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EU gas solidarity complicated by lack of fuel sharing deals

11 Comments
By Kate Abnett
Illustration shows natural gas pipeline, EU and Russia flags
Model of natural gas pipeline, EU and Russia flags, July 18, 2022. REUTERS/Dado Ruvic/Illustration Photo: Reuters/DADO RUVIC

The European Union clinched a deal last week to cope with a gas supply crisis, but to make it work member states need to establish bilateral pacts to share gas and, right now, most have no such agreement in place.

Only six such deals have been secured, leaving most of the EU's 27 countries without firm terms on how and when they would share gas in a supply crunch, or the financial compensation they would give or get for doing so.

"Bilateral deals are really ... the only thing that will hold at the end of the day if there is a real supply crisis," Christian Egenhofer, associate senior research fellow at the Centre for European Policy Studies, said.

"They organize the legal stuff, the compensation, the financial but also the infrastructure constraints," he said.

Fearing Russia may completely halt gas flows, EU countries agreed to curb their gas use by 15% over winter, to fill storage and free up fuel to share around in a supply crisis.

But it is up to individual countries to sort out how that sharing of fuel will happen in practice.

EU laws oblige member states to send gas to a neighboring state whose households or essential services like hospitals face a severe shortage. To make that happen, governments arrange bilateral deals. However, just eight countries are covered by the six agreements so far - including between Germany and Austria, Estonia and Latvia, and Italy and Slovenia.

"This is not sufficient," EU energy policy chief Kadri Simson said last month, urging countries to arrange more.

A handful of countries are negotiating new two-way agreements, government officials said. A German-Czech deal is due to be signed by winter, and Germany is working on further agreements with Poland and Italy, its economy ministry said.

But some countries heavily reliant on Russian gas - such as landlocked Hungary, which opposed the deal - have none. Italy and France are the EU's biggest gas users after economic powerhouse Germany. Italy has just one bilateral deal on emergency gas sharing and France has none.

A senior Italian official said the country was negotiating a deal with Greece on gas storage. The French energy ministry did not immediately respond to a request for comment.

The solidarity deals aim to avoid a panicked response if a supply crisis did strike, and reduce the risk that countries would hoard fuel and refuse to help their neighbors.

GUARANTEEING GAS SHARING

Simone Tagliapietra, senior fellow at the Bruegel think tank, suggested the EU should implement a wider compensation scheme where countries pay other member states to save and share gas.

"Without such a compensation mechanism it will be difficult to ensure solidarity," he said, adding that Europe's biggest economy Germany, which is heavily reliant on Russian gas, should be first to contribute.

Without firmer terms on gas sharing, "we might not see all the solidarity we currently see on paper turn into molecules moving around Europe," Tagliapietra added.

The idea of compensation may appeal to states like Greece and Spain, which initially balked at being asked by Brussels to use less gas to help countries that for years cultivated closer energy ties with Moscow.

Spain does not rely on Russian gas, and EU diplomats said Brussels' call for solidarity rankled in some capitals that still resent Germany's sharp criticisms of southern states' economic policies during past financial crises.

After EU countries approved the gas curbs on Tuesday, however, Spanish Energy Minister Teresa Ribera struck a more conciliatory tone, expressing willingness to reinforce Spain's liquefied natural gas import capacity "for the benefit of all".

German Economy Minister Robert Habeck also pledged, "as part of European solidarity" to keep gas flowing to its neighbors including Austria and the Czech Republic.

Germany has so far been the most active country in seeking solidarity arrangements with neighbors. As well as being Europe's biggest gas consumer, Germany's pipelines are the veins through which gas reaches many central and eastern states.

Some appear unwilling to cooperate, however. Hungary this month said it would stop exporting fuels to other countries. Poland has also struck a skeptical tone on sharing supplies.

The EU-wide deal on Tuesday was approved by all 27 members except Hungary, which also initially opposed EU oil sanctions on Russia. The agreement set voluntary curbs on gas use that can be made binding in a supply crisis. But it included a raft of exemptions and derogations for countries and industries that some analysts said meant, if Russia did shut off flows, more severe curbs and sharing between states would be needed to guarantee supply.

One EU diplomat said it was ultimately in countries' own interests to help one another, since an economic crisis or a gas shortage in one - particularly in Germany - would ripple around the bloc.

"If Germany falls, every one of us will fall with Germany," the diplomat said.

© Thomson Reuters 2022.

©2022 GPlusMedia Inc.

11 Comments
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Did they even think through the repercussions of the US /NATO sanctions? Now their alliance is falling apart.

A simple fact.. You cannot successfully sanction a country whose products YOU need to survive.

-1 ( +4 / -5 )

Drop the sanctions and the 300 million citizens of the EU can go back to their lives.

European families shouldn't have to suffer because NATO has a bone to pick with the Donetsk People's Republic.

-1 ( +4 / -5 )

The EU has 447.7 million inhabitants.

1 ( +1 / -0 )

The EU has 447.7 million inhabitants.

I stand corrected

That's almost 450 million people suffering just because NATO leaders have fragile egos that need propping up and lack the courage to do what's right for the people of Europe and drop the sanctions that are blocking trade between the workers of Russia and the workers of Europe.

1 ( +4 / -3 )

Bronco, drop the sanctions and the 450 million citizens of the EU can look forward to which country/countries Russia will invade and try to annex next. Citizens of the Baltic states are not so sanguine.

-2 ( +2 / -4 )

After Russia invaded Ukrain in 2014, 8 years ago the EU were told you better get off Russian energy. They ignored the warnings. Has the old saying goes “caught inside without a leash.”

-1 ( +1 / -2 )

What?!

The EU isn't "sharing"???

How horrible!

-1 ( +1 / -2 )

Kate.

EU have imposed sanctions against Russia,seized russian funds in euro.

Russia is asking own clients to pay in rubles as payment will go thorugh instead of euros as payment will not go through and will be seized.

Eu have choice.Either pay in rubles as requested by seller/there is no gas for free/or will not pay in rubles.If they are not able to pay in rubles will get no gas.

Its very simple.

EU leaders wants to cut own countries from russian supplies of oil and gas-its their goal.So Russia doing so step by step.

Is anything wrong with it?

EU leaders are very smart and sure will find better prices of oil and gas somewhere else/according to their words/.So EU citizens have nothing to worry about right?

Now lets talk true about EU politicians stupidity...

2 ( +3 / -1 )

Either the European Union is a Union or it isn't, solidarity amongst equals, with a balanced compensation scheme.

Where Germany is concerned former Chancellor Angela Merkel Government is responsible.

-2 ( +0 / -2 )

Angela Merkel was the voice of reason, the one who didn't want Ukraine to be "forced" into NATO by the US. She wanted no part of the proxy war we have now.

-2 ( +0 / -2 )

The gas solidarity scheme is actually a bailout Germany scheme. Understandably, no one in Europe is interested in it except those countries in just as much trouble as Germany. In the Baltic states if there isn't regime change, they are literally going to freeze this winter.

0 ( +1 / -1 )

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