BRUSSELS, June 14 (IPS) – The rapidly changing environment requires Europe’s energy system not only to adapt, but also to find the right mechanisms to ensure its unity in the face of turbulent challenges.
In March 2022, European solidarity was translated into concrete policy actions when EU leaders officially agreed to jointly purchase natural gas, liquefied natural gas (LNG) and hydrogen in an effort to protect citizens from skyrocketing energy prices and reduce dependence on Russian imports. In theory, this shows European alignment and solidarity in action. But what does this mean in practice?
The idea of joint gas purchase agreements is not new. In April 2014, the then Prime Minister of Poland, Donald Tusk, proposed this instrument to jointly purchase gas in a compulsory form, as part of the framework of the ‘EU Energy Union’. Mandatory joint procurement has been welcomed, but with a hint of skepticism, as Member States were not eager to pursue this unified approach due to different national policy views. Therefore, a year later, on 19 March 2015, EU governments approved the voluntary option of this mechanism as a compromise.
Today, however, the energy policy landscape is changing at the speed of light and this tool is perhaps more relevant than ever. According to Kadri Simson, the European Commissioner for Energy, the process of joint purchasing is ‘simple’.
‘Member States that wish to do so define their own parameters for the joint action – how much gas to buy, for how long, how this gas will be used in an emergency, and then they inform the Commission’. The Commission would then inform the other Member States of the measures being taken and monitor compliance with energy market and state aid rules.
To this end, the EU has launched the EU Energy Platform – to pool demand, coordinate infrastructure use and negotiate with international partners to facilitate joint purchasing. Importantly, Ukraine, Georgia, the Republic of Moldova and the countries of the Western Balkans can also join this form of collective purchasing agreement.
Learning Outcomes of Joint Pandemic Procurement
This approach may sound familiar, as the EU was already operating a solidarity mechanism during the pandemic when the Commission coordinated joint procurement of Covid19 vaccines to ensure on-time delivery to each Member State. Some experts argue that gas is much more problematic than buying vaccines.
Pessimistic voices claim that the mechanism works if everyone participates. Purchasing power works best if you buy a lot – and at this point it’s not clear what percentage of EU gas would be covered by the proposed joint purchasing.
In addition, the distribution aspect can be problematic. EU countries have varying levels of gas dependence on Russia, and not every Member State has storage facilities or direct access to an import terminal for cargo arriving by ship.
However, there are also arguments for this mechanism. For example, Christian Egenhofer, Associate Senior Research Fellow at the Center for European Policy Studies (CEPS), said an effective joint gas procurement plan could prevent member states from competing with each other in gas procurement, as well as suppose they are offering shabby deals to autocratic rulers. In addition, the joint gas purchasing platform could lead to a genuine European gas supply policy in the longer term.
The rebirth of the solidarity mechanism
Despite criticism, the crisis is pushing the EU towards a common approach. On April 27, 2022, the state-controlled Russian energy company Gazprom cut off gas to Poland and Bulgaria because they refused to pay in Russian rubles, as President Vladimir Putin had demanded.
European Commission President Ursula von der Leyen responded, stressing in her statement that “Both Poland and Bulgaria now receive gas from their EU neighbors. The era of Russian fossil fuels in Europe is coming to an end.” Bulgarian Energy Minister Alexander Nikolov also underlined that Bulgaria is counting on the Commission’s joint purchasing strategy to buy gas.
Finland was also in the same position on May 21, 2022, when Gazprom officially stopped gas exports for failing to receive payment in rubles. Finland found the solution in a joint approach and concluded an agreement with Estonia on the joint leasing of a floating terminal for LNG that will guarantee the supply of gas to both countries.
More recently, on June 1, 2022, Gazprom extended the gas cuts by ceasing supply to GasTerra, which buys and trades gas on behalf of the Dutch government. Furthermore, it also cut gas flows to Danish energy company Ørsted and to Shell Energy for its contract to supply gas to Germany after both companies failed to make payments in rubles.
GasTerra said it has found alternative contracts for the supply of the 2 billion cubic meters of gas it had expected from Gazprom between now and October. Ørsted also stated that a gas outage would not immediately endanger the country’s gas supply. They would turn to the European gas market to fill the gap.
In the case of Germany, although the move appears to be largely symbolic — representing about 3 percent of Germany’s Russian gas imports, according to Robert Habeck, federal minister of Economy and Climate Action, “the situation is escalating to the point that the use of energy as a weapon is becoming a reality’.
He also stressed that Germany can partially mitigate the latest disruption by securing alternative supplies, adding that there is no need to raise Germany’s alert level. The country’s three-phase contingency plan, which is currently at the first level, could lead the network regulator to eventually start rationing gas if supplies get tight.
At this critical time, the solidarity mechanism is experiencing a renaissance. Ultimately, its effectiveness will depend on the volumes to be purchased and how many Member States adhere to it.
However, given the need to reduce dependence on Russian fossil fuels as quickly as possible, it is clear that no Member State can meet this challenge alone. A truly united European energy front is the only way forward.
Queen Dimitrisina is a policy advisor at the competence center for climate and social justice of the Friedrich Ebert Stiftung.
Source: International Politics and Society (IPS)-Journal published by the International Political Analysis Unit of the Friedrich-Ebert-Stiftung, Hiroshimastrasse 28, D-10785 Berlin
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© Inter Press Service (2022) — All rights reservedOriginal source: Inter Press Service