N. Peter Kramer’s Weekly Column
Rising energy prices are mercilessly exposing dependence of the EU. The EU must import 90 percent of its gas, 43 percent of which came through Gazprom last year. The EU’s dependence on gas imports from Russia will not change any time soon. Hungary recently signed a long-term contract with Gazprom. The Nord Stream 2 pipeline between Russia and Germany is already being filled with gas. And last week Russia offered Bulgaria a new long-term gas contract for ‘normal price’.
It is clear. The EU’s energy system, which has sought to banish domestic fossil fuels, has left the member states vulnerable to the global surge in oil and gas prices. The Financial Times reported that ‘the strength of the wind blowing across northern Europe has fallen by as much as 15 percent’ in 2021. This has reduced the productivity of European wind farms and increased reliance on natural gas.
It creates strategic leverage for Russia, which has been in no hurry to speed production despite requests from EU politicians. A few days ago, for instance, Commission President Ursula von der Leyen noted that Russia’s Gazprom only honors its long-term contracts and does nothing extra. Spanish Prime Minister Pedro Sanchez said, ‘The EU is now the plaything of markets we don’t control’.
‘We will reduce our dependence in areas such as semiconductors, industrial policy and energy’, was one of the conclusions that Council President Charles Michel drew after an informal summit on how the EU can play a stronger role on the world stage.
Could the joint purchase of gas, along the lines of the successful purchase of vaccines, depress prices in international markets? Or as a second option, increasing strategic stocks? As usual the 27 member states have different views on the matter. Dutch Prime Minister Mark Rutte called the proposals, ‘wild plans’. Germany is counting on the high prices being temporarily because the global economy is recovering after the pandemic. Ten member states, among them France, Finland and Poland, see ‘nuclear power as a part of the solution’ to the rise of energy prices.
In the meantime the consumers and the industry are the victims of another EU fragmentation…