EU Finally Strikes Deal To Slash Gas Demand As Russia Starts Squeezing Taps Closed

Topline

With the colder months approaching, the EU reached a deal Tuesday for countries to slash gas demand by as much as 15% from August to March, as the bloc tries to wean itself off Russian gas supplies amid its invasion of Ukraine.

Key Facts

The “voluntary reduction” by member states will focus on reducing consumption in the electricity sector and encouraging alternative energy sources, the EU said, and will not prioritize cutting gas for consumers or essential sectors like healthcare.

Energy ministers from across the bloc met in Brussels Tuesday to discuss details of the deal, which had faced pushback from some countries who wanted individual input on the decision.

In efforts to appease some member states, the deal includes exemptions, including for countries who rely heavily on gas to produce electricity but who aren’t synced to the bloc’s electricity system.

The deal follows wrangling by EU diplomats Monday to agree on a figure.

Last week, the EU urged countries to reduce gas use by 15% over fears Russia could cut off supplies to the bloc through the key Nord Stream 1 pipeline.

According to Reuters, gas consumption across the EU has already fallen 5%.

Crucial Quote

Jozef Síkela, the Czech Republic’s trade minister, said Wednesday: “Today’s decision has clearly shown the member states will stand tall against any Russian attempt to divide the EU by using energy supplies as a weapon… saving gas now will improve preparedness. The winter will be much cheaper and easier for EU’s citizens and industry.”

Big Number

40%. That’s how much of the EU’s gas supply Russia was responsible for just before the war.

Key Background

After swiftly imposing sanctions on Russia’s elite over the country’s invasion of Ukraine in February, including President Vladimir Putin, the bloc now appears at his mercy as it tries to untangle itself from key trade links. For months, the EU has been mulling how to lessen its reliance on Russian gas in efforts to limit Russia’s economic and political power. One of the bloc’s first sanctions on Russia involved Germany blocking the approval of the $11 billion Nord Stream 2 pipeline that would have boosted deliveries of Russian gas to the EU. As winter draws nearer and households across the EU face rising gas prices, leaders are scrambling to shore up gas supplies to avoid astronomical costs for households on top of soaring inflation across the EU—but it’s unlikely to replenish the levels normally expected in time. Crucially, a drop in Russian gas supplies would potentially shrink economies in the EU and hobble businesses and industries that rely heavily on it, including metal production, food and drinks manufacturing, paper products and chemicals.

What We Don’t Know

If, and when, Russia will totally cut off its gas supply to the bloc. EU commission chief Ursula von der Leyen last week warned this is a “likely scenario” as the EU first revealed its plan to deal with the crisis. Russia’s state-owned energy giant Gazprom is already turning the taps by limiting gas supplies through the Nord Stream 1 pipeline for repair works, and supplies will fall to just 20% from Wednesday for ongoing maintenance, it claims, pushing gas prices higher. Meanwhile, Ukraine’s President Zelensky has said Russia is triggering a “gas war” with the EU. Some countries have already reduced consumption, and Germany has triggered a three-stage emergency plan to urge consumers to reduce gas use.

Tangent

It’s not just gas—the EU has also made moves to stop buying Russian oil. In May, the bloc announced a partial ban on oil imports from Russia, with a goal to eliminate 90% of oil imports by the end of the year. Russian oil accounted for around a quarter of EU oil imports as of 2021.

Further Reading

‘Russia Is Blackmailing Us’: EU Plans Gas Reduction As Putin Threatens Shutoff (Forbes)

Explainer: What happens if Germany’s Russian gas flows stop (Forbes)

Oil Prices Rise After EU Announces Partial Ban On Russian Imports (Forbes)