EU could cap gas prices in case of Russian sanctions

EU could cap gas prices in case of Russian sanctions

The European Union could cap natural gas prices to avoid excessive costs if Russia, the region's biggest supplier, restricts or cuts off the flow.

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The European Commission is planning to replace Russian gas imports with energy-market intervention measures, as part of a package to replace Russian gas imports after the invasion of Ukraine. According to a draft document seen by Bloomberg News, it is going to be set to recommend agreeing on common principles to prepare for a wider disruption and a regional or EU-wide emergency.

Concerns over gas supply are weighing on European energy markets as Moscow retaliates to EU sanctions with its own curbs against some gas companies in the region. Uncertainty over how EU-based importers should pay for Russian gas to avoid a breach of sanctions has been a headache for weeks.

The commission said in the draft that a maximum regulated price would be limited to its duration and the market price should be used as long as possible. The document may change before the adoption scheduled for May 18.

One possibility is to limit price formation during the disruption scenario by capping the price on European gas exchanges, but such a price cap can also be introduced in different ways and can intervene at different levels of the gas value chain, the commission said in the document. If compensation is foreseen, this type of intervention could require excessive public funding. The EU doesn't want to comment on draft proposals.

The commission is going to give the green light for short-term measures to cushion consumers and companies from high energy prices. They include :

No emergency liquidity support for commodity traders confronted with high margin calls as a result of market volatility.

No Revising limits were applied to short-term volatility in internal trading rules of European gas exchanges.

The measures are meant to be temporary and will not apply beyond the beginning of June 2023.

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