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EU Nations Back 15% Gas-Cut Target as Russia Reduces Flows
(Bloomberg) -- European Union countries reached a political agreement to cut their gas use by 15% through next winter as the prospect of a full cut-off from Russian supplies grows increasingly likely.
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Energy ministers meeting in Brussels gave the green light to a proposal to voluntarily cut their gas usage over the next months, the Czech presidency of the EU said in a post on Twitter. The plan makes the 15% target mandatory under an emergency situation -- such as a severe disruption to flows from Russia -- albeit with certain opt-outs for particularly vulnerable nations or those integral to the bloc’s network as a whole.
Hungary was the only nation against the EU decision to cut gas use because it goes against the country’s interests, Foreign Minister Peter Szijjarto said in a statement. Prime Minister Viktor Orban called the EU move “alarming” and “another step toward a war economy” on his Facebook page.
“The most crucial outcome is that we will start saving gas now,” Kadri Simson, energy commissioner, told reporters. “The impact on GDP will be significantly smaller if we start saving now and don’t wait until Russia forces us to do so.”
Simson said work is ongoing to explore “different options to design a gas price cap, in particular in the case of market disruption and rationing of scarce quantities of gas.”
The fast pace of the agreement, with the European Commission first proposing the regulation last week, reflects the rapidly deteriorating gas flows from Russia. Supplies through the key Nord Stream 1 pipeline are set to drop to around 20% of capacity from Wednesday, with Gazprom PJSC saying that one more turbine is due for maintenance and will be taken out of service.
That’s made the chances that EU countries will be able to reach their 80% gas storage filling target even more unlikely, raising the stakes for cutting gas demand. Following the agreement, the rules should enter into EU law over the coming days.
The new rules are “an unprecedented step in European solidarity,” said Sven Giegold, a deputy German economy minister. “Member states that do not import any Russian gas are showing support and have committed to reducing consumption. This has never happened before.”
Concerns on Cuts
In the run-up to the meeting, a number of countries including Italy, Hungary, Poland, Portugal and Spain had raised concerns over the reduction goals, citing demand cuts already achieved, lack of gas connections to other countries and the fact that decisions on energy are usually a national competence.
The Czech Republic, which holds the EU’s rotating presidency, had proposed a number of changes in recent days to the commission’s plan from last week in a bid to bring nations onside.
The revisions included a provision that would increase the number of countries that have to request that a 15% demand-reduction target be made mandatory to five from three, according to a draft seen by Bloomberg. The commission could also propose the emergency measure if it deemed there’s a high risk of a shortage. Both scenarios would also need majority backing from member states to take effect.
Other tweaks included taking into account the level of gas storage in a country as well as the possibility of excluding certain key industries. The rules would also only be set for one year, rather than two as originally outlined. Member states could ask for a lower mandatory reduction under certain criteria based on their interconnections with other nations -- island countries like Ireland for instance.
A halt of Russian gas supplies to the EU could potentially reduce its gross domestic product by as much as 1.5% if the winter is cold and the region fails to take preventive measures to save energy, the commission estimated.
(Updates with Szijjarto, Orban remarks in third paragraph)
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