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EU fumes as US, Norway energy profits put solidarity to the test

As the USA and Norway reap unprecedented profits from surging energy prices, EU countries are complaining more loudly

By: EBR - Posted: Thursday, October 6, 2022

Green MEP Michael Bloss told EURACTIV that in this crisis Europe is in the same boat with the US or Norway.
Green MEP Michael Bloss told EURACTIV that in this crisis Europe is in the same boat with the US or Norway.

by Nikolaus J. Kurmayer, Oliver Noyan and Sarantis Michalopoulos

As the USA and Norway reap unprecedented profits from surging energy prices, EU countries are complaining more loudly and are preparing to send the European Commission forward to negotiate a better deal, voluntarily or not.

The European energy crisis has caused energy prices to spike. While Russia, the cause of the crisis, was one of the largest beneficiaries, EU allies, primarily the USA and Norway, are reaping extreme windfall profits as they fill the gap Russia left behind.

Some EU countries, like Poland, have long asked for negotiations with Norway to reduce prices. Now, Berlin has joined the call.

“Some countries, even friendly ones, are achieving astronomical prices in some cases,” Robert Habeck told the Neue Osnabruecker Zeitung.

“This naturally brings problems with it, which we have to talk about,” he added.

With Germany’s opposition to taking a harsher stance on allies profiting from surging gas prices, the issue will also be discussed at Friday’s EU Council meeting.

Green MEP Michael Bloss told EURACTIV that Europe is in the same boat as the US or Norway in this crisis.

“Russia’s gas freeze and strategic warfare must not weaken us in the EU. As allies, we should support each other instead of making a big deal out of Putin’s war. The US should offer an LNG price that is based on the level of the previous year,” Bloss said.

The German politician added that it is only logical that we finally make joint European gas purchases. “This is the only way we can assert our power on the market.”

According to the draft document of the conclusions, seen by EURACTIV, EU leaders will call on the Commission to speed “up negotiations with our partners” to “lower import prices for the European Union.”

“In an energy crisis of such magnitude, the solutions are to be found together in the spirit of solidarity,” commented Renew Europe MEP Nicolae ?tefanu?a.

Technically ‘difficult’ experts warn

Experts, however, are critical of the success of this new approach that aims at equalising the cost of the energy crisis among allies – especially concerning the USA, which would have to be convinced to intervene in its own market.

“It looks impossible,” explained Thierry Bros, gas expert and professor at Sciences Po University. “Some are private contracts, and I don’t know how you can impose this if not in the contract,” he told EURACTIV.

According to Bros, it is equally unlikely that Norway will give in to European demands.

“For Norway, the constitution mandates the government to maximise the hydrocarbon rent,” he noted.

However, some underlying factors might open the doors for compromise between the EU and the two gas exporting countries.

Room for compromise

On Wednesday (5 September), the oil-producing countries OPEC+ announced production cuts of 2 million barrels and extended cooperation with Russia until the end of 2023 during a meeting in Vienna.

In the short-term, such a move will benefit Russia, considering that from December, Europe’s oil embargo against Russia will take effect, and Moscow will be in search of new clients.

“Russians will be forced to make concessions when it comes to prices to attract new customers. The price is, therefore, increased now in order to maximise as much as possible the profit later”, an EU source told EURACTIV.

In Washington, this sparked outrage, as US President Joe Biden has prioritised keeping prices at the pump low, as the high oil prices are one of the main drivers behind the US’ record inflation rates.

“The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas,” a spokesperson said.

The US is amidst a strategic one-year release of petrol from the national reserve to keep prices low. But observers have noted that the US is unlikely to absorb the shock of production cuts by releasing just its own reserves.

Here, the EU could come in, as it did in the past. “The USA turned to us when oil prices shot up, and as a result, national oil reserves were also tapped in Europe,” Habeck explained.

“I think such solidarity would also be good for curbing gas prices,” he added. Perhaps partners can help each other out this time?

Watching from the North

Norway, now the EU’s largest supplier of fossil fuels, is profiting immensely from Russia’s actions and subsequent energy price spike. Norwegian officials say they have a difficult time with such windfall profits.

“There are times when it is not fun to make money, and this is one of them,” said Norwegian petroleum and energy minister Terje Aasland in March.

Yet, the Norwegian government has been extremely reluctant to aim for an equitable solution as it earns immense profits. The Norwegian Greens say the government “argues that our pension fund is taking a hit because of the war, so we need the war profits for ourselves,” which they say “is a really lame excuse,” international relations spokesperson Carl Johansen told EURACTIV.

As the European energy crisis and Russia’s war on Ukraine drags on, pressure on the Norwegian government to come to its EU allies’ aid increases.

“We cannot go on being war profiteers, which is becoming more shameful by the day,” he added. Norway, a small European country, “is as dependent on peace, stability and prosperity on the continent as any other country,” Johansen noted.

Instead, the Greens want the extra fossil fuel profits to go into a solidarity fund to be used to aid Ukraine and Europe’s energy poor.

*first published in: Euractiv.com

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