‘We must cut Russia’s revenues which Putin uses to finance this atrocious war in Ukraine,’ European Commission President Ursula von der Leyen told reporters on Wednesday.
The European Union has proposed a price cap on Russian gas just as Russia’s President Vladimir Putin warned that such a move would cause Moscow to cut off all energy supplies.
Europe is in the middle of an escalating standoff with Russia that could drive up already-soaring European gas prices further in advance of the cold months ahead.
Brussels accuses Moscow of weaponising energy supplies in retaliation for Western sanctions imposed on Moscow over its invasion of Ukraine.
Russia continues to insist that the sanctions are causing the supply problems, which it puts down to pipeline faults.
On Friday, Russia’s Gazprom fully suspended gas supplies through the Nord Stream 1 pipeline to Germany after it said it found an engine oil leak during maintenance work.
Putin has warned that contracts could be discarded in the event of price caps.
“We will not supply anything at all if it contradicts our interests,” Putin said on Wednesday at an economic forum in Vladivostok.
“We will not supply gas, oil, coal, heating oil – we will not supply anything,” Putin stated.
Europe usually imports about 40 percent of its gas and 30 percent of its oil from Russia.
Despite the warnings, the EU is planning to press ahead with a price cap on Russian gas and also a ceiling on the price paid for electricity from generators that do not run on gas.
“We will propose a price cap on Russian gas … We must cut Russia’s revenues which Putin uses to finance this atrocious war in Ukraine,” European Commission President Ursula von der Leyen told reporters.
EU energy ministers are due to hold an emergency meeting on Friday.
The Netherlands, which has consistently opposed a gas price cap, would support one that targets Russian gas, a source with knowledge of the matter told the Reuters news agency on Wednesday.
However, a Czech minister said earlier it should be taken off the agenda for Friday’s meeting. The Czechs are helping to guide discussions as holders of the EU’s rotating presidency.
Curtailing production and spending billions
On Wednesday, Ukrainian President Volodymyr Zelenskyy thanked the EU for confirming five billion euros ($4.97bn) in macro-financial aid. He also added that the country needed a “full-fledged” programme of financing from the International Monetary Fund.
Had a phone conversation with 🇩🇪 Chancellor @OlafScholz on a wide range of topics. Thanked for the confirmation of the €5 billion macro-financial aid from the EU, stressed the need for a full-fledged IMF program. Discussed plans for further strengthening 🇺🇦 defense capabilities.
— Володимир Зеленський (@ZelenskyyUa) September 7, 2022
Zelenskyy made the comments in a Twitter post following a conversation with German Chancellor Olaf Scholz, who he said discussed plans to further strengthen Ukraine’s defence capabilities.
Europe is also spending billions of dollars in support to cushion consumers from the impact of surging energy costs.
New British Prime Minister Liz Truss is expected to unveil her plans on Thursday, with the bill from a price freeze forecast to rise towards 100 billion pounds ($115bn).
Many European companies have already been forced to cut back on production.
Eurelectric, a body representing the European electricity industry, criticised plans for an EU cap of 200 euros per megawatt hour on the price of electricity from generators that do not run on gas.
“The root cause of the problem is a shortage of gas supply and our addiction to imported fossil fuels,” said Kristian Ruby, secretary general of Eurelectric. “Governments should seek to tackle this rather than resorting to distortive, ad hoc interventions in the electricity market.”