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EU agrees to Ukraine aid, but no gas price cap

Priyanka Shankar
October 21, 2022

Officials from EU member states say they will continue discussing price limits on gas. Leaders also talked relations with China and agreed to aid Ukraine further.

A person lights a gas burner inside a house.
EU leaders have not yet found a joint strategy to cap high gas pricesImage: Davide Bonaldo/SOPA Images/ZUMA Press/picture alliance

After burning the midnight oil, the 27 leaders of the European Union have not yet reached a final agreement on imposing an EU cap on gas prices.

Instead, they proposed a "road map" — which energy ministers will have to haggle over in the coming days — to a unified strategy for prices.

"We do now have a very good and solid road map to keep on working on the topic of energy prices,|" European Commission President Ursula von der Leyen told reporters after their meeting in Brussels, where leaders of the bloc had convened for a two-day summit. 

Belgian Prime Minister Alexander De Croo said some countries had "legitimate concerns" on the gas price cap and a joint decision to tackle the high prices would likely be ready within two to three weeks.

Jacob Funk Kirkegaard, a senior fellow at the German Marshall Fund of the United States in Brussels, told DW that the distinct national circumstances of individual member states make it difficult for a single EU position to emerge. 

"The French have nuclear power, so are less dependent on gas," Kirkegaard said. "Germany needs a lot of liquefied natural gas so will be hurt by a cap that will send LNG freighters elsewhere in the world. Meanwhile, countries like Italy have secured gas from Africa so would benefit from a cap."

The German parliament backed the government's proposal of a €200 billion ($195 billion) fund to tackle skyrocketing energy prices. However, other EU member states have criticized the measure as one that would primarily help Germany. 

Germany's €200 billion energy relief plan: How fair is it?

Pawel Zerka, policy fellow at the European Council on Foreign Relations, told DW in an email that trust among EU nations "is in short supply."

"Berlin now bears a particular responsibility for rebuilding trust among the EU27, not least because of its earlier cozy energy relationship with Russia," Zerka wrote.

EU leaders have, however, reached an agreement on jointly purchasing gas for a volume equivalent to 15% of their national storage needs. They also tasked the European Commission with submitting "concrete decisions" on imposing measures on gas transactions at the Title Transfer Facility, the Netherlands-based virtual hub for gas trading in Europe.

"This thing the Commission calls a temporary dynamic price corridor is just a fancy way of saying 'circuit breaker' and is a standard procedure that suspends trading, if prices fall too much too fast. All exchanges have that in place already, so this is really nothing more than a smokescreen in my opinion," Kirkegaard said.

EU gas prices rose to a record high of €335 per megawatt hour (MWh) in the spring. Since then, prices have fallen, but are still up 300% since the start of 2022.

EU leaders discuss energy crisis

Simone Tagliapietra, a senior fellow at the Brussels-based think tank Bruegel, told DW that there are lessons that the European Union could learn from the energy crisis of the 1970s, when oil and gas prices had also spiked substantially.

"What happened in the '70s was a major increase in energy efficiency as a result of the crisis," Tagliapietra said. "There was also a switch to alternative sources of energy. So eventually, to address this crisis we are facing now, people will try to diversify their sources of energy."

"For example, if you look at the imports of solar panels into Europe from China, at the start of the war they skyrocketed," Tagliapietra said. "But they really skyrocketed because people, families and businesses have been importing more to produce electricity at a cheaper cost. So I think, just like the '70s, we will get out of this crisis with more greener energy efficiency."

'Fiercely competitive' China

According to a 2021 report by Eurostat, the European Union's statistics agency, China was the largest origin of extra-EU imports of wind turbines, solar panels and liquid biofuels in 2020.

"On certain topics like climate change China is our partner," de Croo told reporters before the second day of the summit, which focused on the European Union's future strategy toward dealing with China. 

"But in some domains there is hostile behavior and in others they are fiercely competitive," he said.

De Croo said EU countries had been complacent in the past when dealing with Beijing's geostrategic approach to economic relations.

Flags of EU and China are seen.
EU-China relations continue to remain tense.Image: Rainer Unkelimago images

The Baltic nations Estonia and Latvia, which recently left the 16+1 economic forum with China, highlighted the importance of developing a united approach toward Beijing.

"China is like Russia," Estonian Prime Minister Kaja Kallas told reporters. "Considering their interest to divide us. It should be in our interest to stay united," she added.

After a three-hour strictly "no-phones meeting" on China, European Council President Charles Michel said there was "great consensus and convergence on the importance of truly developing strategic autonomy."

Though the European Union has yet to fully converge on its China strategy, said Mathieu Duchatel, the director of the Asia Program at Institut Montaigne in Paris, the bloc remains united on its defensive agenda when it comes to China.

"Increasingly, China is treated as a geopolitical risk that needs to be managed, and patient diplomacy to strive for results, despite all our differences, is part of that game," he said.

Support for Ukraine

Toward the end of the summit, EU leaders also enhanced their financial support for Ukraine. In the years to come, Von der Leyen said, it will be important for Ukraine to have steady income.

"Three to four billion euros per month for Ukraine will be financed by the EU, US and other financial institutions," von der Leyen said in a press conference after the summit.

Von der Leyen said it was important to demonstrate support for Ukraine as the war continues.

Russian strikes target Ukraine's energy grid

The European Council also tasked the Commission with finding options "in line with EU and international law, aimed at using frozen assets to support Ukraine's reconstruction."

"We have over €300 billion euros worth of frozen Russian assets," Estonian Prime Minister Kallas told reporters. "Using this amount to support Ukraine can be beneficial  and we should discuss it."

Edited by Milan Gagnon