EU countries at odds over possible gas price cap

© Reuters. Model of natural gas pipeline and EU flag, July 18, 2022. REUTERS/Dado Ruvic/Illustration

By Kate Abnett

BRUSSELS (Reuters) -European Union countries were at odds on Wednesday over whether to cap gas prices in the bloc, with France, Belgium and 13 other states stepping up their call for the move opposed by Germany and others.

Eyes were on the EU executive European Commission, which was expected to present an analysis on the feasibility of the bloc capping gas prices during a meeting of diplomats from the 27 EU member states on Wednesday.

The Commission's document would not include legal proposals, sources said, but rather present an assessment of options countries could use to tackle high gas prices, which are stoking record inflation across the bloc and threatening a recession.

A group of 15 countries including France, Italy, Spain and Poland urged the Commission on Tuesday to propose a price cap on all wholesale gas transactions to help rein in surging prices.

On Wednesday, Belgium's energy minister Tinne Van der Straeten suggested the measure could be designed as a "flexible price corridor" to address volatile price swings.

But with Germany, the Netherlands and Denmark among those arguing that a gas price cap would harm efforts to contain Europe's energy crunch, there were doubts as to whether any potential proposal could win sufficient support to become law.

"It's highly questionable whether gas price caps are the right measure," an official from one EU country said, adding that saving energy should be countries' priority.

The 15 countries behind the letter would not have a big enough majority to approve a new EU law without support from others - setting up a potential clash among member states if the Commission were to propose a gas price cap in future.

Those reluctant say capping prices could leave countries struggling to secure supply in competitive international markets this winter - concerns also raised by the Commission itself.

Industry also weighed in to the debate, with Europe's steel, cement and fertilisers lobbies among those to call for urgent "EU-wide measures aimed at addressing the impact of natural gas prices on industrial competitiveness" in a joint statement.

Discussions on possible price caps will continue at a Friday meeting of EU energy ministers, who are also set to approve a package of measures proposed by Brussels last week, including windfall profit taxes on energy firms.

Russia has slashed gas deliveries to Europe following its invasion of Ukraine. Russia's two Nord Stream pipelines, built to carry gas to Europe, were damaged this week, with EU suspecting sabotage as leaks spewed greenhouse gas emissions into the Baltic Sea.