Germany has ‘homework’ to do on gas demand cuts to preserve EU unity
Issued on: 26/07/2022 – 17:27
The EU reached a draft agreement on Tuesday for member states to voluntarily reduce gas consumption by 15 percent from August to March. The burden will fall unevenly given that some countries are more dependent than others on Russian gas. But beyond what’s in the text, analysts say that countries that failed to heed the warnings about reliance on Russia – Germany especially – will have to do a lot of heavy lifting if they want to preserve European unity on the matter.
EU energy ministers approved this deal on July 26 to economise on gas – a necessary step to ensure the heating stays on this forthcoming winter – the same day Russia’s state-backed gas firm Gazprom announced it was cutting flows to Germany through the Nord Stream 1 pipeline to 20 percent of capacity.
The gas demand cuts are voluntary but could be made mandatory if an “emergency” arises. And the deal contains numerous opt-outs and special exceptions for countries, like Spain and Ireland, that avoided dependence on Russian gas and have limited capacity to export it to other EU members.
In this way, the deal is a much watered down version of the 15 percent reductions across the board requested by the EU Commission in a plan outlined last week.
To discuss the context and implications of the EU’s plans for gas demand cuts, FRANCE 24 spoke to Jacob Kirkegaard, a senior fellow in economics and trade at the German Marshall Fund Brussels bureau.
Before the deal was reached, Spain, Poland, Greece and Ireland all lobbied for exemptions from the EU Commission’s plan for a 15 percent cut applying to all the bloc’s members. What motivated these four countries to adopt this approach? Do you think it’s representative of a broader unease within the EU that hasn’t been openly expressed yet?
The important thing to understand is that this was a very far-reaching proposal because if you get into a situation where you ration gas for retail consumers, that has potentially very damaging implications for governments. They were never going to hand over to the Commission the power to do so; they were not going to let EU Commission President Ursula von der Leyen’s cabinet decide when rationing is imposed on their own voters.
The Commission was politically ambitious in proposing those cuts across the board, if you want to put it kindly; naïve, if you want to be rude. Member states will bear the political consequences of these measures, not the Commission.
The deal says the cuts will be voluntary and only compulsory in an emergency – but isn’t something like an emergency fairly likely, given that many analysts expect Russia to cut off gas supplies to Europe completely before the winter?
Gazprom said on Tuesday that gas flows will be reduced to a fifth of what they normally are through Nord Stream 1. And we could get a very cold winter. So it’s pretty likely that we will have some sort of emergency.
If [Russian President] Vladimir Putin believes he could foment political chaos this winter, he’ll definitely do it. The probability that Russian gas supplies will be cut to zero is quite high. He’s showing people who’s boss. Let’s not forget that he’s already made the German government kiss his boots – over recent weeks he effectively forced Germany to make Canada break the sanctions by sending that repaired turbine for the pipeline. Then he gave Berlin the middle finger by cutting supplies to 20 percent. That reduction to 20 percent in Nord Stream 1 risks a crisis during a cold winter.
So – in a sense – we have a political emergency already. By being so dependent on Russian gas for all those years, countries like Germany have already handed Putin the initiative, enabling him to show who holds all the cards.
This is a terrible situation to be in, given that we in Europe are trying to help Ukraine win. It’s not an acceptable situation to be in. But it is the reality.
Do you think European unity will hold up on this issue?
Yes, it’s an emergency. And, yes, you need a common decision-making process. But it’s a different kind of emergency from the coronavirus. It’s not the kind of crisis that affects every member state in the same way – not least because of different decisions taken by those member states.
Look at it from Spain’s perspective. You’ve got plenty of terminals for liquefied natural gas; you’ve got a plentiful gas supply from diverse sources. Say you end up making similar gas demand cuts to those made by Germany – a country whose political and economic elites ignored all the warning signs about their dependence on Russian gas both before and after Russia’s annexation of Crimea in 2014. You’d think you were, in effect, bailing out Germany. That’s what it would look like if you’re sitting in somewhere like Madrid.
So there’s moral hazard here because this crisis is not dictated by an unforeseen set of circumstances. Countries are to a large extent responsible for where they are today.
There’s homework – to use the phrase then German finance minister Wolfgang Schauble used about Greece during the Eurozone crisis – that Germany has to do. Berlin has to think about keeping nuclear power plants open – amongst other measures – even if there’s a painful political price to be paid for doing so.
Ultimately I think there will be solidarity but Germany is going to have to make the biggest demand cuts of all EU countries. Other nations like Italy and Austria have been quite dependent on Russian gas and they will have a lot of work to do. But look at Scandinavian countries, look at the Baltic states – they managed to cut themselves off Russian gas completely in relatively little time.