The countries of the European Union have agreed to jointly buy and store gas, hydrogen and liquefied natural gas to meet the challenge of reducing energy dependence on Russia and protecting Europeans from spiraling energy costs. However, they stopped short of imposing a ceiling on energy prices.
European leaders announced the decision on Friday after a historic series of summits on Thursday, when they met alongside NATO and the Group of 7 industrialized nations, and were joined by President Biden in seeking to rally allies against Russia.
EU members who so wish can associate and jointly negotiate gas purchases, increasing their bargaining power in the hope of influencing energy prices. Ukraine, Georgia and Moldova, as well as the countries of the Western Balkans, can join the collective purchase of gas.
Storage capacity can be shared so that all EU nations are prepared with sufficient supplies for the coming winter. The leaders also backed a proposal by the European Commission, the bloc’s executive arm, to fill 80 percent of its underground storage facilities by November and 90 percent by 2023, requiring massive purchases in the coming months. That would be a big jump from current storage levels, now around 25 percent, commission officials said.
Ursula von der Leyen, president of the commission, said that 75 percent of the world market for gas through pipelines was European.
“Now we will use our collective bargaining power,” Ms von der Leyen told reporters on Friday night. “Instead of outdoing each other and driving up prices, we will pool our demand.”
But the intense and protracted debate over ways to steer the bloc away from Russian imports has underscored how contentious energy policy is for its members and demonstrated the limits of a joint response to Russian aggression.
Although the bloc as a whole is heavily dependent on Russia, which provides nearly 40 percent of the European Union’s natural gas and more than 25 percent of its crude oil, the energy mixes and interests of individual countries vary.
Due to the demands of the pandemic, energy prices had already spiraled out of control since October, and the bloc’s vulnerability has been further exposed by the Russian invasion of Ukraine. Unlike the United States, Europe has refrained from imposing an embargo on Russian oil and gas, although it has imposed other sweeping sanctions.
A coalition of southern European nations, led by Spain and Italy, advocated capping energy prices across the bloc, arguing such a move would protect households and businesses. But the Netherlands and Germany strongly opposed that idea, saying it would distort market dynamics and ultimately benefit Russian power producers. On Friday, European leaders agreed to continue discussing whether and how short-term measures such as price controls could be effective.
The Russo-Ukrainian War and the Global Economy
Earlier on Friday, the United States announced that it would help the bloc obtain an additional 15 billion cubic meters of liquefied natural gas by the end of the year.
Most of the gas that the block needs to fill its storage is liquefied natural gas, but its global production is limited and spoken. In recent months, the commission has contacted a number of gas producers, including the United States, Qatar, Azerbaijan, Nigeria and Egypt, and importers such as Japan and South Korea to see if they can redirect some of their supplies to Europe.
“The market is tight,” said Simone Tagliapietra of Bruegel, an economic think tank in Brussels. “We learned from the pandemic that when the European Union moves together, it can be much more efficient than individual countries,” she added, referring to the bloc’s joint purchase of Covid-19 vaccines.
In the short term, Europe will have to compete with other buyers around the world, including China, and if its member countries move together, they will have more bargaining power, experts say.
“We are effectively in a war economy,” Tagliapietra said. “Politics is taking over many economic decisions. In extraordinary times, we need extraordinary measures.”