EU leaders seek ways to give support amid high energy prices

European Union leaders have agreed to phase out dependency on Russian gas, oil and coal imports “as soon as possible” and decided to draw up a plan soon to support the continent’s economies as they face skyrocketing energy prices amid a crisis aggravated by the war in Ukraine.

Heads of state and government, who gathered at the Versailles palace, west of Paris, said in a statement that the strategy will involve accelerating the reduction of an overall reliance on fossil fuels, diversifying supplies and routes for gas and oil, and speeding up the development of renewable energy. They asked the EU’s executive arm, the European Commission, to make proposals by the end of May.

The commission offered suggestions this week to reduce EU demand for Russian gas by two-thirds before the end of the year and phase out its reliance on Russian energy by 2027. Its president, Ursula von der Leyen, stressed that increased supplies of liquefied natural gas, or LNG, delivered by ship will mean the EU is able “to replace quite a part of the Russian gas”.

She also encouraged Europeans to move toward energy savings. “Reducing the energy consumption … by 450 million Europeans makes a big chunk,” she said.

Leaders said they will make decisions about how to support people’s purchasing power and companies’ competitiveness at the next EU summit in Brussels at the end of the month.

Europe was already facing a tricky test before Russia’s invasion because of an outlook for slowing economic growth accompanied by surging inflation, which is being driven by high energy prices.

The commission predicted last month that the bloc’s economic growth would slow from 5.3% last year to 4% this year and 2.8% in 2023.

Since the invasion and intensifying sanctions against Moscow, European officials have signalled those numbers are now too optimistic and will be lowered in the next set of economic forecasts scheduled for May.

French President Emmanuel Macron, who holds the rotating presidency of the EU Council, is pushing for “joint European investments” modelled after the 750 billion-euro recovery plan approved last year in an unprecedented move to help European economies through the Covid-19 pandemic.

Europeans “have an interest in financing” investments together to help protect the bloc from the consequences of war, Mr Macron said Friday.

With most of the pandemic money yet to be disbursed to national capitals, some government heads including Dutch Prime Minister Mark Rutte signalled that it was premature for any separate EU financial initiative to tackle the war’s economic fallout.

There are also divergences on how the EU should tackle the energy price surge.

Italian Premier Mario Draghi said among matters discussed was the possibility of capping the price of natural gas.

“There are various opinions. Some backed this measure. I think the European Commission at the next Council meeting will present a report on the pros and cons,” he said.

Greece proposed a six-point plan that includes a price-cap mechanism to address spiking energy costs.

Spain and France — the latter of which derives about 70% of its electricity from nuclear energy — are calling for splitting apart electricity and natural gas prices. The French argue that the influence of natural gas costs in setting wholesale electricity prices is disproportionate.

The European Commission said this week that it will discuss with member states the possibility of granting temporary aid to companies affected by the energy price crisis. It also said it is considering “options for emergency measures” such as temporary price limits.

The EU imports 90% of the natural gas used to generate electricity, heat homes and supply industry, with Russia supplying almost 40% of EU gas and a quarter of its oil.

Although the latest European sanctions against Russia — including a ban on transactions with the Russian central bank — are unprecedented, the bloc has been careful to avoid disrupting the flow of energy.

But as Russia intensifies its attacks on Ukraine, calls are growing for the EU to join the US in immediately banning Russian energy.

“It’s a very difficult situation that, on the one hand, we have these financial sanctions that are very hard but on the other hand, we are supporting and actually financing Russia’s war purchasing oil and gas and other fossil fuels from Russia,” Finnish Prime Minister Sanna Marin told reporters on Friday. “We have to get rid of the fossil fuels coming from Russia as soon as possible.”

Some EU countries are much more dependent on Russian energy than others, creating a lack of consensus in the bloc necessary for any European fossil-fuel embargo against Russia.