Greek PM: Europe can fight Putin by capping gas prices

Prime Minister of Greece Kyriakos Mitsotakis has said that it is time for Europe to place a cap on natural gas prices as Russia has weaponized energy to "destabilize our societies"

"After months of deliberation and deflection, it is time for Europe to place a cap on natural gas prices. Russia has weaponized energy, its clear aim is to destabilize our societies. Fifteen member states have clearly expressed their support for capping prices. Europe should take back control of its gas market," Mitsotakis said in an analysis published by The Washington Post on October 3.

"Russia is reneging on contracts and deliberately restricting supply. When one player can move prices, there is no sense in 'letting markets function'. Governments are supposed to structure and police markets. Confronted with clear market manipulation, government intervention is not just justified but required," he added.

"As prices increase to unprecedented levels, the market has ceased to function. Liquidity has dried up and volatility has spiked, creating huge opportunities for suppliers and speculators to profit from sharp movements in price. Major energy companies are coming under duress, seeking government help. No household, company or government can plan around or manage a market where prices move up or down randomly" the prime minister noted.

According to official estimates, in the first quarter of 2022, the European Union paid an extra €62 billion to import gas relative to the previous year. The final tally for 2022 will run in the hundreds of billions, trillions if one includes the knock-on effects in the electricity market and the economy at large. Meanwhile, Russia’s current account surplus has tripled to over $180 billion through August 2022.

"These prices have helped attract supply into Europe but at an exorbitant cost — we have secured supply but neglected cost. Europe is paying two to three times more for gas than Asian nations. A certain price increase was unavoidable, but Europe’s success in acquiring gas is partly due to the economic slowdown in China," he wrote.

Mitsotakis said that LNG imports into Europe have been stable since early 2022, despite a continuous rise in prices, adding that "no matter how high prices go, Europe as a whole cannot, in the short term, fully replace the volumes it has lost from Russia".

He suggested that sooner or later, markets will balance — but without a cap on prices, the cost of that balancing will be measured in lives destroyed and jobs lost.

The prime minister went on to say that "still, with high enough prices, suppliers will still send their gas to Europe, and consumers will still have reason to reduce their demand. A cap should be an upward limit on how high prices can go, not an artificially low number that will destabilize markets".

"A cap on prices carries risks, of course. But as we move into winter, the dangers of inertia compound. We cannot afford to sit back and watch as Russia uses our market institutions against us. It is an act of common sense, and of sovereignty, to step in and design rules that respond to the unprecedented challenge we face. Imposing a cap on natural gas prices is an inevitable step in that process," Mitsotakis concluded.