EU moves to reduce energy dependency on Russia

European leaders agreed to accelerate their quest for more secure energy supplies at talks today, saying Moscow’s annexation of Crimea made them determined to reduce dependence on Russian oil and gas.

The EU has made progress in improving its energy security since gas crises in 2006 and 2009, when rows over unpaid bills between Kiev and Moscow led to the disruption of gas exports to western Europe.

However, it has not yet managed to reduce Russia's share of European energy supplies. Russia provides around one third of the EU's oil and gas and some 40 per cent of the gas is shipped through Ukraine.

"We are serious about reducing our energy dependency," said European Council president Herman Van Rompuy.

“Around the table, there was a strong sense we need a new way to do energy business,” he told a news conference after two days of summit talks. “Leaders are ready to maximise their collective hand.”

Diplomats said this could mean pooling their purchasing power to negotiate contracts with Moscow instead of each country bargaining for itself and withholding information on pricing and conditions from European partners that has enabled Russia to play the European countries off against each other.

The EU leaders called on the executive European Commission to draw up detailed proposals by June on how to diversify away from Russia in the short and long term.

German chancellor Angela Merkel said the EU could diversify its gas supplies if US president Barack Obama, due in Brussels next week, agreed to relax restrictions on exports of US gas, now in plentiful supply due to the shale gas revolution.

In response to previous Ukraine gas crises, Europe has made some progress in improving cross-border energy networks, boosting storage capacity and making pipeline flows reversible.

It is better placed now to cope with any disruption of Russian exports than in the past. Accelerated planning procedures, for instance, have cut the lead time to build liquefied natural gas (LNG) facilities to process supplies from all over the world.

Leaders are now pushing for renewed focus on the longer process of reducing Europe’s dependence on imports, rather than just moving around what it has. So far, EU reliance on imported oil and gas, especially from Russia, has been rising, not falling.

EU statistics office Eurostat’s energy dependence indicator, showing the extent to which EU relies on imports crept up to 65.8 per cent in 2012 from 63.4 per cent in 2009.

The share of Russian gas rose to around 30 per cent from 22 per cent in 2010, while Russia’s oil imports accounted for around 35 per cent of EU use.

Denmark led the call to ask the European Commission by June to deliver a detailed plan of action, while Britain has circulated its vision of the longer-term measures available.

France and Britain have spearheaded efforts to convince Washington to agree to export more gas to Europe as part of ongoing trade talks with the United States. But analysts are cautious about how much US gas would be shipped to Europe as higher Asian prices are a bigger lure.

Any increase in US exports would have an indirect effect, freeing up more Middle Eastern supplies from Qatar for instance. "What better opportunity for the United States to extend their influence. It is attractive for political reasons, not necessarily economic ones," one EU official close to the discussions said.

As Europe seeks to increase pressure on Moscow over its seizure of the Crimea region from Ukraine, making Moscow pay an economic price is uppermost in leaders’ minds.

Russian gas giant Gazprom gets around $5 billion euros per month from its gas exports to Europe. Although Baltic states and Bulgaria are among the countries most reliant on Russian gas as a share of their energy use, Germany and Italy import the biggest volumes.

Berlin has been a loyal customer for decades and Russia’s Nord Stream pipeline, specifically built to bypass Ukraine, ships Russian gas directly to Germany. But even in Germany, the rhetoric has shifted.

A senior member of Dr Merkel's conservative bloc, Michael Fuchs, told Reuters the decisive question in the debate about sanctions is what would really hurt Russia. "It could really hit Russia if Germany were to buy less gas and oil. A couple of percentage points less would send out an important signal," he said. Europe's focus on Ukraine has pushed down the agenda attempts to agree a wider climate and energy framework for 2030 to replace existing

energy goals, which expire in 2020.

Today’s talks made scant progress towards a final deal, disappointing those saying an early agreement is vital to give investors in low-carbon energy confidence and help reduce the need for imported fossil fuels.

The renewable energy lobby says the Ukraine crisis has strengthened the case for setting a strong target to use more renewables. Others, however, are pushing for nuclear, coal or shale gas, which could also help the EU to become more

energy independent.

Reuters