Energy: In Prague, the EU tries to escape the trap of disunity

Energy: In Prague, the EU tries to escape the trap of disunity

European Union leaders will try to bridge their disagreements in Prague on Friday to outline a common response to soaring energy prices caused by the war in Ukraine.

The leaders of the 27, meeting in the Czech capital’s castle, will discuss new measures proposed by European Commission President Ursula von der Leyen.

Energy strategy is dividing the Franco-German couple and lively debates are expected on the day after a more consensual day dedicated to the launch of the European Political Community.

The old continent’s economy is entirely dependent on its hydrocarbon imports and is suffering like no other from the supply cuts imposed by Russia.

But finding a common answer is struggling as interests diverge between countries that back nuclear power, like France, those that back coal, like Germany, or those historically linked to Russian hydrocarbons in central Europe walk.

– Temptation of the Solo Rider –

Frustrated by Europe’s slowness, EU member state leaders risk giving in to the temptation to go it alone.

Chancellor Olaf Scholz (left) and French President Emmanuel Macron in Prague on October 6, 2022 (AFP – Ludovic MARIN)

Germany last week announced a €200 billion plan to protect its economy, sparking an outcry. France had also unilaterally lowered fuel prices at the pump.

“Some countries think they can do it on their own, with their own budget. You can do that for a few months. Then it’s a race to see who has the deepest pockets. But at some point even the deepest pockets have their limits,” warned Belgian Prime Minister Alexander De Croo on Thursday.

In a letter to the Twenty-Seven on Wednesday, von der Leyen agreed to “consider a cap on gas prices” paid to exporting countries. 15 Member States, including France, require this.

However, Germany is hesitant about this still-unclear mechanism, believing it could exacerbate supply difficulties. It poses “significant risks,” the Bruegel Institute recently assessed, judging that it “could increase demand for gas while undermining Europe’s ability to attract much-needed supplies.”

Another topic of confrontation: the reform of the European electricity market, which penalizes consumers with high tariffs linked to those of gas.

Ms von der Leyen proposed on Wednesday to discuss a temporary cap on wholesale electricity prices, a measure that would be a first step before the structural measures demanded by Paris in particular.

“The discussion must lead to a message of unity,” said the Elysée. But the concrete results should wait a few weeks.

– OPEC snubbed –

The Europeans also have to deal with the reluctance of their suppliers.

Twenty-three oil-producing countries, led by Saudi Arabia, on Wednesday announced sharp cuts in their production to prop up prices, a boon to Moscow and a snub to Westerners.

The case highlights buyers’ difficulties in imposing their prices on suppliers, even when they are “friends”. Federal Economics Minister Robert Habeck also complained on Wednesday about the “astronomical” prices that countries like Norway and the USA charge for their gas.

EU Commission President Ursula von der Leyen on October 6, 2022 in Prague (AFP - Ludovic MARIN)
President of the European Commission Ursula von der Leyen, in Prague on October 6, 2022 (AFP – Ludovic MARIN)

The EU, which has decided to halt its purchases of Russian oil by sea from December 5, is also likely to have the greatest difficulty in getting third countries to accept the G7 cap on Russian oil prices in order to sanction Moscow .

Ms von der Leyen also suggests developing joint gas purchases, but also going beyond the €20 billion in European subsidies already decided on infrastructure to get rid of Moscow.

It’s urgent. Since the invasion of Ukraine in February, wholesale prices for gas and electricity in the EU have increased 15-fold, Bruegel said. At the end of September, European employers warned of an “imminent” threat to the survival of thousands of companies.

So far, the 27 have agreed to share in the energy producers’ “super profits” to help consumers, as well as jointly reduce their electricity and gas consumption.

European leaders must also reiterate their continued support for Ukraine on Friday.

French President Emmanuel Macron hinted Thursday night that he could announce new arms shipments, particularly Caesar arms.


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