Russia was accused of economic terrorism on Monday as the cost of Europe's energy crisis spiraled with Germany on the hook for at least 19 billion euros ($18.99 billion) to bail out its biggest importer of Russian gas.
Europe has seen a surge in gas prices as top exporter Russia's cuts to supplies have squeezed German utility company Uniper, prompting it to seek an extra 4 billion euros in credit lines from Berlin, on top of a 15 billion euro bailout deal agreed last month.
How to respond to the crippling impact of soaring energy costs on businesses and households is top of the political agenda across the continent as autumn approaches.
The Czech Republic, which holds the rotating European Union presidency, called an emergency meeting of energy ministers for Sept. 9 when it will propose a cap on the price of gas used for electricity production.
"What is going on is really a pan-European problem, it has an impact on all countries, on some less and on some more. And that is why we are convinced the best solution is a Europe-wide solution," Czech Industry Minister Jozef Sikela told a news conference.
German benchmark power prices for 2023 breached 1,000 euros per megawatt hour for the first time on Monday as supply concerns kept prices of gas and related fuels such as electricity and coal sky-high.
‘Bitter reality’
"Russia is using economic terror," Ukrainian President Volodymyr Zelenskyy told an energy industry conference in the Norwegian city of Stavanger.
"It is exerting pressure with price crisis, with poverty, to weaken Europe," Zelenskyy told the audience via a translator.
His comments come as Russia’s Gazprom plans maintenance this week that will halt gas flows along the Nord Stream 1 pipeline that links Russia and Germany via the Baltic Sea.
The outage has fuelled fears that Russia is curbing supply to put pressure on Western nations opposed to its invasion of Ukraine, a charge Moscow denies.
Countries such as Germany and Italy, heavily reliant on Russian gas imports for their energy, have been building up storage levels ahead of the cold winter months when demand peaks.
Germany faces the "bitter reality" that Russia will not restore gas supplies to the country, Economy Minister Robert Habeck said on Monday, ahead of the planned halt by Gazprom.
"It won’t come back ... It is the bitter reality," Habeck said in a panel with European Commission President Ursula von der Leyen.
Already Russia has only been supplying 20% of the usual capacity of the Nord Stream 1 link from Russia to Germany.
Uniper is the highest-profile corporate victim of Europe’s energy crisis so far. It has been pummelled by cuts in gas flows from Russia, its main supplier, forcing it to cover the shortfall at much higher prices elsewhere.
This is causing cash losses of "well over" 100 million euros a day, Chief Executive Klaus-Dieter Maubach said.
‘No Lehman Brothers rerun’
The minister separately said that German gas storage facilities were more than 80% full and he expects prices to retreat. Italy has hit a similar level, giving a cushion against further supply shocks.
Germany would get through the winter better than some people thought a short time ago, German Chancellor Olaf Scholz said on Monday.
Habeck also stressed that Germany will not allow a Lehman Brothers-style domino effect to happen on its gas market.
"I promise on behalf of the German government that we will always ensure liquidity for all energy companies, that we don’t have a Lehman Brothers effect on the market," said Habeck, referring to the U.S. investment bank's collapse, which helped trigger the 2008 financial crisis.
There was a less upbeat prediction from the head of gas major Shell who warned the gas shortages could persist.
"It may well be that we will have a number of winters where we have to somehow find solutions," Shell CEO Ben van Beurden told a news conference at the industry meeting in Stavanger.
Reform of electricity market
Von der Leyen and Scholz on Monday pledged reform of the continent’s electricity market to help bring down power prices.
Von der Leyen said in a speech in Bled, Slovenia, that soaring electricity prices "are now exposing the limitations of our current electricity market design."
"It was developed for different circumstances," she noted. "That is why we are now working on an emergency intervention and a structural reform of the electricity market."
The continent’s electricity market is underpinned by a "merit order" system in which the power stations offering the cheapest electricity are tapped first, but prices are determined by the last and most expensive power stations to be tapped – at present, those using gas.
Scholz, visiting Prague on Monday, said that the question of how the European electricity market can be redesigned "so that we no longer have to bear these high prices we are currently seeing" took up much of his meeting with Czech Prime Minister Petr Fiala. He said that "we will act together quickly."
"It is necessary for us to make structural changes that contribute to prices sinking again quickly and there being a sufficient offer" of electricity, Scholz said at a news conference. He added that "there is great readiness to change something, and that seems to me to be very much mutual among the heads of state and government in Europe."
"Clearly what is currently being asked as a market price does not reflect supply and demand in the proper sense," he said.