Neither hot nor cold

Natalia Dembinskaya

The European Union is persistently trying to agree on price limits for Russian resources. On the one hand, it is necessary to d-eprive Moscow of income, on the other hand, we ourselves cannot be left without energy carriers. Otherwise, you will have to buy at exorbitant prices from those who agree to “help”. The final decision of the European Commission surprised everyone: the ceiling turned out to be so high that some were indignant, while others laughed.
Upper limit
The leaders of Western countries agreed on limiting prices back in June at the G7 summit. From December, limits for oil come into force, from February – for oil products. Gas is still unclear.
But the European Commission has already proposed: a maximum of 275 euros per MWh on the virtual hub of the Title Transfer Facility (TTF).
“It’s not a panacea,” said EU Energy Commissioner Kadri Simson. “But it gives us a powerful tool that we can use when needed.”
The document clarifies that the mechanism is triggered when two conditions are met simultaneously. First, the calculated price of the TTF derivative for the month ahead exceeds 275 euros per MWh for two weeks. Secondly, this indicator is above the base price of liquefied natural gas for ten consecutive trading days for two weeks.
This means a limit of approximately $3,000 per 1,000 cubic meters of gas under a month-long contract.
“This is bulls..t”
Such a “forced” decision caused a flurry of criticism: the ceiling is more than twice the current prices, although below the summer peaks.
“This is a joke. It will not bring any benefit to anyone even under the extreme scenario that happened in August. Nonsense, not a limitation,” said Sim-one Tagliapetra, a senior researcher at the Bruegel think tank in Brussels.
In August, quotes on the London ICE exchange jumped to 300 euros per MWh after the cessation of supplies via Nord Stream. But they only stayed there for a week.
In Germany, they explained that the “decorative ceiling” is a political step necessary to ease the differences. That is, Brussels responded both to the demands to regulate prices and to calls not to interfere in the market system.
“The dispute is getting sharper. Belgium, Greece, Italy and Poland have threatened to block other decisions on the gas market at a meeting of energy ministers,” writes Die Welt.
Above the ceiling – at least 15 EU countries, including Spain and Greece. The calculation is to reduce prices for consumers in the winter and avoid social unrest. Germany, the Netherlands and Denmark, on the contrary, believe that the restrictions will only lead to an increase in gas consumption, and traders will resell.
“Gesture of Despair”
There is another, more compelling reason: the gas dependence on Russia is too strong. It is necessary to “take measures” to protect businesses and households from rising energy prices, but not to lose gas altogether.
“The restrictions were formulated in such a way that their probability was minimal. The EC could not refuse for political and ideological reasons. Therefore, they came up with a mechanism that can be implemented only under a fantastic set of circumstances. There is a mechanism, but there is no ceiling,” says Alexei Grivach, Deputy General Director of the National energy security.
“The political nature of the decision is obvious: the European Union authorities want to leave themselves room for maneuver in relations with the United States and Russia. On the other hand, this is a gesture of desperation: officials in Brussels clearly understand the futility of trying to push Russia through sanctions,” adds Leonid Khazanov, an independent industrial expert.
With the already accumulated reserves of blue fuel and American LNG, at the very least, the Europeans will survive the winter. But the next aggravation with Moscow in the current situation is completely useless to them.
Neither hot nor cold
Such props are unlikely to cause problems for Russia.
“A contract for a month ahead is used in many long-term agreements as a price indicator. And if the mechanism is activated, the supply may stop,” says Alexey Grivach. But this is pure theory, because the limit is too high.
In Europe, apparently, they are gradually realizing that no ceiling can change the situation: in any case, gas will have to be bought at market prices.
They are still scratching their heads with oil. According to Bloomberg, they are discussing 65-70 dollars per barrel. But even here they run the risk of miscalculating: the limit corresponds to the average historical values. And since Russia is already selling at a discount, such restrictions on trade will have little effect.