Energy ministers reach deal on EU-wide 15% gas reduction plan

By Jorge Liboreiro & Alice Tidey

Published on 26/07/2022 - 12:25•Updated 19:06

Member states rushed to secure exemptions to the target to reflect national circumstances, like LNG availability.

Energy ministers from EU countries have reached a deal on an unprecedented energy plan that will introduce a voluntary 15% reduction in gas consumption across the bloc from now until next spring.

The reduction could become mandatory in case of extreme gas shortages, although many countries would be automatically spared from making painful sacrifices under a long list of agreed-upon exemptions.

The draft plan was unveiled last week by the European Commission in response to Russia's continued manipulation of gas flows in retaliation for the Western sanctions imposed over the invasion of Ukraine. Dwindling supplies of Russian gas are raising fears of an imminent recession and a winter crisis.

The Czech Republic, which holds the rotating EU Council's presidency, announced the breakthrough on Tuesday, at exactly 12:00 PM CET, in the midst of a ministerial meeting in Brussels.

"This was not a Mission Impossible!," the presidency's Twitter account wrote.

"Negotiations were not easy. At the end, everybody understands that sacrifices are necessary and that we will have to share the pain," Jozef Síkela, the Czech minister for industry and trade, told reporters.

"We send a strong signal, not only to Vladimir Putin, who once again failed to divide the European Union, but also to our citizens."

Following the Commission's original text, ministers agreed that all 27 member states should cut down their gas consumption by 15% from August until March 2023. The first phase will be voluntary, based on coordination, fuel switching, temperature limits and information campaigns.

Businesses, public buildings and private households will all be asked to contribute to the collective undertaking, which could help save up to 45 billion cubic metres (bcm) of gas.

But in the event of a drastic reduction of Russian gas or exceptionally high demand, the 15% target will become mandatory under an innovative Union Alert system, triggered through a qualified majority vote.

This will open the door for rationing across the bloc, forcing hand-picked energy-intensive factories to shut down for a certain period of time. Households and essential services, such as hospitals and schools, will remain protected – unless the crisis turns desperate.

A long list of opt-outs

The Commission's ambitious plan immediately came under attack by several member states, particularly those from the South, who denounced it as disproportionate, unfair and ineffective.

The last days saw a flurry of negotiations to introduce amendments and secure carve-outs to the 15% reduction should it turn mandatory. Countries pushed to make the target more malleable and tailored to national circumstances.

The final compromise kept the 15% goal intact but injected a long list of exemptions and opt-outs to the Union Alert system.

Countries who are not interconnected to their neighbours or are not synchronised with the European electricity system will be spared from the compulsory reduction.

This will benefit insular nations – Malta, Cyprus and Ireland – and the Baltic states, which are still hooked to the Russian power grid and will likely need to boost their gas supplies if the Kremlin cuts them off.

"Asking the same from every member state overnight, it seems even a bit unfair to me," said Riina Sikkut, Estonia's minister for economic affairs and infrastructure. "But I'm sure that if we all put in the effort that it's asked, we can do enough to successfully survive the winter."

Another derogation will apply to those countries who demonstrate they use their liquefied natural gas (LNG) infrastructure to import from non-Russian suppliers and then export to other member states "to the fullest."

Spain, Portugal, Italy, Belgium and Greece were among those who campaigned for the tweak.

"This package doesn't fully satisfy anybody," said Teresa Ribera, Spain's minister for the ecological transition, ahead of Tuesday's meeting. "But it can be a very positive meeting point."

Ribera, who has been one of the most critical voices against the Commission's draft, struck a more conciliatory tone in Brussels but insisted the principle of solidarity should be based on flexibility and efficiency.

"We all understand that when somebody asks for help, we have to help," Ribera told reporters.

Derogations to the mandatory 15% reduction could be also be requested by those who overshoot their gas storage filling targets – minimum 80% by 1 November –, those who use gas molecules in critical industries – such as fertilisers and chemicals –, and those who have increased their gas consumption by at least 8% in the past year and cannot therefore be asked to make a sudden cut.

"This ensures the EU will not harm its economy," said Síkela, calling the final text a "strong compromise."

'Bye, bye, Russian gas'

The long list of special provisions means the bloc will not be able to reach the 45 bcm gas reduction the Commission originally estimated and will end up slashing something between 30 bcm and 45 bcm, depending on how many derogations are granted.

An initial analysis by the Bruegel think tank shows that, at the present moment, up to 18 countries could benefit from some sort of opt-out or partial exemption, including the bloc's four largest economies.

Besides the actual substance of the plan, member states also moved to change the procedure to trigger the Union Alert system, giving themselves a greater say to the Commission's detriment.

Still, the executive welcomed the Council's agreement, achieved in less than a week.

"By acting together to reduce the demand for gas, taking into account all the relevant national specificities, the EU has secured the strong foundations for the indispensable solidarity between member states in the face of the Putin's energy blackmail," Commission President Ursula von der Leyen said in a statement.

The meeting in Brussels took place just a day after Gazprom, Russia's state-owned energy multinational, announced it would further reduce natural gas flows through the Nord Stream 1 pipeline to just 20% of capacity, citing equipment repairs.

Von der Leyen said Gazprom's latest decision lacked any "justifiable technical reason" and validated the need to move forward with the EU-wide emergency plan.

For his part, German Vice-Chancellor Robert Habeck, who attended Tuesday's meeting, warned that so many exemptions to the 15% target could cause "too much bureaucracy" and slow down the bloc's response in times of crisis.

"But the exemptions, in themselves, they are reasonable, they can be explained," Habeck admitted. "It’s very important that Europe stays united and is able to send a strong signal."

Claude Turmes, Luxembourg's energy minister, said the bloc will "stand together" and overcome "this winter, and then, next winter."

"And then anyway, it's bye, bye, Russian gas," he quipped.

The Union Alert regulation will apply for one year, until May 2023.

Hungary votes no

Despite the calls for European unity to face Russia's blackmail, Hungary voted against the legislative file during Tuesday's meeting, making it the only country to break ranks.

"This is an unjustifiable, unnecessary, unworkable and harmful proposal that completely ignores national interests," Hungarian Foreign Minister Peter Szijjarto told reporters.

Szijjarto said that energy supply security was "the responsibility of national governments," calling the legal basis "dubious".

"Will someone in Brussels explain to Hungarians that there is gas in Hungary that individuals and companies cannot use? This is nonsense," he said.

In contrast with the EU's plan to become less reliant on Russia's energy sources, Szijjarto visited Moscow last week to negotiate an additional 700 million cubic metres of gas on top of the 4.5 billion cubic metres delivered to Budapest each year before the conflict in Ukraine.

The Czech presidency did not comment on Hungary's negative vote.

This article has been updated to include new developments.

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