Tuesday

28th Jun 2022

Summit set to agree gas purchases, skirt Russia oil ban

  • The EU Commission last year has already proposed a system to jointly buy strategic stock of gas to provide a buffer against supply disruptions (Photo: European Parliament)
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EU heads of state and government meeting at a summit later this week are expected to agree to joint purchasing of natural gas, liquified natural gas and hydrogen as part of efforts to decrease their dependency on Russian energy.

According to draft summit conclusions, the leaders were also set to ramp up gas storage, and interconnection between their countries, and to discuss how to control soaring energy prices.

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"With a view to next winter, member states and the commission will urgently coordinate measures to ensure adequate levels of gas storage; work together on the joint purchase of gas, LNG and hydrogen," said the draft conclusions, which still could change pending the outcome of the 24-25 March summit in Brussels.

The EU-27 plan to establish "necessary solidarity mechanisms" and to "complete and improve our interconnections." They also would look at how to "optimise" the functioning of the energy markets and ask the EU Commission to take "necessary initiatives."

The commission has already proposed a system for jointly purchasing strategic stocks of gas to provide a buffer against potential supply disruptions, and it was set to take further steps on Wednesday — making the EU more resilient to volatility on the gas market, and mitigating energy prices though the use of tools including a price cap.

"Our intention is to work on the best options available for the heads of state and government," commission vice-president Maroš Šefčovič told reporters on Tuesday.

He said the commission would put forward a legislative framework so each gas storage unit could be filled by 1 November to at least 90-percent-capacity ahead of winter each year. EU storage is currently running at 26-percent-capacity.

"We need to do much better when it comes to energy security," Šefčovič said.

European gas prices had been rising in the months leading up to the invasion, and that already had prompted governments to spend billions of euros on tax breaks and subsidies to shield citizens from the higher costs.

Spain, Belgium, Portugal, Italy and Greece are calling for intervention in Europe's energy markets that would entail capping prices, or decoupling the price of electricity from the soaring price of gas.

States including Germany, Austria, the Netherlands and Denmark oppose market intervention; they prefer to speed up the rollout of renewables as a way to phase out fossil fuels and accelerate energy independence.

A third group of countries, central and eastern Europeans, want to reevaluate and reduce the ambition of the commission's flagship green package, Fit for 55, because they think these climate policies will push prices even higher.

A Polish diplomat said the EU should first reassess its political priorities: "Until we know the scale of the necessary redefinition of our climate and energy policy, negotiations on the Fit For 55 package in its present form should be slowed down or even halted by the EU," the diplomat said.

Another diplomat, who asked not to be identified by country, said the plan to cap prices could be hard to implement in practice. Energy is a global commodity and so energy producers could earn much more selling to higher paying regions like Asia, with little incentive to keep selling as much to Europe, the diplomat warned.

Sanctions later

EU leaders are not expected to adopt a new round of sanctions at their summit despite the escalating Russian attacks on civilians in Ukraine.

That is a sign of the deep divide on whether to limit, let alone ban, oil and gas imports from Russia, which supplies Europe with important quantities of both.

Poland and the Baltic states want further sanctions, including on energy supplies. Germany, however, has been arguing that any sanctions on energy sources must be done with care and deliberation.

"We need to strengthen our sanctions if Russia doesn't show any signs of striving for peace," French minister for EU affairs, Clément Beaune, said Tuesday. "We have seen over the last few days is that Russia has intensified its attacks," he said.

"It is possible there may soon be further sanctions, this is a discussion which is upcoming."

Green label for gas may be coming unstuck

The European Commission on Tuesday defended labelling natural gas as a sustainable investment during a session at the European Parliament. Sceptical lawmakers said demand for gas is strong enough.

EU Commission proposes Russian oil-ban in new sanctions

Commission president Ursula von der Leyen said EU countries should phase out Russian crude oil imports within six months, and refined oil by the end of the year to minimise the impact on European economy and global supply.

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