same terms to Ukraine.

The loans to Ukraine will be backed by guarantees provided by EU countries which will complement the provisioning available from the EU budget.

Between the EU budgetary provisions and the member state guarantees, the loans will be fully secured for 70 per cent of their value.

“As soon as the European Parliament and the Council approve today’s proposal and the corresponding Memorandum of Understanding and Loan Agreement with the Ukrainian authorities are signed, the Commission will swiftly make available the five billion euro,” the EC said.

(Photo: EC Audiovisual Service/Dati Bendo)

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