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Ukraine war: EU countries deliver trench warfare over energy prices

2022-03-25T21:22:45.329Z


The West currently wants to show unity towards Kremlin chief Vladimir Putin. But the EU summit showed that when it comes to money, the united front shakes.


Enlarge image

Chancellor Scholz at the EU summit in Brussels

Photo: Michael Kappeler / dpa

Actually, Friday would have been a public holiday for the EU.

Under different circumstances, said Chancellor Olaf Scholz after the two-day summit marathon in Brussels, "we could celebrate an anniversary at this time".

The Treaty of Rome, the cornerstone of the EU, was signed exactly 65 years ago to the day.

But little is normal at the moment, especially not in the EU.

Brussels experienced an unprecedented summit marathon on Thursday and Friday: On Thursday, a NATO meeting with US President Joe Biden, at which the defense alliance was more determined and united in the face of the Russian attack on Ukraine than it had been in years or even decades more.

Immediately afterwards, a G-7 summit took place at NATO headquarters, after which Biden rushed to the EU summit in Brussels' European Quarter.

There, too, there were oaths of unity, and Europeans basked in the splendor of the first visit by a US President to a European Council.

On the second day of the summit, however – Biden had long since traveled on to Poland – it became clear that when it comes to money, harmony in the EU is quickly over, Ukraine war or not.

Russia's invasion of Ukraine has sent energy prices skyrocketing in Europe.

In France, there are fears of new unrest like the yellow vest protests of 2018 and 2019, in Spain's capital Madrid around 150,000 people demonstrated against high energy prices last weekend alone.

EU in the energy price dilemma

This puts the EU in a dilemma.

Its member countries are closely intertwined via the EU internal market, which also includes the energy market.

That makes national special ways in the fight against the price explosion almost impossible.

However, the energy mix is ​​the responsibility of the federal states, and the differences are correspondingly large.

Sweden, for example, obtains around 42 percent of its primary energy from renewable sources, Poland a full six percent.

France supplies itself 37 percent from nuclear power plants, Germany only five percent.

This is now taking revenge in the fight against the rapidly rising prices.

For almost nine hours, the heads of state and government debated measures to counter skyrocketing energy prices - and finally agreed on a soft compromise that is typical of Brussels.

The lines of conflict were clear beforehand.

For days, southern EU countries such as Spain, Italy and Greece had lobbied to cap energy prices in the EU or otherwise intervene in the market - which Germany, the Netherlands and several other countries firmly opposed.

Before the summit, the EU Commission presented a whole bunch of measures to reduce high electricity costs.

There was talk of subsidies and new taxes on the extra profits of energy producers, of subsidies for particularly affected households and energy-intensive industries.

All well-intentioned ideas that have only one disadvantage in the primarily nationally organized energy system of the international community: what may make sense in one country is harmful in another.

And so the specialist officials had decided on the suggestion not to make a suggestion.

But the Spanish Prime Minister Pedro Sánchez was not satisfied with that.

He presented the group with a short paper with a supposed panacea for the entire international community.

According to the proposal from Madrid, the EU must cap the price of gas and allow states with a high proportion of renewable energies to abolish the effects of supply and demand on the electricity markets.

The price of electricity should be "decoupled" from the price of gas, as economists used to say.

In fact, in all countries where the proportion of climate-friendly energies is »more than 45 percent«.

Practically from Sánchez' point of view: In Spain the proportion is a good 46 percent.

Otherwise, the model would have considerable charm for Spain.

The country could impose heavy taxes on its currently highly profitable wind and solar power plants in order to subsidize its gas-fired power plants.

That could help keep the price of electricity low.

In countries like the Netherlands, on the other hand, which operate a particularly large number of gas-fired power plants, that would hardly be affordable.

The price of electricity would be higher there.

In the EU-wide competition for industrial settlements and jobs, that would be a considerable disadvantage.

It would be "the solution of a Spanish problem with European means," etched EU diplomats.

No wonder that many northern European countries firmly rejected the Spanish concept.

In the meantime, Sánchez left the meeting room in a rage, as diplomats reported.

"There are some who have very definite ideas" as far as market intervention is concerned, Scholz later commented dryly.

Everyone gets something - including Sánchez

Sánchez didn't help much with the acting.

He was unable to push through the gas price cap or other major market interventions.

Instead, the heads of state and government agreed, among other things, on “voluntary joint purchases of gas, liquid gas and hydrogen” in order to get prices under control.

But Brussels wouldn't be Brussels if Sánchez hadn't gotten something that he can sell as a success at home.

The summit communiqué speaks of "temporary emergency measures" that could be used to mitigate the impact of the prices of fossil fuels such as gas on electricity production.

It would probably be something like a light version of the decoupling of gas and electricity prices demanded by Spain.

The electricity tariffs for consumers and companies should also be able to be reduced with these measures.

But all this should only be allowed if it is in accordance with the EU treaties and does not damage the "common interest" of all EU states.

In other words, Spain is allowed to violate the principles of the internal market a little, but only to the extent that it does not cause too much damage.

According to the summit document, the EU Commission should monitor this.

Meanwhile, their boss Ursula von der Leyen was able to announce real progress.

Together with US President Biden, she appeared in front of the cameras on Thursday and announced a rapid expansion of American liquid gas deliveries to Europe.

As early as this year, special tankers are expected to bring around 15 billion cubic meters of gas across the Atlantic;

enough to fill all the storage facilities in Europe.

In a few years, the US gas volume is expected to increase to 50 billion cubic meters.

About a third of Europe's gas requirements would then be met from America.

"That," von der Leyen said, "will replace the liquid gas that we have been getting from Russia."

Source: spiegel

All news articles on 2022-03-25

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