While more than 1,500 police officers are busy securing the Palace of Versailles, the 27 leaders of the European Union who will meet there are preparing to break the unity behind the economic sanctions imposed on Russia. Faced with its own dependence on Russian gas, Europe should not follow suit with the US embargo on imports of Russian gas in retaliation for the invasion of Ukraine. In Versailles, where the summit will take place on Thursday and Friday under the chairmanship of French President Emmanuel Macron, the discussions promise to be tough as this embargo could hit the economy of the old continent hard.
Two weeks ago, when defining the financial sanctions imposed on Moscow, Brussels took care to spare the giants Sberbank and Gazprombank, through which several hundred million dollars pass per day in order to supply Europe with oil. and gas. Although the Nord Stream 2 gas pipeline project has been abandoned by Germany, Nord Stream 1 continues to deliver its annual billion cubic meters of gas.
Because if Russian gas accounts for only 8% of gas imports from the United States, a country largely self-sufficient in this area since the exploitation of shale gas, it represents, depending on the year, up to 40% of imports. Europeans. Since Angela Merkel’s decision to phase out nuclear power in 2011, the share of Russian gas in German imports has risen from 36% to 55%.
Chancellor Olaf Scholz was also clear. “Europe has deliberately exempted energy imports from Russia from sanctions,” he said. At present, our energy supply for heat generation, mobility, power supply and industry cannot be ensured in any other way. »
Get out of addiction
The same goes for countries like Hungary, Slovakia and Bulgaria, where these imports often exceed 70%. “We fully support the existing sanctions, but we cannot afford to stop Russian oil and gas imports,” Bulgarian Prime Minister Kiril Petkov said. In France, only François Hollande and Yannick Jadot’s Les Verts propose an immediate embargo. Even if it means “requesting the French to reduce their heating next winter”, writes the former Prime Minister.
“An immediate European embargo on Russian gas would not be easy, but it is nevertheless possible”, according to Thomas Pellerin-Carlin of the Jacques Delors Institute. According to him, however, it would require a general mobilization that we do not see emerging in the European Union.
According to AFP, the 27 gathered in Versailles on Thursday should therefore be content to commit to getting out of dependence on Russian gas and oil imports. An exit of which it is not certain that they will specify the calendar.
Last week, the International Energy Agency (IEA), attached to the OECD, proposed a dozen measures to urgently reduce gas consumption. The IEA hoped to reduce this consumption by a third in one year. A few days later, the European Commission did the same. There was talk of cutting off two-thirds of its Russian natural gas imports by 2023.
According to investment bank Goldman Sachs, an immediate embargo would cost the euro zone 2.2% of its GDP. “The repercussions would be particularly strong in Germany, whose dependence on Russia is disproportionate”, explains the German economist Daniel Stelter in the German weekly Focus. “If the international community boycotts Russian gas and oil, inflation will exceed 10%, and our economy will collapse suddenly,” he summarizes.
According to the UBS bank, stopping Russian gas supplies to Europe would take at least four or five years. Although Italy imports only 40% of its gas from Russia, the Minister for Energy Transition, Roberto Cingolani, estimates that weaning will take at least two or three years. Even the United Kingdom, which imports barely 3% of its gas from Russia, remains cautious. If getting out of Russian gas “is absolutely the thing to do […]we must take it step by step, ”said Prime Minister Boris Johnson, yet an unwavering ally of Washington.
In the meantime, if European countries claim to have enough stocks for the coming weeks, they are already worried about next winter. This is why the European Commission intends to present a proposal making it compulsory to fill gas tanks to at least 90% of their capacity before winter. It will be a question of knowing at what price.
Another proposal on the table of this European summit: Brussels could repeat the recent experience which saw for the first time the European Union massively issue debt securities to deal with the pandemic. This time it would be a question of coping with the repercussions of the war in Ukraine and the sanctions which could seriously penalize the Europeans.
The double jeopardy?
As recalled in Release economist Philippe Chalmin, Europe is currently subject to a “double penalty”. It must not only face historic increases in oil and gas, but it must also buy them with a euro that is largely depreciated on the foreign exchange market.
One could even speak of a “triple penalty” since in Europe, because of the rules of the single energy market, the price of electricity is indexed to that of gas. On the wholesale market, the price of electricity is fixed on that of the last kilowatt-hour produced. However, we first turn wind turbines, dams and nuclear power. When demand is higher, gas-fired power stations are used, which thus determine the final price. This rule has been described many times as “aberrant” by the Minister of the Economy, Bruno Le Maire, since it prevents France from benefiting from the low-cost electricity that its nuclear power plants have been producing for years.
Faced with European reprisals, Moscow was not afraid to threaten itself to freeze its deliveries to European Union countries. “We have the right to take a similar decision and impose an embargo on gas arrivals via the Nord Stream 1 gas pipeline,” said Russian Deputy Prime Minister responsible for Energy, Alexander Novak. According to him, in the event of an embargo on Russian oil, the price of a barrel of oil could reach 300 US dollars.