Berlin, Brussels Robert Habeck swears by unity. “Europe cannot be divided,” said the Federal Minister for Economic Affairs this week at the meeting of EU energy ministers. But despite all the declarations of solidarity, one thing is clear: the danger that Germany will be alone in a gas crisis is real.
“At the beginning of the corona pandemic, we saw how quickly a crisis can go it alone,” says Klaus Schmidt, Chairman of the Scientific Advisory Board at the Ministry of Economic Affairs. “That has made the crisis considerably worse, which we must not allow to happen again.”
Experts agree: If a large part of the inner-European gas flows dried up, rationing, especially in Germany, would probably no longer be averted. In a letter to Habeck, the 38 economists on the advisory board warn against mere expressions of solidarity. Rather, Germany must create clear incentives for the rest of Europe to actually receive support in the event of a crisis.
“If European cooperation is to work here, Germany will have to approach the other European countries and offer compensation payments,” says the letter, which is available to the Handelsblatt.
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Vice Chancellor Habeck has been working flat out for weeks to secure European cooperation in the event of a gas shortage. Solidarity agreements with several neighboring countries are on the way. LPG from alternative countries of origin is to be delivered via the Netherlands and France. Berlin and Vienna are now filling the empty storage facility in Haidach, Austria, which is primarily intended to supply Bavaria.
Germany becomes the price driver
Nevertheless, the Advisory Board warns that if the situation escalates, none of this could be worth much. Because Germany has an original problem: the reduced but still relatively high dependence on Russian gas makes the Federal Republic a price driver. The failure of deliveries from Russia is mainly responsible for higher prices because German consumers are so dependent on it. And Germany needs all the more expensive liquid gas as a replacement.
The triggers are therefore often German, but the whole EU is feeling the consequences in the form of high market prices. And so there is a risk, writes the advisory board, that other countries will stop deliveries to Germany. Individual countries could seal themselves off and simply cap their gas prices. The decoupling would make it easier for them because they would no longer be influenced by the price driver Germany. Schmidt calls this scenario “the greatest risk of a gas crisis”, which must be avoided at all costs.
That is why the government must “prepare now,” the letter says. In order to implement gas solos in practice, Schmidt proposes more cooperation in purchasing: “It would be good if the member states gave up part of their sovereignty in gas procurement and distribution to Brussels.” In the course of this, a mechanism for the compensation money could also be installed will.
The discussion about gas solos is still at an early stage. Government circles said on Wednesday that this was not yet an issue in Berlin. In Brussels, however, Greek Prime Minister Kyriakos Mitsotakis initiated a similar compensation debate this week.
New EU mechanism under discussion
In a letter to EU Commission President Ursula von der Leyen, he proposed an EU mechanism to compensate companies for reducing their gas and electricity consumption. Ideally, this should be financed from national and European funds.
From the Greek point of view, the EU gas emergency plan adopted on Tuesday is not sufficient. This stipulates that all countries will voluntarily reduce their gas consumption by 15 percent by the end of March. In an emergency, the EU Commission should propose mandatory savings targets.
Mitsotakis writes that financial incentives are better suited than the prospect of impending supply disruptions to encourage industry to save. Specifically, Athens proposes auctions at national level, in which large energy consumers offer to save a certain amount of gas or electricity in exchange for compensation. The EU Commission should then select the best offers. Since the reduction in demand has a dampening effect on gas prices, the idea is self-financing, says Mitsotakis.
Greek Energy Minister Kostas Skrekas also presented the proposal at the special meeting of the 27 energy ministers in Brussels on Tuesday. According to Greek information, several states signaled support – including the large countries Germany, France, Italy and Spain.
Observers expect that after the summer break the issue will continue to move up the agenda. “We need a European compensation mechanism,” says economist Simone Tagliapietra from the Bruegel Institute in Brussels. This is the only way the EU can ensure that, in the event of a Russian supply freeze, the available gas will be distributed within Europe in such a way that no country experiences an acute supply crisis.
New pipeline construction works for gas supply are underway in Greece.
(Photo: dpa)
Spain, for example, could cede its cheap pipeline gas from Algeria to Italy, which is also connected to Algeria by a pipeline, explains Tagliapietra. From there, the gas can be forwarded to Austria and Germany, where the need is greatest. Spain could then easily cover its own needs with liquefied natural gas (LNG) because it has many terminals. However, since LNG is more expensive than pipeline gas, Spain must be compensated for the price difference.
According to the same principle, residents of Europe’s largest gas field in Groningen, the Netherlands, could be compensated if The Hague were to restart production. The gas field is actually supposed to be shut down by the end of the year because it triggers too many earthquakes. There is no national interest in ramping up production again, but there is a European interest, says Tagliapietra.
The gas field once produced 50 billion cubic meters of gas per year, currently it is less than five billion. Increasing production to 25 billion cubic meters would make a big contribution against a gas shortage in Germany, says Tagliapietra. “We cannot expect countries to increase their gas production or divert gas to Central Europe if they themselves are not threatened by a possible Russian supply freeze.” Therefore, a financial incentive is needed to ensure this behavior.
He advocates setting up an EU fund in the tens of billions, which will be managed by the Commission. There are three options for financing: The funds could come from the EU budget, from national budgets or from joint borrowing. “There is a real danger that countries will not share their gas in a crisis,” says the expert. “We need insurance.”
More: EU countries adopt gas emergency plan