EU Leaders Endorse Joint Purchases to Replace Russian Gas

(Bloomberg) — European Union leaders backed the idea of member states joining forces to buy natural gas to replenish depleted reserves and win lower prices in a tight market.

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The political decision at a summit in Brussels on Friday paves the way for the the EU’s executive arm and interested member states to start planning for collective bargaining with international partners. The bloc seeks to replace this year nearly two-thirds of gas imports from Russia, its biggest supplier, after Moscow’s invasion of Ukraine.

“The energy mix and concrete situation in our members is very different but we need to work together pool our weight,” European Commission President Ursula von der Leyen said at a news conference following the two-day summit. “We have an enormous purchasing power. Therefore, I welcome that we will now use our collective bargaining power. Instead of outbidding each other, driving prices up, we will pool our demand.”

The notion of common purchases, first floated in the EU several years ago, was resurrected after an energy crunch amid limited supplies from Russia pushed gas and electricity prices to record levels. With customers reeling from high bills and companies warning about sky-rocketing costs, governments are facing mounting pressure to seek new ways to remedy the crisis.

“We’ve never done it. So what we’ve enacted today is a political choice built on a voluntary basis because these are not government contracts,” French President Emmanuel Macron told reporters. “It is not the government but companies that sign these contracts.”

The leaders agreed on Friday that the joint purchase platform will also be open for Western Balkan countries and three associated partners: Ukraine, Moldova and Georgia, according to a joint statement after their meeting. Pooling demand would help ensure LNG, gas and hydrogen at affordable prices in partnerships with suppliers in the Mediterranean region, Africa, Middle East and the U.S.

Under a new energy strategy outlined by the commission earlier this week, the imports from Russia could be replaced by growing renewables and greater energy efficiency, as well as imports of pipeline gas and liquefied natural gas from other countries, according to the commission. To that end, the EU executive proposed creating a task force on common gas purchases at the union level.

German Chancellor Olaf Scholz said the idea to voluntarily bundle purchasing power and buy natural gas on the market could help keep prices down. Governments would now have to get the private sector on board for this push as in many cases companies were in charge of sealing such agreements, he told reporters after the two-day summit.

EU heads of government also had a heated debate on emergency measures to curb soaring prices, including imposing a cap on wholesale markets and decouple gas and power prices. While southern members, led by Spain, have urged the EU to intervene, Germany, Netherlands and other nations were skeptical about such a move.

In a compromise solution, the leaders agreed to task the commission and national governments to urgently reach out to energy companies and discuss how to use various short-term options to address the gas price contagion effect on power markets.

Additionally, countries such as Spain and Portugal, which have large shares of renewable energy and few power interconnections with the rest of the bloc, were given an option to apply to be able to introduce price caps.

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