EU moves to cut Russian energy dependence and curb cost crisis

Discussions on electricity prices follow Biden announcement of deal for US to supply LNG

The European Union moved to end its dependence on Russia for energy imports with a deal with the US to boost liquified natural gas shipments, while agreeing to review its pricing system for electricity blamed for high costs.

US president Joe Biden and European Commission chief Ursula von der Leyen jointly announced a deal for the US to supply 15 billion cubic metres of liquefied natural gas (LNG) to the EU this year to reduce reliance on gas from the east.

It is part of EU plans to phase out all Russian fossil fuel imports by 2027 due to its invasion of Ukraine and cut its dependency on Russian gas by two thirds this year, and reflects a tightening of the transatlantic relationship due to the war.

“Putin has issued Russia’s energy resources to coerce and manipulate its neighbours . . . He’s used the profits to drive his war machine,” Mr Biden told reporters as he announced the deal.

Dr von der Leyen said it was a “big step” in reducing dependency and that imports of LNG from the US would reach 50 billion cubic metres annually by 2030.

“We want, as Europeans, to diversify away from Russia, towards suppliers that we trust, that are friends, and that are reliable,” she told reporters.

The EU began scouring the world for alternative gas supply as Russian troops began massing on Ukraine’s borders months ago, seeking to refill depleted gas storage facilities believed to have contributed to soaring energy prices.

The LNG is intended largely to help the countries most dependent on Russian gas, and will not come to Ireland for now, as it sources natural gas from the Corrib and the North Sea and does not currently have structures in place for the liquid-form gas.

The deal will only go part of the way to help the EU ease off gas from Russia, which currently supplies 40 per cent of its needs. Switching to LNG is also complex, requiring different infrastructure and transport, instead of the gas pipeline infrastructure that currently criss-crosses Europe.

Leaders stressed that green ambitions had not been forgotten, amid concerns that addressing climate change is receding in priority due to the war.

In a sign of a broader strengthening of relations, the EU and US also announced an agreement in principle for a new data transfer agreement to replace a “Privacy Shield” arrangement that was struck down by the EU’s top court in 2020. While seen as a boost for business, privacy campaigners are likely to be watchful towards what protections the new deal offers.

The EU is set to hold a summit with China next week, which may prove a test of whether closer ties with the US will lead to a hardening of positions towards Beijing, something Washington has long called for.

After Mr Biden departed Brussels, where he had attended back-to-back Nato, G7 and EU summits, the 27 EU national leaders remained in talks for hours over energy, and whether a cost crisis could be curbed by intervention on the electricity market.

The leaders agreed to task the European Commission with identifying how to stop the price of gas setting a floor for all electricity costs, as in the current pricing system, and to examine whether prices could be capped.

Ireland tabled an amendment to protect its current derogation on VAT rates, Taoiseach Micheál Martin said.

The summit had agreed “a very strong commitment to reduce dependency on Russian gas, and oil, and coal”, he told journalists. “I think that represents a very fundamental shift, which is brought about by this war.”

Naomi O’Leary

Naomi O'Leary

Naomi O’Leary is Europe Correspondent of The Irish Times