The EU’s gas-rationing plan faces a haircut

 

The EU’s gas-rationing plan faces a haircut

 

Efforts to prepare the bloc to ride out a Russian gas cutoff are running into national special pleading.

 

BY AMERICA HERNANDEZ

July 26, 2022 12:06 am

https://www.politico.eu/article/eu-gas-rationing-plan-expected-to-pass/

 

When they meet in Brussels on Tuesday, EU energy ministers will be under intense pressure to agree on a common gas-saving plan ahead of winter to buttress the bloc in case the Kremlin turns off the taps.

 

But the initial sense of urgency in the Commission's proposal for mandatory rationing of natural gas has waned, according to several EU diplomats and a Commission official. Instead, talks among EU ambassadors on Monday centered around carve-outs, exemptions and loopholes, with countries proffering excuses for why they shouldn't be subject to a full 15 percent cut in gas consumption from August to March.

 

An initial show of strength from opposing countries last week opened the door to a flurry of new requests, even from capitals that were initially in favor of the mandatory cuts, according to revised drafts seen by POLITICO.

 

"We know it’s the winter package, but now it feels like Father Christmas is in town giving out presents, even [to countries that] haven’t been the nicest in the last year,” said one EU diplomat from a country supporting binding gas reductions.

 

Part of the problem, according to a Commission official, is that in the initial Commission plan to trigger emergency rationing, "all of our scenarios were based on an interruption [in Russian gas supplies] beginning in July."

 

That was back when governments — not least Berlin — feared the Russia-to-Germany Nord Stream pipeline would not switch back on after annual maintenance earlier this month.

 

However, flows through the pipeline have partially resumed, although they are set to drop to 20 percent capacity beginning Wednesday.

 

Kyiv was quick to say I told you so.

 

"All this is done by Russia deliberately to make it as difficult as possible for Europeans to prepare for winter," Ukrainian President Volodymyr Zelenskyy said Monday evening.

 

But the various concessions — plus a recognized need to preserve the bloc from a possible Russian supply shock — mean there is "generally a cautious optimism that an agreement can be reached tomorrow," a second EU diplomat said late on Monday.

 

A third diplomat also said a deal was likely to be reached on Tuesday, as most countries agreed on the importance of a show of "EU unity and solidarity" in the face of Russian threats.

 

But the risk is that any deal will have been watered down too far to achieve the main goal: saving 45 billion cubic meters (bcm) of natural gas needed to weather a colder-than-average winter in case deliveries from Russia's Gazprom cease.

 

"Nobody knows exactly what the shortfall will be in terms of volumes: whether it will be an average or very cold winter, whether there will be a maximum of renewables or less wind," the Commission official said. "We always set ourselves on the most conservative scenario because we wanted to be prudent, while member states set themselves on, I'd say, an optimistic scenario."

 

Excuses, excuses

The first article of Brussels' emergency proposal to be hacked away was the most contentious: giving the Commission the power to impose binding gas cuts on countries without their consent.

 

“This is something we cannot agree to," Polish Climate Minister Anna Moskwa said Monday. "And not only us: Greece, Spain, Portugal, Cyprus, Malta are also against such solutions, and there are other countries that have objections to particular provisions of this document.”

 

A revised version of the proposal — cobbled together by the Czechs, who hold the rotating presidency of the Council — instead calls for the Commission to propose an emergency trigger on mandatory rationing, to be voted on by countries.

 

The document would also grant a complete pass from the savings cuts to Cyprus, Malta and Ireland, on the grounds that the island nations aren't physically connected to the Continent, meaning they couldn't send over any extra gas to neighbors anyway.

 

The Commission official downplayed that concession, arguing each of the three islands only consumed between 1 bcm and 2 bcm of gas annually.

 

Other countries are balking at the need to cut gas use by 15 percent.

 

A French energy ministry official emphasized that "the 15 percent figure is just in case of a crisis, we can't know for sure if this emergency alert will even be triggered or not," and added that France's national goal of slashing overall energy use by 10 percent over the next two years should be more than enough to cover the gas savings requirements.

 

Paris also scored a victory in the text by adding a provision promising that countries would make "best efforts to preserve all electricity production capacities that do not rely on imported gas," which French ministry officials said should encourage Germany to extend the lives of its nuclear plants.

 

Bulgarian Prime Minister Kiril Petkov told POLITICO the binding gas cuts "could be definitely something that can be supported" by Sofia, but that in case of crisis, they could "maybe have some derogations on coal, just for this winter.”

 

Athens pointed out on Monday that because it uses most of its gas for electricity generation, cutting down on consumption would only force it to suck more power away from the continental grid. That, too, garnered an amendment allowing for a reduced savings target.

 

The Iberian Peninsula will get also a special reduction on the savings obligation to account for its limited ability to send gas to France due to a dearth of gas interconnectors between the countries.

 

EU members that reduced gas consumption early in 2022 — like Denmark and the Netherlands — will be able to deduct those savings from the required winter quota, and count any extra gas in underground storage above EU mandates as contributing toward the savings target as well.

 

Industrial powerhouses like Germany will have the option to request that gas consumed by industries deemed critical be "not taken into account in determining the volume of mandatory reduction." Several diplomats rationalized that by saying the German economy was very interlinked with that of its neighbors.

 

Something patently lacking throughout Monday's negotiations — which ran past 9 p.m. — was a formal running tally or calculation to see if the concessions would undermine the overall savings target. However, "there was a consensus that it would still be enough to be effective," the third diplomat said.

 

But the haggling is prompting the Commission to revise its expectations downward.

 

"I don't have a complete figure yet, I expect the spotlight [on Tuesday] will be on the volumes, but if we stay between 30 bcm and 45 bcm, I think it's a good result," the Commission official said. "What will still be historic is if there is agreement and a policy signal that everyone must start reducing demand, because we are not yet there."

 

Victor Jack, Lili Bayer, Nektaria Stamouli and Joshua Posaner contributed reporting.