Europe agrees to compromise gas curbs as Russia squeezes supply

Model of natural gas pipeline, EU and Russia flags, July 18, 2022. REUTERS/Dado Ruvic/Illustration

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  • EU ministers agree to emergency gas use cuts
  • Voluntary cuts would become binding in supply emergencies
  • Final deal exempts numerous countries, industries
  • EU racing to save gas as Russia slashes supply

BRUSSELS, July 26 (Reuters) – European Union countries approved a weakened emergency plan to curb their gas demand on Tuesday, after striking compromise deals to limit the cuts for some countries, as they brace for further Russian reductions in supply.

Europe faces an increased gas squeeze from Wednesday, when Russia’s Gazprom (GAZP.MM) has said it would cut flows through the Nord Stream 1 pipeline to Germany to a fifth of capacity. read more

With a dozen EU countries already facing reduced Russian supplies, Brussels is urging member states to save gas and store it for winter for fear Russia will completely cut off flows in retaliation for Western sanctions over its war with Ukraine.

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Energy ministers approved a proposal for all EU countries to voluntarily cut gas use by 15% from August to March.

The cuts could be made binding in a supply emergency, but countries agreed to exempt numerous countries and industries, after some governments had resisted the EU’s original proposal to impose a binding 15% cut on every country. read more

German Economy Minister Robert Habeck said the agreement would show Russian President Vladimir Putin that Europe remained united in the face of Moscow’s latest gas cuts.

“You will not split us,” Habeck said.

Hungary was the only country that opposed the deal, two EU officials said.

Russia’s Gazprom has blamed its latest reduction on needing to halt the operation of a turbine – a reason dismissed by EU energy chief Kadri Simson, who called the move “politically motivated”.

Russia, which supplied 40% of EU gas before it invaded Ukraine, has said it is a reliable energy supplier.

It also says the invasion, began on Feb. 24, is a “special military operation”.

BINDING VERSUS EXEMPTIONS

The EU deal would exempt from the binding 15% gas cut countries such as Ireland and Malta that are not connected to other EU countries’ gas networks.

News of the latest reduction to Russian supply has driven gas prices higher, adding to the cost of filling storage, while creating incentives to use less.

Early on Tuesday, the benchmark front-month Dutch contract rose almost 10% and is more than 450% higher than a year ago, although down from record highs touched shortly after Russia began its invasion of Ukraine.

Countries that meet an EU target for filling gas storage by August could face weaker targets – softening the cuts for roughly a dozen states, including Germany and Italy, based on current storage levels.

They can also exempt the gas they use in critical industries, such as energy-intensive steelmaking, from the target.

In addition, those with a limited ability to export gas to other EU countries can request a lower target, provided they export what they can. That could include Spain, which does not rely on Russian gas, and has said cutting its own demand would not help other countries since it lacks infrastructure capacity to share spare fuel.

“Everyone understands that when someone asks for help, you have to help. Help can be in different ways, but I believe that the spirit of collaboration will prevail,” Spanish Energy Minister Teresa Ribera said on Tuesday.

The EU plan has tested countries’ solidarity, with Greece and Poland among the countries opposed to mandatory gas cuts. read more

Polish Climate Minister Anna Moskwa said the deal would impose no constraints on Poland’s gas use, and opposed the idea that a country should curb its industrial gas use to help other states facing shortages.

Some EU diplomats raised concerns that the number of opt-outs in the final regulation may mean it fails to ensure countries save enough gas for winter.

Although governments including Germany, Europe’s biggest gas user, have increased their energy saving measures, EU countries have reduced their combined gas use by only 5%, despite months of soaring prices and dwindling Russian supplies.

“Fifteen percent will probably not be enough given what the Russians have just announced,” Irish Environment Minister Eamon Ryan said.

The deal requires backing from a majority of countries to trigger the binding gas cuts, after many opposed the Commission’s original proposal that it has the final say.

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Reporting by Kate Abnett, Philip Blenkinsop, Robin Emmott, Marine Strauss, Gabriela Baczynska; Editing by Philip Blenkinsop, Matthew Lewis and Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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