What will Europe do if Russia’s President Vladimir Putin turns off the gas supply? Planning is in full swing in Brussels. An internal paper now shows that the EU Commission is ready to take a particularly radical step.

In the event of a Russian gas embargo, the EU Commission is proposing a Europe-wide cap on gas prices. “One possibility would be to limit pricing during this disruption scenario by setting a price cap on the European gas exchanges,” says the EU Commission’s draft strategy paper, which is available to FOCUS Online. The Bloomberg news agency, the “Welt am Sonntag” and international specialist media had previously reported.

A price cap on gas would be a particularly radical measure, as the EU Commission itself concedes. “This type of market intervention could require significant funding,” the paper said. The measure should therefore remain limited to the duration of the energy crisis and end on May 1, 2023 at the latest.

A price cap would bring with it a whole range of other “challenges”, as the EU Commission itself emphasizes. Access to gas or LNG supplies could deteriorate depending on how the lid is designed. If a supplier suddenly receives less money for his gas, he may deliver elsewhere. A cap would also artificially fuel the demand for gas – and this at a time when supply is already scarce and actually needs to be saved.

The plans are therefore met with skepticism by experts and politicians. “Capping the gas price is not a solution,” said energy politician and MEP Michael Bloss (Greens). “By doing so, we are throwing billions of taxpayers’ money down the throats of Putin and other gas suppliers.” Instead of paying the “excessively high” gas prices, a buyers’ cartel is needed. The gas price falls when, for example, the group of leading democratic industrialized nations (G7) only buys gas for a low price.

Upper price limits are well intentioned, but “unsuitable” because they fuel the shortage instead of eliminating it, said Manuel Frondel from the RWI Leibniz Institute for Economic Research of the “Welt am Sonntag”. A good example is the petrol price cap introduced in Hungary: It only led to “a lack of petrol and to a mass death of small petrol stations”.

The EU Commission also writes in its paper that various players from the energy sector and industry have warned the Commission of “significant disadvantages”. However, should the EU nevertheless intervene in the price of the market, the actors would have recommended capping at least only the gas price and not the electricity price.

The paper is part of another package of measures against high energy prices that the EU Commission intends to present shortly. The package is intended to expand the so-called “toolbox” of measures that the EU had already presented in October. And time is of the essence: on Thursday, the government of Russian President Vladimir Putin issued a series of counter-sanctions against 31 Western energy companies. This also includes the German subsidiary of the Russian state-owned company Gazprom, which is now subject to the trusteeship of the Federal Network Agency.

At the level of the EU states, a state price cap for energy has long been controversial. There had already been a dispute about this at an EU summit in March. Spain and Portugal received the green light from the EU Commission last week for a national price cap on gas. Hungary has introduced a price cap for petrol, and France is imposing an upper limit on the price of electricity for its state-owned utility EDF.

In the past, the federal government has repeatedly spoken out against such market interventions. The Federal Ministry of Economics did not want to comment on the current draft of the EU Commission when asked.