EU Resolves to Collectively Buy Energy, Reduce Dependence on Russia

A worker walks through a liquified natural gas facility in Italy. On Friday, the EU announced that its member states could jointly purchase and store gas. Clara Vannucci/NYT

After summits with NATO and the G7, the European Union resolved on Friday to jointly purchase and store gas, hydrogen, and liquid natural gas (LNG). 

The culmination of these meetings, known officially as the Versailles Declaration, outlined a series of policies intended to address rising energy prices whilst reducing the bloc’s dependence on Russian exports.

Any EU member, along with several other European countries - including Ukraine, Georgia and Moldova - will be free to coordinate with one another to negotiate, buy and store natural gas and oil. 

A proposal to cap energy prices was also floated around over the weekend, but was quickly shot down by Germany and the Netherlands, who argued that doing so would distort the market and ultimately lower incentives for exporters to ship gas to Europe.

The EU will also seek to increase its energy stockpile for the winter, aiming to fill its underground storage facilities to 80% capacity by November. By 2023, the bloc hopes to increase this number to 90%. At the moment, current storage levels sit at around 25%.

In theory, this will increase the continent’s collective buying power and drive down energy prices.

For months, global energy prices have skyrocketed due to colder weather, tightening supply chains, and increased demand as countries around the world continued to lift pandemic restrictions. Now, Russia’s invasion of Ukraine has not only contributed to rising energy prices, but has forced the EU to reconsider its long-standing reliance on Russian energy.

Russia is easily the EU’s largest source of energy, providing nearly 40% of the European Union’s natural gas and 25% of its crude oil. However, each individual member state’s reliance and energy mix varies, with countries such as France receiving only 20% of its gas imports from Russia, whereas Germany - the bloc’s largest nation - received 55% of its imported natural gas from Russian suppliers in the past year.

A Reuters graph depicting who buys Russia’s oil and gas. Photo credit: Reuters Graphics

The European Union has also begun a search for alternative sources of gas and oil. On Friday, the US announced that it would send the EU 15 billion cubic meters of LNG by the end of the year, representing nearly 12% of the former's current exports and 10% of what the latter receives from Russia. Seeking to position itself as a long-term alternative to Russia, the US will aim to send Europe as much as 50 billion cubic meters of LNG to Europe by 2030. 

This plan, however, will do little to satisfy European energy demands in the short run. At the moment, American export capacity has already peaked and European import capacity is nearing its limit.

With this in mind, the EU has reached out to other gas exporters around the world like Qatar, Nigeria, Egypt, and Azerbaijan, along with importers such as Japan and South Korea to see if any nation is willing or able to redirect energy supplies to the bloc.

The energy crisis facing Europe seems to many as the perfect storm, with numerous factors influencing the exorbitant energy prices affecting each individual, household and company. Curbing oil and gas prices will be a herculean task, requiring the sustained and collective will of each member of the EU in coordination with their partners. Anything short of a miracle may be too little, too late. Even then, a miracle is unlikely to truly soften prices in the short run.