European leaders managed to agree on joint gas purchasing during a Thursday summit in Brussels but were not able to agree on imposing a price cap on Russian gas. The bloc has been considering the move over the past months – and their plans met backlash from Moscow, as Russian gas giant Gazprom adamantly said it would stop deliveries if Europe restricts the prices.
Dr Gal Luft, co-director of the Institute for the Analysis of Global Security and a senior adviser to the United States Energy Security Council, told Sputnik what options are on the table for the EU, and described how the bloc is risking tanking its own economy by introducing new sanctions against Moscow.
Sputnik: Why, in your view, has the US-led agenda to impose a price cap on Russian gas failed to prevail again?
Dr. Gal Luft: This idea was a fantasy to begin with. Gas prices are tied to long-term contracts and any unilateral breach of the contract would lead to a suspension of supply which would only deepen the current energy crisis of Europe.
Sputnik: In the event of a gas price cap being agreed upon, what effect would the measure have on electricity bills in the EU?
Dr. Gal Luft: This depends on the season and on the level of gas in national reserves. But under any scenario, Europe will continue to operate under a high-price environment with all the attendant economic ramifications.
Sputnik: Given that Russia has repeatedly said that it would not sell gas at its own expense, what circumstances would the price cap entail for the socioeconomic situation in Europe?
Dr. Gal Luft: A prolonged high energy price environment will effectively deindustrialize Europe. Europe is currently engaged in self-mutilation, effectively deindustrializing itself. Its manufacturing sectors will become uncompetitive and businesses will begin to migrate to more hospitable locations.
Sputnik: What practical alternatives to Russian gas supplies does the EU have on its table?
Dr. Gal Luft: In the near term, the only alternative to Russian gas is the increased use of coal and nuclear power. When it comes to gas there are no good options. Even today Europe’s LNG infrastructure cannot absorb the new gas supplies from US and Qatar and scores of tankers are waiting to be offloaded.
Sputnik: Do you believe it is possible to convince existing gas suppliers, such as Norway, to sell gas at a reduced price?
Dr. Gal Luft: Norway, Europe’s second biggest gas supplier behind Russia, has been raising production but when it comes to prices it is not an EU country and is not legally obligated to reduce its prices. It may agree to provide a discount as an act of goodwill but this will not make a dent in Europe’s gas bill.
Sputnik: What are the positive aspects for Europe in the EU leaders’ inability to agree on the gas price issue?
Dr. Gal Luft: European governments will increasingly adopt a go-it-alone attitude or risk civil uprising and political turmoil.
Sputnik: The EU roadmap on solving the gas crisis suggests establishing a market correction mechanism to “limit episodes of excessive gas prices”. How do you assess this agreement; is it a breakthrough? Will the initiative help the EU cope with the crisis?
Dr. Gal Luft: Market correction mechanism is a nice way of saying government subsidization through increased debt. It’s an exercise in self-deception that will only lead to more inflation and higher fiscal deficits.
In short: like lemmings marching toward the sea, Europeans are in the process of committing economic suicide. They have no real solutions for the near term and by the time they’re done fielding midterm solutions the economic damage will have been severe and irreversible.