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EU Allows Get-Out Clause in Russian Gas Cut Deal

Members of the European Union have agreed to reduce their gas use in case Russia cuts off supply, although some nations will be excluded to prevent rationing.

Since the proposal was made last week, EU countries have been in discussions, and they have now decided to voluntarily cut their gas use by 15% between August and March.

The Czech Republic, which is now in charge of rotating the EU chair, tweeted, “This was not a Mission Impossible!”.

However, after initially lacking exemptions, the agreement was softened.

The EU has warned that Russia is “constantly using energy supply as a weapon” and that its goal from the agreement is to save money and stockpile gas before winter.

If supplies run out, the voluntary arrangement would become obligatory.

Some nations, like Ireland, Malta, and Cyprus, who are not linked to the EU’s gas pipelines, would be excluded from any obligatory gas reduction orders since they would not be able to seek alternative supplies.

In order to reduce the possibility of a crisis in the supply of power, the Baltic states, who are not connected to the European electrical grid and mainly rely on gas for electricity production, are also excluded from mandatory objectives.

Countries may also request exemption if they surpass the goals for filling gas storage, if their “important” industries rely substantially on gas, or if their gas consumption has grown by at least 8% in the last year compared to the average over the previous five years.

As the EU seeks to lessen its reliance on Russian gas, Nathan Piper, an oil and gas analyst for Investec, said that there is a “huge political and economic price” that is being reflected in the exemptions for members, which would likely lessen the impact of the measures.

But according to preliminary calculations, the EU as a whole would still lower consumption to a level “that would get us safely through an ordinary winter,” according to Kadri Simson, European Commissioner for Energy.

She also discussed efforts to increase the supply of alternative gas from nations such as Azerbaijan, the United States, Canada, Norway, Egypt, and Israel.

Robert Habeck, the Economy Minister of Germany, said the following before the accord was announced: “Of course, this text now contains numerous concessions. This is how the EU operates.”

The “problem” that all the exclusions may result in “too much bureaucracy so that we are too sluggish in times of crisis,” according to Mr. Habeck, was acknowledged, but he added that the exemptions were “fair.”

Only one member, Hungary, objected to the agreement.

The deal was reached shortly after the Russian energy company Gazprom said it had once again cut gas shipments into Germany to facilitate construction work on a turbine for the Nord Stream 1 pipeline.

Since weeks, the pipeline carrying Russian gas to Germany has been operating much below capacity, and Ukraine has charged Moscow of launching a “gas war” against Europe.

Because these countries refused to follow a Kremlin directive to pay their bills in roubles rather than in euros or dollars, Gazprom has completely stopped supplying gas to Bulgaria, Denmark, Finland, the Netherlands, and Poland.

40 percent of the gas used in the EU last year came from Russia, and since the Russian invasion of Ukraine, European leaders have discussed ways to lessen their reliance on Russian fossil resources.

By the end of this year, the EU decided to ban all maritime imports of Russian oil, but it took longer to get an agreement on gas import restrictions.

Because it imports less than 5% of its gas from Russia, the UK would not be directly harmed by an interruption in the gas supply, but it would be impacted by increased prices on the international markets as demand in Europe grows.

Due to the uncertainty surrounding Russian supply, UK natural gas was trading at almost 350p per therm on Tuesday, a level not seen since early March.

Energy costs in the UK soared by an astounding £700 in April, and a typical household’s annual energy costs are predicted to climb once again to £3,244 in October.

When the agreement was announced, Jozef Skela, the Czech minister of industry and commerce, remarked that “the EU is unified and solidary.”

“Today’s decision has amply demonstrated that the EU’s member states would resist any Russian attempts to split the EU by using energy supply as a weapon, according to the statement.

“Save petrol now to increase readiness. For EU citizens and businesses, the winter will be far less expensive and simpler.

EU nations decided to give priority to strategies that won’t damage homes and vital services like healthcare and defense when deciding how to cut gas use.

The EU listed such solutions as targeted requirements to cut heating and cooling, national awareness-raising efforts, and incentives to stimulate fuel changes in industry.

Ursula von der Leyen, president of the European Commission, described the possibility of Russia shutting off all supply to the EU as a “probable scenario.”

Since Russia invaded Ukraine in February, wholesale gas prices have increased precipitously, increasing consumer energy costs.

Bob Carlson
Bob Carlson
Bob Carlson is a business journalist, with over a decade of experience in the trenches of reporting up-to-date business news for publications all over the world. With a wealth of knowledge at his back, Bob strives to bring the most important insights into the business world for TheOptic daily.
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