After Oil, a Price Cap on Russian Gas is being decided by EU. What does it look like?

Europe seems more confident now than in the Summer when it comes to dealing energy blows to Russia. Indeed, last August had seen a spike in oil and gas prices, worrying that EU could withdraw support to Ukraine fearing a cold winter.

But Putin, once again, had miscalculated his bet. First, the onset of winter was particularly warm, surely not as cold as it usually is. This allowed Europeans to save on gas reserves, which had been completely filled beforehand.

Now, Putin has completely lost any kind of leverage he had over Europe, as the EU keeps financing Ukraine’s war effort. The European Union, as well as the G7 countries, also implemented a price cap on Russian oil, killing any hope of sustained revenues for Russia.

A similar price cap for gas is being discussed within European circles. Indeed, gas is still the most important Russian export to Europe, but it might not be for too long.

It’s true that before the war Russia held a tight grip on European gas supplies. However, with the invasion and the destruction of the Nord Stream pipeline, a new era began. Now the EU is looking for alternatives, with some members even changing their geopolitical landscape completely.

A first draft of a price cap on gas could be decided on even today, on Monday, by EU diplomats.

What will the gas price cap look like

There have been several proposals so far, trying to look for a compromise between the parties. As mirrored by the oil price cap, some member states wish to be a bit more conservative than others.

Germany, for example, did not agree on a gas price cap in the first place (though implementing one herself). They were joined by the Netherlands and Austria, while Eastern European countries wanted a strong response against Russia.

The first proposal was a price cap at 275 eur/MWh, which would have barely made a dent in the Russian budget. For comparison, the only time gas reached this price level was back in August, when it went up to 300 eur/MWh.

Now, gas is being traded at far less, around 180 eur/MWh, so a change had to be made. A recent proposal by 11 member states put the price cap at 160 eur/MWh, or 20 eur/MWh more than liquified natural gas.

EU diplomats will convene today to make a final proposal: things look good. “On the side of the conference . . . there were some proposals that sounded like a good solution,” said German chancellor Olaf Scholz, the same that was initially skeptical of the idea.