Joint gas purchasing could be a breakthough

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

The joint document, which is intended to be the starting point for negotiations with the European Commission, provides for the measure to be in force until 31 December 2022. [Pakhnyushchy / Shutterstock]

A joint gas purchasing platform could lead to a truly European security of gas supply policy. This would amount to no less than a common energy policy for gas, thereby completing the missing link of the EU energy policy framework for oil and electricity, write Christian Egenhofer and Francesco Gazzoletti.

Christian Egenhofer is Associate Senior Research Fellow at the Centre for European Policy Studies (CEPS) and Senior Research Associate at the School of Transnational Governance, European University Institute, Florence. Francesco Gazzoletti is Managing Partner at FortyEight Brussels

This European Council meeting of 24 and 25 March focused on the response to the Russian invasion of Ukraine. Two topics dominated the agenda: coping with persistently high energy – gas, electricity and oil – prices and whether to cut off Russian gas and oil imports.

The response to high energy prices has predictably led to an uncoordinated series of fiscal and regulatory measures in the Members States. In October and in March, the European Commission tried its best to rein over this dispersed series of measures by publishing two Communications on energy prices, the so-called Toolbox. Unilateral, uncoordinated actions seem to be the predominant reflex of the Capitals.

Joint gas purchasing could become a breakthrough

As European Councils in times of crisis tend to do, they adopt the bare minimum needed to address the crisis. In this case, this is creating a joint gas purchasing platform, aired by the European Commission in its 8 March Communication, and many times before by member states or CEPS.

However, the wording adopted in the draft European Council Conclusions reduces the impacts of the original European Commission sketched proposal. In fact, the conclusions talk about voluntary purchase agreements and associate the Member States to the European Union in the “collective political and market weight” in the price negotiations.

Still, Joint gas purchasing platforms could turn out to be a significant step forward, provided the platform enjoy the support of the main ‘Gas Member States’. In the end, the measure’s effectiveness will depend on the quantity of new volumes it will cover that, in turn, depend on how many member states will adhere.

Effective joint gas purchasing could stop member states from competing with each other in buying gas but also in presuming to offer shabby deals to autocratic rulers. More transparency on where the gas is coming from and under what conditions can only help governments hold firm on values. It will also help to increase transparency in markets.

In addition, and more long term, the joint gas purchasing platform could lead to a truly European security of gas supply policy in a way the Security of Gas Supply Regulation has never been able to do. Although not yet part of the proposed Regulation, joint gas purchasing will need to trigger the formulation of ex-ante rules – principles, distribution keys, priority customers etc. – to redistribute the gas, notably in times of crisis.

This would amount to no less than a common energy policy for gas, thereby completing the missing link of the EU energy policy framework that already exists for oil and electricity. Oil security is largely guaranteed by a liquid global market, backed up by effective emergency measures by the International Energy Agency. Electricity is for long governed by a functioning internal market, made more robust by the Clean Energy Package under the Juncker Commission.

No agreement on cutting revenues to ‘Putin’s war’

Since the Russian invasion of Ukraine and the following Western sanction packages, the EU has not been able to find a common view on the need to cut off Russian gas. Those countries depending on Russian gas, such as Germany, seem to shy away from the ultimate step.

Interesting to note that, with yesterday’s Presidential decree mandating all gas and oil exports to be paid in Ruble, Russia could have introduced a de facto ban on energy exports. The matter certainly demands a deeper assessment, but it seems that by complying with the demand, the EU would effectively kill its own sanctions (because of the Russian Central Bank asset freeze) while burdening the whole price of stabilisation of the roubles against the euro. It seems we may have been lost the initiative, and no one can underestimate the economic and social consequences on the EU of a voluntary or imposed Russian energy ban.

Pressure will be mounting – from within, the EU and the US – on those still reluctant member states the longer the war lasts and the more brutal it gets. Irrespective, the EU may have to face a situation where Russian supplies decrease, for example, due to the sanctions undermining the underlying financial software to pay and settle imports or, more generally, the reluctance of importers to ‘touch’ Russian commodities.

The Russian decision to accept payments in Ruble only may speed up a decision. We may well see another European Council in May to deal with this.

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