Europe hopes to reap political gains from an expensive winter | Energy News

European leaders have agreed to an unprecedented array of energy subsidies and fiscal measures aimed at making the continent less dependent on Russian coal and oil and gas, and it appears increasingly political will is hardening to make that independence permanent.

European Union heads of government voted on Friday to subsidize the electricity and gas consumed by households and businesses this winter amid rising prices.

They have asked the European Commission, the EU’s executive, to suggest price ceilings above which subsidies will start.

Governments will pay for it by recovering excess profits for electricity producers and gas importers.

Leaders said that over the past year, gas prices rose eightfold to 340 euros ($345) per megawatt-hour last month, while electricity prices tripled this year due mainly to higher hydrocarbon prices.

Some EU members have already started subsidizing bills.

Greece leads the league, committing to spending 6.5 per cent of GDP to split electricity bills with consumers by 50-50 – more than any other EU member.

Germany’s spending is expected to be around 2.6% of GDP.

Russian blackmail

The European Union banned imports of Russian coal last April in response to Russia’s invasion of Ukraine, and this was followed by a ban on Russian oil in June.

But it did not ban gas, which is difficult to replace with shipments to European ports.

This is because the global supply of liquefied natural gas (LNG) has already been exceeded after the global recovery after the pandemic and the transition to cleaner fuels, but also because some EU countries do not have LNG import facilities.

Germany and landlocked Eastern and Central Europe, in particular, depend on gas brought in through Russian pipelines, which supplied about a third of EU gas last year.

Russia has threatened to cut off this vital supply unless the European Union lifts sanctions and halts arms deliveries to Ukraine.

We are ready to supply gas in quantities that have been contracted so far. “However, this will certainly depend on the position of European countries,” Deputy Chairman of the Russian Security Council Dmitry Medvedev said on August 28. “If our guns are crooked, or if payments are blocked, or deliveries of repaired turbines are denied, or Nordstream 2 launches are denied, supplies of this kind will probably not be in volumes Western countries expect.”

Germany halted the certification process for the newly built Nordstream 2 pipeline on February 22, after Russian President Vladimir Putin ordered his first forces into eastern Ukraine. The pipeline was to begin transporting 55 billion cubic meters of gas to Germany this year.

The sanctions prevented German industrial giant Siemens from delivering gas compressor turbines to Russia after maintenance. Without them, Russia says it cannot put pressure on the Nordstream 1 pipeline.

It halved flows through Nordstream 1 twice, on June 15 and July 27, before announcing it would shut down completely on September 3. On every occasion, Russian actions have driven up gas prices in Europe.

European leaders rejected the Russian explanation that technical difficulties led to the shutdown.

“Putin’s gas war on Europe is a direct continuation of his war on Ukraine,” Ukrainian Foreign Minister Dmytro Kuleba said in July.

And wherever he can hurt, he will do. All of Europe’s dependence on Russia will be used to destroy the normal life of every European family. The only way is to respond aggressively and get rid of any dependency.”

energy security

Europe’s energy decoupling from Russia could cripple it this winter and many economists believe it will suffer a recession, mainly due to rising energy costs.

“Europe does not have enough gas as a whole, even though the stores are 85 per cent full, because it comes down to whether you can get the gas from where it is stored to where it is needed,” said Jonathan Stern, who leads the Oxford Energy Institute. studies.

For example, France [which has LNG terminals] You cannot supply Germany with gas because there is insufficient capacity between them.”

Germany is aggressively buying gas tankers as offshore storage and is building regasification plants on shore.

“Germany is supposed to bring one LNG terminal online at the end of this year in Wilhelmshaven, and another early next year in Brunsbuttel. So it may have some LNG imports in the second half of winter, but only if all goes according to plan,” Stern said.

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Cutting Russia is not complete.

Russian gas continues to flow through the Yamal pipeline, which crosses Ukraine, and the Turk Stream pipeline, which runs under the Black Sea.

Losing these would only make matters much worse for Europe, which still leaves Russia with influence, said Michalis Matiulakis, head of the Greek Energy Forum think tank.

About 10 billion cubic meters annually [bcma] still flowing [through TurkStream]. The system through Ukraine runs at about 50-60 [percent] eligibility… [through which] We get about 25bcma. Total 35 billion cubic meters… If that is closed, we can’t replace it,” Matiolakis said.

The United States has promised to increase exports of LNG to Europe, but it is dependent on the capacity of the private sector.

Even Schulz is not entirely sure he can maintain Germany’s power.

“We are ready and may be able to get through this winter,” he said on September 7.

The European Commission’s proposal to cut 15 per cent of the consumption of member states divided between those with import facilities and those without.

Spain, France and the UK will probably be fine. Southeast Europe would probably be fine. Stern predicted that Germany, Central Europe and Italy would not do well.

The new political will

Despite the unknown, the effects of the power cut on European politics are clear, and the shutdown of Nordstream 1 appears to have been a turning point.

In Germany, arguably the most Russia-loving member of the European Union after Hungary, the tides seem to be turning.

“Russia is no longer a reliable partner in the energy field,” German Chancellor Olaf Scholz said at a press conference on September 4th.

Three days later, he told Frankfurter Allegemeine Zeitung, “Such dependence on one supplier should never exist again. We should be able to switch to other suppliers at any time.”

Schulz followed the spirit of public opinion.

In response to the question, “Should we continue to subsidize Ukraine despite high energy prices?” 70 per cent of Germans answered yes in a poll conducted by the Politte Barometer this month, representing an overwhelming majority of every party in the Bundestag except the AfD.

Schulz recently admitted that “Germany has seen a radical change” in its support for Ukraine.

This is important because, by supporting the construction of Nordstream 2 over the past 12 years, Germany has been accused of not ignoring Ukraine’s concerns.

Operating the new pipeline would have allowed Russia to end gas shipments to Europe via Ukraine, which had hitherto been its main route, depriving that country of transit fees and leverage.

“It’s been a very steep learning curve for the Germans because they haven’t had any problems with Russia so far,” said Mina Olander, research fellow at the Finnish Institute of International Affairs.

“They had a very lucrative energy relationship with Russia, which enabled Germany to have the kind of industry it has without any of its own natural resources and would not have developed otherwise.”

Other outages were also turning points.

In May, Russia cut off the flow of gas to Finland and Bulgaria, claiming that they refused to pay in rubles.

“Once it is cut off, there is no interest in reopening it…it is Russia’s loss,” said Olander. “Once it is cut off, the speaker of the Finnish parliament said.” Bulgaria, once considered the most Russia-loving country in the Balkans, turned to Greece.

The two have just finished building a connecting line that will allow LNG imported through Greece to flow into Bulgaria.

It is clear that the war in Ukraine is pushing European integration.

The European Union invited Ukraine and Moldova to start membership talks in June, weeks after they submitted an application.

Albania and Macedonia, whose candidacies for EU membership have been stalled for years, are expected to be invited to start talks in December.

The EU’s largest members, France, Germany and Italy, are now swaying behind qualified majority voting to increase effective foreign policy decision-making.

The European Union in March approved a strategic compass to build a rapid reaction force and command and control capabilities independent of NATO by 2030.

Russia’s war against Ukraine, which was driven in large part by Ukraine’s desire to integrate with the European Union, how far Ukrainians are willing to go and the heavy price they are paying for the future as part of the European Union, Olander emphasized that there is no really good alternative to European integration. “.

Seeing Ukraine literally struggle for its European choice somehow led to the ‘renaissance’ of European identity.

This winter is likely to be very costly for the European Union, but its leaders seem to expect good political gains in the coming year.