Putin’s war on energy is testing solidarity between EU nations

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Putin’s war on energy is testing solidarity between EU nations
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Russia’s continuing war in Ukraine is causing a “very, very challenging” situation in Europe, which is testing its countries’ solidarity not only in how they react to Putin’s aggression, but also in how they deal with the aftereffects.

The conflict’s impacts on energy have rippled across Europe: Germany has scrambled to bolster its natural gas storage, French President Emmanuel Macron has encouraged people to cut their gas usage by 10% ahead of winter, and Italy is looking to scale back gas consumption by 7%.

“We have never experienced such a challenging experience,” Paolo Gentiloni, the EU’s economics commissioner, told CNBC on Oct. 12.

“I’m calling [for] European action, European solidarity, because the experience we had in the previous crisis … was that acting together, responding together, you are not only able to avoid divisions among European countries but you have a strong, strong reaction,” Gentiloni said, referring to the unanimous, albeit “slow” procurement and rollout of Covid-19 vaccines in 2021.

Gentiloni also referred to a “common tool” that could be used across the EU to help member states combat the energy crisis.

“I’m not calling for further common debt,” Gentiloni highlights, “because we have a big common debt for what we call next generation EU. I’m calling for a common tool based on loans to face the emergency that we have,” he said.

Divisions in the ranks?

But divisions are starting to show in how countries are approaching the energy crisis.

Poland, Belgium, Italy and Greece are among the countries proposing a gas “price corridor” across Europe in an attempt to tackle soaring prices.

The gas price corridor, “should act as a circuit breaker and disincentive to speculation. It is not meant to suppress prices at an artificially low level,” according to a draft proposal, as reported by Reuters.

But other countries, including Germany, are thought to oppose the plan over fears that capping prices could have negative impacts on energy security.

The corridor is thought to have been discussed on Oct. 7, but no further details have been released.

Meanwhile, Germany has already put provisions in place as winter approaches.

Chancellor Olaf Scholz announced a 200 billion euro ($193 billion) package to subsidize basic consumption for households and small and medium-sized companies on Sept. 30.

But Germany working independently of the wider European community has prompted questions over the country’s commitment to a unified response to the energy crisis, with fears that the package could have a negative impact on the country’s neighbors.

When asked whether Germany should commit to not buying energy ahead of other European countries, Gentiloni said that would be “a very good move.”

“I would say not only for Germany, [but also] for Italy, for other countries that are understandably on their own in looking for energy sources, alternative[s] to Russian fossil fuels,” Gentolini said.

“I’m not criticizing Germany,” Gentiloni emphasized, “but asking for something more from the EU.”

Others have been more direct in their disapproval of Germany’s role in Europe’s energy crisis, including Polish Prime Minister Mateusz Morawiecki.

“This is our collective problem,” Morawiecki said, “it cannot be so, that one country, which is the richest and the most developed in Europe like Germany … can block everything which is now happening,” he said, referring to the proposed gas corridor.

“We don’t want to be patronized by some countries which then behave in a completely different way than they were expected to do just before,” he told CNBC’s Charlotte Reed in an exclusive interview on Oct. 6.

Poland’s Finance Minister, Magdalena Rzeczkowska, took a more balanced approach, saying that while Europe should try to “find common solutions for all” that won’t “disturb the equal playing field in Europe,” she could understand why countries may put forward their own proposals.

“The energy discussions are taking too long,” Rzeczkowska told CNBC’s Geoff Cutmore at the 2022 Annual Meetings of the International Monetary Fund and the World Bank Group in Washington, D.C.

“Poland is [also] doing our own programs, our own solutions, because we cannot wait. But still, we need to be strong, we need to have a coordinated approach,” she said.

Eurogroup President Pascal Donohoe said he too could understand why countries are bringing forward their own policies rather than waiting for an approach with EU-wide approval.

“Every single government is looking at the right measures for their own governments,” he said, also speaking from Washington.

IMF chief economist Pierre-Olivier Gourinchas said he was unable to comment on whether Germany’s plan would work as “we don’t have details yet.”

While specifics have yet to be released, the plans are set to run until 2024, and include electricity and gas price brakes, reactivation of the Economic Stabilisation Fund, which was used to bail out Lufthansa during the pandemic, and a reduction of gas VAT.

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