The rapidly changing environment not only requires the European energy system to adapt, but also to find the right mechanisms to ensure its unity in the face of turbulent challenges. In March 2022, European solidarity translated into concrete political action when EU leaders formally agreed to jointly purchase natural gas, liquefied natural gas (LNG) and hydrogen with the aim of protect citizens from soaring energy prices and reduce dependence on Russian imports. In theory, this shows European alignment and solidarity in action. But what does this mean concretely?
The idea of joint gas purchase agreements is not new. In April 2014, the then Polish Prime Minister, Donald Tusk, proposed this instrument for the joint purchase of gas in a mandatory form, within the framework of the “European Energy Union”. Mandatory joint procurement was welcomed, but with a touch of skepticism, as member states were unwilling to pursue this unified approach due to differing views on national policies. This is why, a year later, on March 19, 2015, EU governments approved the voluntary option of this mechanism as a compromise.
Ukraine, Georgia, the Republic of Moldova, as well as the Western Balkan countries, can also join this form of collective purchasing agreement.
However, nowadays the energy policy landscape is changing at the speed of light and this instrument could be more relevant than ever. According to Kadri Simson, European Commissioner for Energy, the joint procurement process is “simple”. “Member states that want to set their own parameters for joint action – how much gas needs to be purchased, for how long, how that gas would be used in an emergency, and then they inform the Commission.” The Commission would then inform the other Member States of the measures taken and verify that the rules of the energy market and state aid are respected. To this end, the EU launched the EU Energy Platform – to pool demand, coordinate the use of infrastructure and negotiate with international partners to facilitate joint purchases. It is important to note that Ukraine, Georgia, the Republic of Moldova, as well as the Western Balkan countries, can also join this form of collective purchasing agreement.
Pandemic Joint Procurement Learning Outcomes
This approach may sound familiar, as the EU has already managed a solidarity mechanism during the pandemic when the Commission coordinated the joint purchase of Covid19 vaccines to ensure a timely supply to each member state. Some experts say gas is much more of a problem than buying vaccines. Pessimistic voices claim that the mechanism works if everyone is in it. Purchasing power works best if you buy a lot – and at the moment it is unclear what percentage of EU gas would fall under the proposed joint supply. Also, the distribution aspect could be problematic. EU countries have different levels of gas dependence on Russia, and not all member states have storage facilities or direct access to an import terminal for cargoes arriving by ship.
Nevertheless, there are also arguments in favor of this mechanism. For example, Christian Egenhofer, associate researcher at the Center for European Policy Studies (CEPS), said that an effective joint purchasing plan could prevent member states from competing with each other for the purchase of gas, but also from pretending make lousy deals. autocratic rulers. Furthermore, and in the longer term, the common gas purchasing platform could lead to a genuine European gas supply security policy.
The revival of the solidarity mechanism
Despite criticism, the crisis is pushing the EU towards a common approach. On April 27, 2022, the state-controlled Russian energy company Gazprom cut off gas supplies to Poland and Bulgaria because they refused to pay in Russian rubles, as demanded by President Vladimir Putin. European Commission President Ursula von der Leyen reacted and stressed in her statement that “Poland and Bulgaria now receive gas from their EU neighbours. The era of Russian fossil fuels in Europe will come to an end. Bulgarian Energy Minister Alexander Nikolov also underlined that Bulgaria relies on the Commission’s Common Purchasing Strategy to buy gas.
Finland also found itself in the same position on May 21, 2022, when Gazprom officially stopped gas exports because it had not received payment in rubles. Finland has found the solution in a joint approach and, together with Estonia, has reached an agreement on the joint lease of a floating terminal for LNG which will guarantee gas supplies for both countries. More recently, Gazprom extended its gas cuts on June 1, 2022 by stopping supply to GasTerra, which buys and trades gas on behalf of the Dutch government. In addition, it also cut off gas flows to Danish energy company Ørsted and Shell Energy for its contract to supply gas to Germany, after the two companies failed to make ruble payments. GasTerra said it had found alternative contracts for the supply of the 2 billion cubic meters of gas it expected to receive from Gazprom by October. Ørsted also said a gas cut would not immediately endanger the country’s gas supply. They would look to the European gas market to fill the void.
According to Robert Habeck, Federal Minister for Economic Affairs and Climate Action, “the situation is getting worse to the point that the use of energy as a weapon is becoming a reality”.
In the case of Germany, although this decision seems to be largely symbolic – representing around 3% of German imports of Russian gas, according to Robert Habeck, Federal Minister of Economics and Climate Action, “the situation worsens to the point that the use of energy as a weapon becomes a reality”. He also stressed that Germany can cope with the latest disruptions in part by securing alternative supplies, adding that there is no need to raise Germany’s alert level. The country’s three-stage contingency plan, which is currently in its first stage, could see its network regulator eventually ration gas in the event of a supply shortage.
In this critical period, the solidarity mechanism is experiencing a renaissance. In the end, histhe effectiveness will depend on the volumes that will be purchased and the number of Member States that will join.However,given the need to reduce dependence on Russian fossil fuels as soon as possible, it is clear that no Member State can meet this challenge alone. A truly united European energy front is the only way forward.