EU price cap on gas could push suppliers to other markets - Novak
MOSCOW. Dec 23 (Interfax) - The introduction of a price cap on gas on the European market could result in suppliers going to other markets without such restrictions, Russian Deputy Prime Minister Alexander Novak said in an interview on TV channel Rossiya 24.
It was reported earlier that the price will be part of the European gas market correction mechanism. This mechanism will be triggered automatically when the Title Transfer Facility or TTF price for the benchmark front-month contract exceeds 180 euros per MWh or $1,977 per 1,000 cubic meters for three trading days and does not exceed the price of LNG on world markets by more than 35 euros over these three days.
This is a "populist" decision and "European partners do not fully understand how this mechanism will work," Novak said.
He said that by introducing this mechanism, Europe will hit those suppliers who now remain on the local market. "The Europeans are doing this as if against Russia and price growth, blaming Russia for price growth. This will in fact primarily affect European consumers and European suppliers, because the main suppliers to Europe today are Norway, Algeria and American LNG. And these suppliers will suffer in the first place if this somehow concerns them," Novak said.
Novak said that a direct consequence of such a decision would be a bigger gas shortage. "Neither traders, nor suppliers fully understand today how this will work, or whether it will work. It seems to me that European partners do not fully understand that such instruments lead only to the redistribution of the energy resource - gas. In the event of such restrictions, that resource will seek other markets. That is, the European market's liquidity might be reduced significantly. Since today we are seeing a shortage of gas resource in the world market, this gas might simply go to the Asian-Pacific region, and we will get a deficit in the European market. It is not known how it will be covered and how the price will be formed in the future," he said.
"Suppliers will go to other electronic bourses, where there will be no such restrictions. And there the price will still be formed in a market way, and it might be unpredictable if there is a shortage," Novak said.
