What do they think in Hungary?
Nine EU countries, including Hungary and Germany, opposed imposing a price cap on Russian gas in a trial vote by EU energy ministers. About declaration Hungarian Foreign Minister Peter Szijjártó.
“Nine countries, including us, were against the price ceiling, but this qualified majority accumulated, although nine countries were against it because a qualified majority was needed,” RIA Novosti said, quoting the minister.
He said that all other countries that voted against the price ceiling decision, except Germany, were not able to block the initiative because their population was sparse.
Before the meeting, Szijjarto said on social networks that Budapest would in any case object to the introduction of gas prices. “The proposal to raise gas prices is bad, harmful and dangerous, but it still seems likely to be accepted,” he wrote, adding that the restriction could be introduced as early as Monday.
After a test vote, he once again called the gas price cap a harmful measure. And he noted that these four months could be spent on finding new fuel sources for the European market as EU countries try to agree on them. “This would be the best solution to lower the price,” said Szijjártó.
What was invented in the EU
In November, the European Commission developed a temporary mechanism that should be activated in case of sharp increases in gas prices. For this to happen, two conditions must be met. First, the two-week futures price at TTF, Europe’s main gas hub, has been above €275 per MWh (just over $3,000 per thousand cubic meters at the 19 December rate).
The second condition is that the difference (difference) between the stock market price of natural gas and the price of liquefied natural gas (LNG) must be at least € 58 within 10 days. When both of these conditions are met, EU member states will not contract gas for more than €275 per MWh.
However, opinions among the countries of the union differed, as €275 is a very high price for a gas futures. In all history, it was reached only a few days in August 2022. The Czech Republic has proposed to set a diffusion limit of €220 per MWh (about $2,450 per 1,000 cubic meters) and €35 per LNG.
On 19 December, ahead of the meeting, French Minister of Energy Transition Agnès Pannier-Runachet announced that a new proposal had been received from the Czech Republic’s EU Presidency to limit gas prices to €188 per MWh (about $2,090 per thousand cubic metres). And there is a high probability that this initiative will be adopted.
How did they react not only in Russia, but also in Russia?
On the TTF, which is considered the basis of European contracts, the price of natural gas for January delivery was $1,215 per thousand cubic meters, down 5% since the start of the transaction at 17.40 Moscow time.
Russian President Vladimir Putin has previously said that any artificial restrictions on the energy market for Russia would result in Moscow not trading with those who support ceiling prices.
On the morning of 19 December, Yuri Sentyurin, Ambassador of the Russian Ministry of Foreign Affairs, expressed the view that the introduction of a gas price cap by the European Union is a violation of international law and will lead to market disruption.
Stanislav Mitrakhovich, a leading expert of the National Energy Security Fund and Financial University under the Government of the Russian Federation thinksThe mechanism proposed by the EU is unlikely to be implemented as it would scare other gas suppliers from the European market.
“Of course, you can create a hard form of the marginal price mechanism, you can – soft. If you create a solid form that will really scare the suppliers, then you risk going out of gas, ”Mitrahovich explained.
Vladimir Demidov, an independent resource and energy market expert, is confident that capping gas prices will keep them at a high level, literally “under the ceiling.”
“It can be assumed that the high gas prices in August and September and the Russian gas supply price are due to the market, but with a delay of about a quarter, the price of Russian gas will approach. this ceiling is already in January. “I accept that the price of Russian gas will be in the range of $ 1,300 to $ 1,800 per thousand cubic meters, excluding mandatory discounts,” he said. He added that a return to prices of 700-800 dollars per thousand cubic meters cannot be expected in the coming years.
On 16 December, the Intercontinental Exchange (ICE), an international exchange network that operates the Amsterdam-based TTF gas distribution centre, said that if the EU decides to set a gas price cap, it may have to pull the TTF out of the EU.
“It is up to ICE as a market operator to consider all options once this mechanism is agreed upon. Until an efficient market is still viable in the Netherlands,” the company said, adding that the price ceiling would backfire and only increase the cost of fuel.
Source: Gazeta
Ben Stock is a business analyst and writer for “Social Bites”. He offers insightful articles on the latest business news and developments, providing readers with a comprehensive understanding of the business world.