Desk Report
Published: 26 Jul 2022, 05:32 pm
Model of natural gas pipeline, EU and Russia flags, July 18, 2022 || Photo: REUTERS
European
Union countries approved a weakened emergency plan to curb their gas demand on
Tuesday, after striking compromise deals to limit the cuts for some countries,
as they brace for further Russian reductions in supply.
Europe
faces an increased gas squeeze since Wednesday when Russia's Gazprom (GAZP.MM)
has said it would cut flows through the Nord Stream 1 pipeline to Germany to a
fifth of capacity.
With
a dozen EU countries already facing reduced Russian supplies, Brussels is
urging member states to save gas and store it for winter for fear Russia will
completely cut off flows in retaliation for Western sanctions over its war with
Ukraine.
Energy
ministers approved a proposal for all EU countries to voluntarily cut gas use
by 15% from August to March.
The
cuts could be made binding in a supply emergency, but countries agreed to
exempt numerous countries and industries after some governments had resisted
the EU's original proposal to impose a binding 15% cut on every country.
German
Economy Minister Robert Habeck said the agreement would show Russian President
Vladimir Putin that Europe remained united in the face of Moscow's latest gas
cuts.
"You
will not split us," Habeck said.
Hungary
was the only country that opposed the deal, two EU officials said.
Russia's
Gazprom has blamed its latest reduction on needing to halt the operation of a
turbine - a reason dismissed by EU energy chief Kadri Simson, who called the
move "politically motivated".
Russia,
which supplied 40% of EU gas before it invaded Ukraine, has said it is a
reliable energy supplier.
It
also says the invasion, which began on Feb. 24, is a "special military
operation".
BINDING
VERSUS EXEMPTIONS
The
EU deal would exempt from the binding 15% gas cut countries such as Ireland and
Malta that are not connected to other EU countries' gas networks.
News
of the latest reduction to Russian supply has driven gas prices higher, adding
to the cost of filling storage, while creating incentives to use less.
Early
on Tuesday, the benchmark front-month Dutch contract rose almost 10% and is
more than 450% higher than a year ago, although down from record highs touched
shortly after Russia began its invasion of Ukraine.
Countries
that meet an EU target for filling gas storage by August could face weaker
targets - softening the cuts for roughly a dozen states, including Germany and
Italy, based on current storage levels.
They
can also exempt the gas they use in critical industries, such as
energy-intensive steelmaking, from the target.
In
addition, those with a limited ability to export gas to other EU countries can
request a lower target, provided they export what they can. That could include
Spain, which does not rely on Russian gas, and has said cutting its own demand
would not help other countries since it lacks the infrastructure capacity to share
spare fuel.
"Everyone
understands that when someone asks for help, you have to help. Help can be in
different ways, but I believe that the spirit of collaboration will
prevail," Spanish Energy Minister Teresa Ribera said on Tuesday.
The
EU plan has tested countries' solidarity, with Greece and Poland among the
countries opposed to mandatory gas cuts.
Polish
Climate Minister Anna Moskwa said the deal would impose no constraints on
Poland's gas use, and opposed the idea that a country should curb its
industrial gas use to help other states facing shortages.
Some
EU diplomats raised concerns that the number of opt-outs in the final
regulation may mean it fails to ensure countries save enough gas for winter.
Although
governments including Germany, Europe's biggest gas user, have upped their
energy saving measures, EU countries have reduced their combined gas use by
only 5%, despite months of soaring prices and dwindling Russian supplies.
"Fifteen
percent will probably not be enough given what the Russians have just
announced," Irish Environment Minister Eamon Ryan said.
The
deal requires backing from a majority of countries to trigger the binding gas
cuts after many opposed the Commission's original proposal that it has the
final say._Aljazeera