Another suicidal EU sanctions package on its way
Prices on the Dutch TTF gas exchange produced a sharp jump at the news of yet another round of EU sanctions to come, with quotes rising from a near 100-euro level to around 125 euros.
Encouraged by the Baltic three (Estonia, Latvia and Lithuania) and Poland, Brussels is busy preparing its ninth sanctions package against Russia, the Hungarian Vilaggazdasag writes. Citing press reports, the newpaper notes that
the new package would broaden restrictions affecting the energy sector and add a ban on cooperating with Russia on nuclear energy and fuels. An import ban would be imposed on diamond, steel and liquefied gas products. The embargo would cover software and high-tech exports, while Russian vessels would be banned from European ports and Russian TV channels would also be barred from broadcasting in the EU.
The ban on nuclear cooperation would be the most dangerous part of the package for Hungary, Mate Litkei, director the Mathias Corvinus Collegium’s (MCC) Climate Policy Institute told Hungary’s public broadcaster. The news of another round of sanctions instantly pushed prices up on the Amsterdam TTF gas exchange. It is easy to observe how the trading of gas futures reacts sensitively to any news regarding a prospective sanctions package, or another EU summit. In the second half of October during the week-long EU summit, prices standing at around 112-113 dollars on Wednesday jumped to 127 euros by Thursday, the first day of the summit. Gas prices rose by 10 per cent at the mere utterance of the word „price cap,” the Hungarian daily Magyar Nemzet wrote. Even Norway, a country raking in huge profits from soaring prices, firmly rejected the idea of a price cap. After news that gas storage facilities have been filled to favourable levels in mid-October, prices fell to 150 euros, a more than fifty per cent drop compared to the price well above 300 euros in mid-August. On Friday, quotes rose from a near 100-euro level to around 125 euros after news of yet another sanctions package to come.
The far-left has long been calling for broadening the ban to include nuclear energy. „If EU governments are serious about stopping the war, they need to cut the European nuclear industry’s umbilical cord to the Kremlin and instead focus on accelerating energy savings and renewables,” Ariadna Rodrigo, EU sustainable finance manager at Greenpeace, told CNBC after the approval of the eighth package,
Vilaggazdasag pointed out. The previous rounds of sanctions focused on Russian oil, gas and coal in a bid to exert threatening pressure on Moscow – achieving little success but causing huge inflation. The restrictions are not very effective as the decrease in pipeline gas deliveries is compensated by an increase in LNG shipments – at a far higher price. Major buyers of Russian LNG include France, China and Japan.
The paper also highlights that during negotiations on the eighth sanctions package, Hungary and Bulgaria were the two countries to most firmly reject the inclusion of nuclear energy, and this will not be any different when it comes time for the next package. France, a nuclear superpower in Europe, is likely to take a similar position on the issue. Poland has also taken a stand in favor of nuclear energy, contracting the American Westinghouse for the first phase of construction works for its planned new power plant, while another one would be built as a result of Polish-South Korean cooperation.
The only trouble with this is that the former is planned to be put into operation in 2033, and building the reactor will start in 2026. Without Russian energy carriers, the Poles are forced to live with high energy prices in the long term.
Brussels is also mulling the possibility of imposing the sanctions to some degree on Iran, in response to Tehran supplying Russia with military drones. The question is what kind of counter-measures the major Middle Eastern oil-producer, striving to reinforce its regional influence yet again, intends to take towards the EU.
Speaking to Politico, Estonian Foreign Minister Urmas Reinsalu, a representative of the Baltic states known for their strong anti-Russian sentiments, has called for further sanctions, arguing that „European countries currently have rather solid gas reserves.”
Apparently, the politician’s failed to read the International Energy Agency’s (IEA) recently published analysis, cautioning EU governments and Brussels against being overly optimistic about the current high gas storage levels. The IEA believes that
Europe needs to start preparing for next winter now, because of potential gas shortages due to an expected decline in Russian gas imports, and an uptick in the use of LNG.
Following a summit of EU energy ministers at the end of October, Hungarian Foreign Minister Peter Szijjarto emphasized Hungary’s insistence that member states have a sovereign right to decide what energy carriers they buy and in what quantity, from whom and based on what price formula. „Moreover, a significant part of these business details are confidential, energy-supply-related secrets, and sensitive information in terms of national security,” he added.
Mr Szijjarto noted that some European leaders have come up with rather „crazy” ideas, such as setting not only an upper, but also a lower limit for gas prices, arguing that consumers would not be encouraged to reduce their energy consumption, if prices were too low.
For incomprehensible reasons, Brussels keeps revisiting the idea of a price cap from time to time, despite the fact that Moscow has clearly indicated that it will immediately halt deliveries if a price freeze is imposed.
The regulator overseeing the Dutch TTF gas exchange, which can’t be accused of bias, ha salso expressed concerns regarding an upper price limit. The Dutch Authority for the Financial Markets (AFM) warned that attempts to impose a cap on futures prices could have negative repercussions, including physical shortages. Brussels has called for the creation of a price correction mechanism and the establishment of a dynamic price limit on futures contracts on the gas exchange, in a bid to avoid extreme fluctuations in quotations. Setting up a mandatory, joint gas procurement platform is another nonsensical proposal from Brussels. Its proposal on the so-called solidarity mechanism was also described as absurd by Hungary’s foreign minister.
„So in case of an emergency they would accept, from Hungary’s storage sites, the Russian natural gas that they wanted to phase out from the European market? And if they will accept it, why do they want to eliminate it, causing supply problems? FM Szijjarto asked.
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