It was clear by 2014, when Vladimir Putin first invaded Ukraine, that Europe would have to protect itself from being held hostage to foreign energy suppliers. In that year the idea of an “energy union” gained rhetorical support from leaders, some of whom continued with the hard work of making their energy pipelines more resilient.
To their chagrin, Germany made itself more, not less, exposed to Putin by pushing forward the Nord Stream 2 pipeline. This was not even the worst mistake in European energy policy: more foolish still was the failure to secure alternatives, so that energy trade need not mean geopolitical dependence.
One area of neglect was in allowing the expansion of renewable electricity to be partially offset with a decline in nuclear energy. Another was not planning sufficient infrastructure to fully tap the global liquefied natural gas market. Above all, there was too little attention paid to improving the flow of all forms of energy in any direction across Europe, so that no supplier could gain a chokehold on any particular member country.
The danger some warned against is now a reality clear to all. Putin’s weaponisation of energy has caused a massive international wealth transfer from energy-importing countries to exporters such as Russia itself. Politically more perilous is redistribution from consumers to producers of energy even within countries. The fact that electricity is priced at the marginal generation cost has allowed the Kremlin to drive up power prices to extreme levels as well.
Millions of energy users are facing serious hardship. This could produce political paralysis, distraction from Ukraine (as Putin clearly hopes), and even civil unrest. European governments are keenly aware of the risks — “three years of these prices, and we have Hitler”, as one official put it to me.
That is why it is essential for countries to agree on more and deeper unified energy policy. There was always a conflict between the EU’s common energy market — connected, if imperfectly, by physical and financial links — and national energy policy prerogatives. For example, the whole notion of national autonomy over a country’s energy mix becomes incoherent the more electrons cross borders. The desire for national control has delayed the removal of physical bottlenecks in the continent’s energy flows. The price is being paid today in the risk that it may be hard to get enough energy to the right places in an emergency, even if overall supply is adequate.
While the efforts made by many countries to secure new, non-Russian, gas supplies have been impressive, these could prove beggar-thy-neighbour successes if not accompanied by a much more integrated common policy. The risks of political division are legion: governments outbidding each other for the same scarce supplies, as German chancellor Olaf Scholz has highlighted; countries tempted to limit their power exports, as mooted by Norway; or differential price support schemes undoing the level playing field in the EU’s single market.
Such risks should sound realistic because it is only two years since they last materialised. In the pandemic, countries at first rushed to hoard medical supplies. The differing resources allocated to business support schemes threatened to unravel the single market. But remember, too, that within months, EU countries signed up to joint vaccine procurement and a common recovery fund.
Putin’s invasion of Ukraine is as much of an external common shock as coronavirus. The signs are that Europe is staying true to the sense of community that prevailed then. The EU has agreed sanctions on energy. Earlier plans for greening the energy system have been pushed through and reinforced. New plans to boost energy security and connectivity and to save energy have been laid.
The ideas put forward by the European Commission last week, and the encouragement they received from energy ministers on Friday, are the latest welcome step. Brussels rightly wants governments to capture windfall profits for the most targeted support possible while letting markets work, and to keep the incentives for greater efficiency. In contrast, the UK’s choice is to cap prices for everyone. Above all, the EU’s policies show an understanding that if each tries to fix their energy crisis on their own, they will not solve it at all.
Benjamin Franklin’s warning that we will “hang together or hang separately” applies to Europe today. If EU leaders can hang together through a tough winter, they will finally be building the energy union they need. And if the UK knows what is in its best interests, it will join the effort.