EU plan for a life without Russian gas a priority as leaders meet

BRUSSELS, June 24 (Reuters) – European leaders will discuss on Friday how to respond to soaring energy prices and the threat of a complete Russian gas cut, accusing Moscow of “weaponising” energy via a supply squeeze that Germany says could partly shut down its industry this winter.

A day after celebrations of putting Kyiv on the path to joining the bloc, Friday’s summit in Brussels was to be a sober reflection on the economic impact of Russia’s invasion of Ukraine. Read more

According to a draft summit statement seen by Reuters, the leaders of the 27 European Union countries will blame the huge price spike and slump in global growth on the war that began exactly ago four months.

Following the unprecedented Western sanctions imposed following the invasion, a dozen European countries have so far been hit with cuts in gas flows from Russia.

“It’s only a matter of time before the Russians stop all gas supplies,” an EU official said ahead of Friday’s talks.

German Economy Minister Robert Habeck has warned that his country is heading for a gas shortage if Russian supplies remain as low as they are now, and that some industries are expected to shut down this winter.

“Companies would have to stop production, lay off their workers, supply chains would collapse, people would go into debt to pay their heating bills,” he told Der Spiegel magazine, adding that this was part of Russian President Vladimir Putin’s strategy to divide the country. . Read more

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

‘ARMING THE GAS’

According to a draft statement seen by Reuters, European leaders will say that “in the face of Russia’s weaponization of gas”, the European Commission should find ways to guarantee “supply at affordable prices”.

EU countries have already poured billions of euros in tax cuts and subsidies to combat soaring energy prices.

But it represents heavy bills for already bloated coffers, leaving many scrambling to find a solution, and EU countries disagree on a bloc-wide solution to deal with the price spike.

Spain and Portugal capped gas prices in their local electricity market this month, but other states warn price caps would disrupt energy markets and further drain government coffers. if governments had to pay the difference between the capped price and the price on international gas markets.

“We have to start buying energy collectively, we have to put price caps in place and we have to make plans together to get through the winter,” Belgian Prime Minister Alexander De Croo said on Friday upon arriving at the summit. of the EU.

“If we are not careful, the whole EU economy will go into recession with all its consequences.”

The bloc has responded to the war with unusual speed and unity, but some sanctions, such as a planned embargo on Russian oil imports, are impacting its economies.

Inflation in the 19 countries sharing the euro has reached all-time highs above 8% and the EU executive expects economic growth to fall to 2.7% this year.

Eurogroup chief Paschal Donohoe warned the bloc must “recognize the risk we could face if inflation takes root in our economies”.

“If inflation becomes a real and lasting part of our economies in the years to come, the challenge we face with the standard of living and the cost of living will only grow in the years to come. a very difficult challenge.”

Rome has called on European leaders to come together again for a one-off meeting in mid-July to discuss ways to deal with rising petrol prices, but there are no plans to do so for the moment, an EU official said.

Another EU official, however, said some European leaders were considering the possibility of holding an additional summit in July to discuss broader economic issues.

Reporting by Phil Blenkinsop, Marine Strauss, Bart Meijer, Francesco Guarascio, Kate Abnett, Jan Strupczewski; Additional reporting by Miranda Murray in Berlin, Gianluca Semeraro in Rome; written by Jan Strupczewski, Phil Blenkinsop and Ingrid Melander; edited by John Chalmers, Sam Holmes and Alex Richardson

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