The European Union plans to live without Russian gas amid rising inflation

  • ‘The idea of ​​cheap energy is gone,’ says the Latvian prime minister
  • Inflation in the euro zone is at an all-time high
  • Germany has warned that some industries will close this winter

BRUSSELS, June 24 (Reuters) – EU leaders on Friday warned that “cheap energy is gone” and agreed to increase production to further reduce Russia’s gas, accusing Moscow of “arming” with energy supply pressure, while Germany warned it would be partially shut down. Industry.

A day after the celebrations to form Kiev as a member of the group, Friday’s summit in Brussels was a sober response to the economic impact of Russia’s invasion of Ukraine, warnings of rising prices and a “severe winter”.

“Inflation is a major concern for all of us,” European Council President Charles Michel told a news conference after the two – day summit.

Sign up now for unlimited free access to Reuters.com

“Russia’s war of aggression raises the prices of food, energy and commodities,” he said, adding that the leaders agreed to closely coordinate their economic policy responses.

The summit agreed to some decisive action, but the leaders tasked the European Commission to find additional ways to protect “supply at affordable prices” due to “gas disarmament by Russia”.

European Commission President Ursula von der Leyen said the search for alternative supplies was already underway, with US LNG supplies up 75% this year and Norway’s pipeline gas supplies up 15% over the previous year.

Besides, the EU executive will present to the leaders a plan for more gas cuts from Russia in July, adding: “Believe in the best, be prepared for the worst. That is what we are doing now.”

The European Commission will bring proposals and options to be discussed at the next EU summit in October, including alternative market designs that could cut off gas from setting market prices for electricity, Van der Leyen said.

“We are working on different models to look at the market design, not just how to control energy or electricity prices,” he said.

One controversial issue is whether governments should take action to control prices.

Spain and Portugal have closed gas prices on their local electricity markets this month, but other states have warned that price limits could destabilize energy markets and further expel state treasuries if governments were forced to pay the difference between prices in international gas markets.

“Hard Winter”

The leaders of 27 EU countries blamed the war, which began exactly four months ago, on falling prices and global growth.

“The idea of ​​cheap energy is gone and Russia’s idea of ​​energy is gone. We are all engaged in protecting alternative resources,” said Latvian Prime Minister Krisjanis Karins. “Governments must support the most vulnerable sections of society.”

Dozens of European countries have so far been hit by cuts in gas flows from Russia, following unprecedented Western sanctions imposed on the invasion.

“It is time for the Russians to shut down all gas exports,” an EU official said ahead of Friday’s talks.

German Economy Minister Robert Hebeck has warned that if Russia’s supply is even lower, his country could face gas shortages and some industries will close in the winter.

“Companies must stop production, lay off their workers, supply chains will collapse and people will sink into debt to pay their heating bills,” he told Der Spiegel. read more

The EU relied on Russia for 40% of its gas needs before the war – rising to 55% for Germany – leaving a huge gap to fill the already tight global gas market.

Inflation has risen above 8% all time in the 19 euro-sharing countries, and the EU executive expects growth to slow to 2.7% this year.

Paschal Donohoe, head of the Eurogroup, warned that “the Black Sea must admit the danger we face if inflation is embedded in our economies.”

“If we do not pay attention, the entire EU economy will go into recession with all its consequences,” warned Belgian Prime Minister Alexander de Cruz.

Sign up now for unlimited free access to Reuters.com

Report by Jan Strupczewski, Phil Blenkinsop, Marine Strauss, Bart Meijer, Francesco Guarascio, Kate Abnett, Charlotte Van Campenhout, Benoit Van Overstraeten, Gabriela Baczynska; Written by Ingrid Melander and Jan Strupczewski; Editing by John Salmers, Alex Richardson and Nick McPhee

Our standards: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published.