The Twenty-Seven arm themselves to lower gas prices

This Friday, March 25, the 65th anniversary of the Treaty of Rome, but more importantly the 30th day of Russia’s war against Ukraine, the European summit painfully addressed the energy issue that has arisen since Russia’s aggression against its neighbor is. She led around 8pm on a multi-pronged plan designed to help reduce the continent’s reliance on Russian fossil fuels and bring gas prices down on a sustained basis across the continent as consumer bills soar and their competitiveness erodes.

According to Emmanuel Macron, “the strongest lever” of this strategy will be the mandate given to the European Commission to make joint purchases in order to have greater bargaining power at Twenty-Seven. As the purchase agreements were signed by private companies, the Commission will start bringing them together in the next few days to lead to coordinated acquisitions – it will also involve renegotiating existing contracts.

Opening to the Balkans

The joint purchasing platform of the EU will be “open to the countries of the Western Balkans” and to the three states linked to the EU by association agreements (Moldova, Ukraine, Georgia), specify the conclusions of the summit. Private companies that combine their orders do so on a voluntary basis.

The commission also has the task of negotiating with new suppliers for the whole contract package. On Friday morning, Ursula von der Leyen, President of the European Executive, announced a massive LNG supply deal with the United States. They will aim to deliver more than 15 billion m3 of additional LNG this year (compared to the 22 billion delivered in 2021) and eventually around 50 billion m3 on top of the existing flows. This corresponds to a third of the current annual imports of Russian gas by the EU. The Commission is already negotiating with other producer countries (Norway, Qatar, Algeria).

algorithm

Second direction of work, more controversial in the European Council: decoupling the wholesale price of electricity on the European plate, which today correlates with the evolution of the price of natural gas at world level. The 27 ministers are asking the Commission to consider possible wholesale price caps to send a signal to the market. The EU executive must also consider a new wholesale pricing formula that better reflects Europe’s energy mix, which consists of many cheaper energy sources (nuclear, renewables). Member states are of course free to protect end customers with national “shields”, but these have the disadvantage of straining public finances and which, according to Emmanuel Macron, can only be “temporary”.

Debates have sometimes been heated between, broadly speaking, southern countries experiencing serious energy price tensions, leading to social movements such as in Spain, and northern countries that have great industrial needs and, above all, want to secure large supplies. Germany, Austria and the Netherlands fear that a pronounced intervention in the market mechanisms will prevent suppliers from supplying their gas.

polemical interventionism

“Germany and other countries are still very skeptical about interventionism, we risk jeopardizing our supply without having a lasting effect on prices,” said Federal Chancellor Olaf Scholz. The European market “is complex and includes thousands of contracts, hundreds of players with big differences between regions,” argued his Dutch counterpart Mark Rutte.

Spain, which has faced road transport blockades for the past 12 days, and Portugal have struggled and won temporary approval to reduce the price of gas used for power generation, “special treatment” made possible by the Leyen Commission, according to President Ursula, by the bad Connecting the Iberian Peninsula to the rest of the continent.

As for Russia’s demands to pay for the gas in rubles, they have been swept away by all leaders: the maneuver is not legal because it violates the terms of the existing treaties. “All signed texts are clear: it is forbidden. European actors buying gas who are on European soil must therefore do so in euros,” Emmanuel Macron said after the summit. “It is therefore not possible today to do what is required and it is not contractually agreed,” he stressed.

food safety

The summit was also an opportunity to reflect on the necessary solidarity towards the countries of Africa and the Middle East, which are heavily dependent on wheat from Russia and Ukraine and are likely to experience significant shortages in the coming months. Together with the World Trade Organization (WTO), Europe wants to prevent the obstacles to grain transport that have already been observed, while countries like China stock up massively. Like the United States, the EU is seeking a multilateral engagement against restrictions on exports of agricultural commodities.

The Union also wants to review its own agricultural strategy and reverse its previous production reduction targets decided to improve biodiversity or reduce fertilizer use. Priorities have changed. It’s about being able to feed as many as possible.

Charles Michel, who was appointed President of the European Council until December 2024, announced a month after the start of the Russian invasion that a trust fund would be set up in favor of Ukraine, to which third countries could contribute.

Orban rejects Zelenskyy’s demands in the name of “Hungary’s interests”.

“Hungary wants to stay out of this war,” affirmed Hungarian Prime Minister Viktor Orbán. He was arrested by Ukraine’s president on Thursday in a video call broadcast during a summit of the Twenty-Seven in Brussels. “You have to decide once and for all which side you are on,” said Volodymyr Zelenskyy. Hungary rejects calls for arms supplies to Kyiv and tougher sanctions against Moscow, but also to reduce its dependence on Russian energy. “Shutting down the oil and gas taps would be a war price for Hungarian families,” said a Hungarian government spokesman. “We can’t afford that,” he stressed as Viktor Orbán prepares for close elections on April 3.

Leave a Comment