News

European Council March 2022 summit: conflict in Ukraine is a test of European unity and its transatlantic solidarity

Leading up to the European Council 24-25 March 2022 summit it was clear that coming up with a plan to tackle the rising energy prices would be tough. Particularly, Southern EU Member States have demanded concrete actions at European level for a longer time. The conflict in Ukraine and subsequent sanction regime put on Russia have put this topic even higher on the agenda. The situation intensified by Putin’s announcement to only accept rubles as a means to pay for Russian gas imports. The summit was also marked by the presence of US President Joe Biden, who also attended part of the European Council Meeting and made clear that Europe and the US can count on each other in difficult times.

EU’s starting position

Through the new REPowerEU initiative, The European Commission wants to ensure that Europe’s gas supplies are sufficiently filled for next winter. As with the purchase of vaccines during the corona crisis, the Commission wants to start negotiations on behalf of EU countries with more reliable suppliers of gas via pipelines and LNG ships such as the United States, hoping to enforce larger contracts and better prices thanks to the collective power of EU Member States. Northern EU Member States have voiced skepticism about this proposal. The Commission’s proposal also includes the option to replace gas with hydrogen in the future, which gives Europe the opportunity to accelerate the transition to the more sustainable renewables.

North-South division on price interference

Leading up to the European Council March 2022 summit, Southern EU Member States – primarily Spain and Portugal – advocated a price ceiling or an intervention in the functioning of the electricity market, an option that Northern Member States such as the Netherlands and Germany have voiced a dislike for. Member States can help companies with state aid. However, this costs governments a lot of money that goes into unproductive investments, they argue. France seems to have tried to stay in a position to seek consensus. The Commission announced that in this regard, it will release a new report in May with possible medium-term measures for the electricity price.

On the measures to cap gas and electricity prices, The French Secretary of State for European Affairs, Clément Beaune, stated on 22 March in preparation of the summit that the discussion was more difficult. Also, an embargo on Russian energy products was an option to be explored. The EU leaders put forward a request to the energy ministers to examine the measures which the Commission proposed to deal with rising prices. On the purchase of gas, LNG and hydrogen they already reached a commitment to work together.

Energy (in)dependence high on the agenda

One of the first major announcements following the European Council March 2022 summit was a commitment by President Biden to increase the American gas supply to Europe to support the EU in its effort towards energy independency from Russia. He vouched the US could replace 10% of the Russian gas export to Europe. It has to be noted, however, that environmentalists raise questions about the environmental impact of said American gas, most of which consists of shale gas. The Green group in the European Parliament already criticized the Commission’s proposals for mandatory filling of gas storage facilities, stating that this can only be a short-term and interim solution in the current crisis. They argue that the Commission must accelerate the approval procedures for subsidies for energy efficiency measures.

Fit for 55 services

On 25 March, the last day of the summit, an embargo on Russian oil and gas was discussed. However, there did not seem to be broad support for such an extensive measure. The morning of 25 March was devoted on how the EU could reduce the Union’s dependence on Russian fossil fuels and how it could deal with rising energy prices. The proposal to cap gas prices is very divisive, while the announcement by the European Commission on the joint gas purchases seems to be more consensual.

Special compromise on price caps

The discussion on price caps on gas was resolved by giving Spain and Portugal special concessions. Because of their specific energy situation, as the Iberian Peninsula is not fully integrated with the European power network, the two countries will be allowed to temporarily exercise a higher control on their domestic energy market. The Commission will, however, maintain the right to control the Spanish and Portuguese emergency measures in order to ensure they do not impede general European interests.

Towards unity on joint actions and strategy

Lastly, the EU Member States announced their intention to pool together the purchasing power of the member states in the international energy market and will therefore explore the possibility of joint energy purchases, specifically for LNG, hydrogen and gas. This will also be coupled with more investments in gas storage facilities. For the long term, it was clearly confirmed that an end of European dependency to Russian energy will be the common strategic objective. A direct embargo on Russian energy products was not made concrete.

Sanctions, data and more

The Council decided to not further increase the sanctions put in place on the Russian economy. This can be interpreted in relation to concerns raised by certain heads of state that the sanctions should not hurt the European economy more than they do the Russian. The Council did confirm that an extra sanction package in the form of a boycott of Russian oil is ready in case Russia crosses the red line of using chemical weapons during the conflict.

Additionally, the Council announced the conception of a Solidarity Trust Fund to support Ukraine. The fund will be open to all sorts of donations and the specifics have been discussed with Ukrainian president Zelensky. Lastly, the EU and the US have confirmed their commitment to negotiate an agreement on data flows and privacy between the two markets. This can be interpreted in relation to the recently published European Data Act that requires such multilateral agreements to facilitate data sharing.

What to expect following the European Council March 2022 summit?

An issue put on the table that remained unresolved is that of decoupling the gas price from the energy market. European Commission President Ursula von der Leyen announced this will be looked at more concretely in May. We can expect this, as well as the REPowerEU agenda to remain in focus for the next months. Furthermore, we can expect more precise information on the German plan to quickly decouple from Russian energy and the Spanish and Portuguese governments are expected to publish details on their emergency energy measures. Any initiatives regarding security and the energy crisis will be dealt with on top of the current legislative priorities. As of this moment, the Commission has not announced that any of the current revisions and or proposals, such as those part of the Fit for 55 package, will be delayed.

Want to know more about these latest developments and how they impact your organization? Please get in touch with us.