EU plans for life without Russian gas amid inflation spike

·3 min read
© AFP/John Thys

EU leaders met on Friday to prepare for further cuts in Russian gas, limit the impact on inflation and seek alternative supplies.

A day after celebrations over setting Kyiv on the road to membership of the bloc, Friday's summit in Brussels was a sober reflection on the economic impact of Russia's invasion of Ukraine.

French President Emmanuel Macron hailed the EU’s prompt collective response to Russia’s invasion of Ukraine as France’s rotating presidency of the bloc draws to an end.

Following unprecedented Western sanctions imposed over the invasion, a dozen European countries have so far been thumped by cuts in gas flows from Russia."It is only a matter of time before the Russians close down all gas shipments," said one EU official ahead of Friday's talks.

"The notion of cheap energy is gone and the notion of Russian energy is essentially gone and we are all in the process of securing alternate sources," Latvian Prime Minister Krisjanis Karins said, adding governments must "support those portions of society that suffer the most".

German Economy Minister Robert Habeck warned his country was heading for a gas shortage if Russian supplies remained as low as currently, and some industries would have to close come winter.

The EU relied on Russia for as much as 40 percent 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.

Inflation was the main concern in morning talks among leaders on the EU's economic situation, but there were also positive comments about growth and the summer tourism season, an EU official said.

Inflation in the 19 countries sharing the euro currency has shot to all-time highs above 8% and the EU's executive expects growth to dip to 2.7 percent this year.

According to a draft statement, EU leaders will say that "in the face of the weaponisation of gas by Russia", the European Commission should find ways to secure "supply at affordable prices".

"We need to start buying energy collectively, we need to implement price caps and we need to make plans together to get through the winter," Belgian Prime Minister Alexander De Croo said as he arrived at the summit.

"If we don't pay attention then the whole EU economy will go into a recession with all its consequences."

The bloc responded to the war with uncharacteristic speed and unity, but some sanctions, such as a planned embargo on Russian oil imports, have repercussions for its economies.

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

But that adds up to hefty bills for already stretched coffers, leaving many scrambling to find a solution, and EU countries disagree on a bloc-wide solution to address soaring prices.

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

(with Reuters)

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