Will the EU leaders’ summit be able to pass the adequacy test?

MOSCOW, 15 Oct 2021, RUSSTRAT Institute.

What is happening now with energy prices in Europe may seem like “another planet”. It is quite obvious that the crisis is caused by the implementation of a comprehensive European program for the refusal of long-term contracts “with a single supplier”, combined with the desire to maximise the transfer of the energy market to the exchange mechanism of “free trade”.

Its authors proceeded from the conviction that the European Union, under any circumstances, will retain the status of a leading market, where all exporters will strive. Thus, it will be possible to pit them against each other and get a stable drop in selling prices. To do this, it is necessary to introduce “free market mechanisms” as widely as possible.

However, now it turns out that the ideas about the essence of these “mechanisms” are clearly erroneous. And most importantly, the basic attitude about the indisputability and inviolability of the status of the leading market for Europe is incorrect.

It turned out that “free suppliers” are guided by their own interests, therefore they easily sacrifice Europe in favour of more profitable sales in Asia. The problems of the European economy are of little interest to them. They ignore even the risks of the heating season for the population being disrupted. Accordingly, someone must be appointed guilty. And it is what the summit of the heads of the EU member states scheduled for October 21-22, 2021 to be busy with.

According to the European Commissioner for Energy, the key topics of discussion at it will be: investigation into the causes of the crisis itself in the European energy sector; creation of a mechanism for general gas purchases to replenish the EU’s strategic gas reserves, as well as the composition of a set of short-term measures to support citizens and businesses.

This means three things. Firstly, the leadership of the European Union continues to remain within the framework of the old ideas about the indisputability of European self-exclusivity. In the framework of which they are “right” anyway, and the problems are caused by the malicious actions of “someone else”. 

Considering how often and in unison Russia is now accused in Europe of “dishonesty as a supplier” for the reason that Gazprom is in no hurry to expand gas supplies beyond the volume of long-term contracts, most likely the conclusions of the summit on this issue are quite predictable already now. Prices have risen due to a shortage of supply, so the supplier is to blame. And this is Russia. Italy and Germany will object to such a definition, but the EU authorities will ignore their opinion.

Secondly, Brussels intends to use the crisis to strengthen its own integral power in the European Union. The idea of creating a general procurement mechanism is aimed at this, so that the entire EU as a whole acts as a buyer before the conditional Gazprom (the Russian export monopolist is not named in the document, but it is clearly suspected). In this way it is possible to combine the demand of 27 participating countries and to demand on this basis substantial discounts “from the market price”.

In theory, this initiative looks attractive to Europeans. Especially for limitrophes, who are faced with the consequences of the price peak especially strongly, and almost have no way to influence it on their own.

While in practice, this will further expand the possibilities of the European Commission to twist the hands of national governments on the issue of “compliance with Eurodiscipline”.

As the history of 2020 has shown during the rise of the coronavirus pandemic, the advisory mechanisms of Europe are clearly giving up before the complexity of the task of “dividing structurally critical resources”. Often without providing not only the proper level of efficiency of specific solutions, but also without developing them at all.

In such circumstances, the most cohesive bureaucracy, which the European Commission is today, usually takes over.  And those who allocate resources actually own the power.

The operational recommendations formulated by the European Commission now for the national governments of the EU countries – to compensate losses from rising energy prices to private consumers and businesses  from state budgets, but not to sign any long-term contracts with Gazprom – confirm this assumption a little more than completely.

Thirdly, the heads of state of the European Union at the summit will face the question: either decompose the current EU mechanism to the level of a “voluntary collective farm of independent states united only economically” of the period of the early 1990s, as Poland requires, but then there will be need to fight the price crisis in the “everyone for themselves” mode; or to strengthen the internal consolidation of a united Europe, while agreeing to an even greater transfer of powers from national governments to the central apparatus of the European Union in Brussels (the European Commission and the European Parliament).

And it is this that will become the main test of the authorities of the current Europe for adequacy in a week and a half, automatically specifying also the entire strategic line of the EU in politics and economy for the next 6-8 years.

Institute for International Political and Economic Strategies – RUSSTRAT

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