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Why Capping Russian Gas Price Won't Stop EU’s Economic Slide

© AP Photo / Michael ProbstPipes of the gas storage plant Reckrod are pictured near Eiterfeld, central Germany, Thursday, July 14, 2022, after the Nord Stream 1 pipeline was shut down due to maintenance. (AP Photo/Michael Probst)
Pipes of the gas storage plant Reckrod are pictured near Eiterfeld, central Germany, Thursday, July 14, 2022, after the Nord Stream 1 pipeline was shut down due to maintenance. (AP Photo/Michael Probst) - Sputnik International, 1920, 01.11.2022
Qatar has denounced the EU's proposal to set a price cap for natural gas as "hypocritical." The European Commission is seeking to take the measure as soon as this winter in an effort to curb gas prices driven by the energy embargo imposed by the US and its NATO allies on Russia.
"The EU’s energy policies are muddled," said Dr. Mamdouh G. Salameh, an international oil economist and a global energy expert. "They are torn between their energy needs and their green policies. The EU’s proposed policies of capping the price of Russian gas exports and banning these exports aren’t only doomed to fail miserably, but they are bound to cause shortages in the global gas market and a further staggering rise in gas prices."
"Moreover, the concept of capping prices is simply a cartel-like manipulation of the market and the free movements of prices at a time when the United States has been accusing OPEC+ falsely of manipulating the oil prices and supply in the global oil market," the energy expert continued.
Qatar’s Energy Minister Saad al-Kaabi on October 30 warned the EU against resorting to the price cap initiative while speaking to a US broadcaster. According to al-Kaabi, interfering in markets clearly contradicts the free market rules that Europe has previously applied to producers.
"The free market is always the best solution," highlighted al-Kaabi, who is also CEO of Qatar Energy, the world’s biggest liquefied natural gas-producing company.
The Qatari energy minister explained that the price capping initiative could reduce incentives to invest in natural gas production. What's worse, it could deprive some buyers of energy supplies, he pointed out, explaining that by "offering just one cent," other gas importing countries could persuade LNG producers to sell gas to them rather than to Europe. According to al-Kaabi, Europe should not take additional risks, given that it is already facing a lot of trouble until at least 2025 if winters are harsh and Russian natural gas flows don’t return to previous levels.
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"Russian gas supplies to the EU and the world at large are irreplaceable now or ever," highlighted Salameh. "There is no one single LNG producer or a group of LNG producers including the United States, Qatar, Australia and Algeria capable of replacing Russian gas supplies to the EU estimated under normal circumstances at 200 billion cubic meters (bcm) of piped gas and 16 million tons (mt) of LNG (equivalent to 22 bcm) amounting in total to 222 bcm or 45% of the EU needs. Moreover, there are no alternatives to Russian gas supplies."
According to the oil economist, Europe is already paying "an extraordinary price for its sanctions against Russia and its failed policies, with many sectors of the German economy and the EU on the verge of collapse." In addition to that, the EU's policies have de facto retarded their energy transition and declared zero-emissions by many years.
"The proof is the rising demand for coal globally, particularly in the EU, where coal-fired electricity plants are being resurrected," Salameh underscored. "In Germany, which has always prided itself as the leader of green policies, it has extended the life of the last two nuclear plants which were destined for closure at the end of 2022 and re-activated many coal-fired electricity plants. When Germany dismantles turbines on a wind farm in the West region to make way for an expansion of an open-pit of lignite coal, it shows how much the energy crisis has retarded the march of renewables."
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Still, the EU has only itself to blame for the unfolding energy crisis, noted the expert, referring to unintended negative consequences of Western green energy policies, as well as "short-sighted and futile measures of politicizing the oil and gas trade like imposing sanctions against Russia and trying to cap the prices of Russian oil and gas and banning them." The EU is set to become the largest loser in the energy war, the oil economist warned, adding that the living standards of Europeans are already crumpling with the bloc's economy balancing on the verge of a harsh recession.

"The only exit for the EU from this crisis is to lift sanctions on Russia in exchange for plentiful and cheap Russian gas and oil supplies," Salameh underscored. "The EU has no vital strategic interests in Ukraine. It was dragged into a war on Russia by the United States aimed at, first, weakening Russia; second, undermining the strategic alliance between Russia and China and, third, slowing down the transformation of the world order from a unipolar system led by the US since the collapse of the former Soviet Union into a multipolar one being ushered by Russia and China."

Still, Salameh does not believe that the EU will manage to change its course: "The EU has neither the political will nor the courage to stand up to the United States and therein lies the rub," the expert concluded.
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