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EU gas price cap still elusive as leaders meet again over energy crunch

[October 20, 2022] By Charlotte Van Campenhout and Jan Strupczewski

BRUSSELS (Reuters) -Leaders of the 27 European Union countries meet on Thursday for the second time in two weeks to try to bring down energy prices, though persistent divisions between them mean the bloc is unlikely for now to put a ceiling on what it pays for gas.

The 27 are expected to back parts of a package of EU energy proposals made this week, including an alternative price benchmark for liquefied natural gas and joint gas buying, after earlier agreeing to fill gas storage and claw back revenues from energy firms to spend on helping consumers with crippling bills.

But they remain as split as they were months ago on whether and how to cap gas prices to stem high inflation and stave off recession, after Russia cut gas flows following its invasion of Ukraine.

While 15 countries including France and Poland are pushing for some form of a cap, they face strong opposition from Germany and the Netherlands - respectively Europe's biggest economy and gas buyer, and a major European gas trading hub, which warn a gas price cap could compromise stability of supplies.

"An agreement is extremely unlikely... Opinions seem to be really far apart," a senior EU diplomat said ahead of Thursday's talks.

A draft of the leaders' summit conclusions, seen by Reuters, would ask Brussels to propose a price cap on gas used to generate electricity - an idea favoured by France and already used in Spain and Portugal.

But even before the meeting has begun, that idea has hit the roadblocks - with Germany requesting that all mentions of price caps are removed from the text, according to a document seen by Reuters.

The leaders will also discuss emergency spending to mitigate the effects the acute energy crunch has on their economies and 450 million citizens.

While some countries have called for the bloc to issue new joint debt to finance that, more frugal members say hundreds of billions of euros unused from previous programmes should be spent first.

"Division is not a luxury we can afford," the summit's chairman, European Council President Charles Michel, said.

Given EU countries' diverse energy mix and interests, the meeting risks falling short on short-term action to tackle high energy prices ahead of winter.

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European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, September 28, 2022. REUTERS/Yves Herman/File Photo

"Unity among member states is dangerously under pressure, with unilateral national decisions being announced without an EU framework to keep them together," said climate change think-tank E3G.

EU energy ministers meet again next week to discuss the latest energy package and aim to agree on final measures in November - although for now, the package does not include a proposal to immeditely cap gas prices.

"It's clear there is no one size fits all. And that's a challenge," another EU diplomat said.

WAR IN UKRAINE

EU leaders will also discuss options for giving more support to Ukraine, including providing energy equipment, helping restore power supply and long-term financing to eventually rebuild the country.

As regards bringing those responsible for alleged war crimes in Ukraine to justice, some EU countries want to set up a dedicated tribunal quickly, while others are seeking to go more slowly to ensure maximum international endorsement.

"The European (Union) Council condemns in the strongest possible terms the recent indiscriminate Russian missile and drone attacks targeting civilians and civilian objects and infrastructure in Kyiv and across Ukraine," the leaders will say, according to their draft statement.

They will single out Belarus for enabling Russia's war but are not expected to support further sanctions against Moscow on Thursday.

The bloc is already moving to impose new sanctions on Iran over the use of Iranian-made drones in Russian strikes on Ukraine.

(Reporting by Jan Strupczewski, Charlotte van Campenhout, John Chalmers, Kate Abnett, Gabriela Baczynska and Philip Blenkinsop, Writing by Gabriela Baczynska; editing by John Stonestreet and Nick Macfie)

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