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Politics

Wie Europa ohne russisches Gas auskommen kann

Sep 8, 2022 Daniel Gros

BRÜSSEL/VALLETTA: Während der letzten Monate sind die Gas- und Strompreise in Europa um fast 100 % in beispiellose Höhen gestiegen, dann um ein Drittel gesunken und nun – nach Russlands Ankündigung, den Betrieb von Nord Stream 1, seiner Gaspipeline nach Deutschland, auf unbegrenzte Zeit auszusetzen – erneut in die Höhe geschossen. Viele europäische Regierungen haben auf die wilden Preisausschläge an Europas Energiebörsen mit Schuldzuweisungen an die Märkte reagiert. Doch den Boten der schlechten Nachricht zu erschießen ist nie der richtige Ansatz.

Für die europäischen Politiker ist die extreme Volatilität der Energiemärkte der Beweis, dass diese Märkte nicht länger rational operieren. In Wahrheit jedoch entwickelt sich Erdgas zu einem knappen Gut, und die Energiepreise reagieren lediglich darauf. Russlands Schließung von Nord Stream 1 war keine Überraschung angesichts der Tatsache, dass die Füllstände der europäischen Gasspeicher rasch steigen und der russische Präsident Wladimir Putin weiß, dass er geopolitisch an Einfluss verlieren wird, falls Europa auf einen Winter ohne russisches Gas vorbereitet ist.

Das Ausmaß des Problems ist enorm. Bevor es in der Ukraine einmarschierte, bediente Russland etwa 30 % von Europas Gasbedarf. Seit Februar waren die europäischen Länder gezwungen, diesen Verlust durch Energiesparen und Importe aus anderen Quellen auszugleichen.

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0 Comments on this paragraph, 10 Comments on this article

Alex Aslanidis Sep 15, 2022

Hey, look, another terrible "article" by Daniel Gros. Remember when this guy used to write in favor of austerity all the time? Now he writes about promoting another form of poverty, an energy related one. Of course one suspects that Gros is a wealthy man, so he won't subject himself to the same sacrifices that he wants to subject the poor. If there's one constant in his "articles", it's this one, how much he hates the poor.

Anyway, on to Europe's energy problems. They can be solved extremely easily by terminating the common electricity market. This includes: 1) the Target Model, 2) the "market coupling" between countries, 3) the carbon taxes, 4) the pay-as-clear model which couples power prices with gas (who even thought of that one?). These measures will drop electricity prices considerably once and for all.

While we are at it, we should also terminate the other common European thing, the common currency. It doesn't work, it never did, and it never will. Let's accept it and move on.
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César Rodríguez Gabilondo Sep 13, 2022

I respectfully disagree, Mr. Gross. Even if the total amount of gas produced does not grow, if Russia sells now its natural gas to China and India at discount prices of course, what are the previous suppliers to China and India going to do with their gas? Sell it, of course. It may be to Europe or to Latam. In any case, all natural gas produced must be sold or burned, and only Putin is willing to burn some gas to show off while on camera. If sales people do their job, and we always do, we will have enough gas, I am positive.
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vic lai Sep 11, 2022

The affected EU countries in need of expensive non-Russian oil and gas imported from abroad in the foreseeable future, can keep buying them from other friendly countries, through the help of a continued and much-enlarged issuance of new common Euro-denominated EU notes and bonds in the global financial markets.
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On July 17, 2020, a 4-day long face-to-face summit meeting was convened by the EU countries led by Germany and France, which finally led to the formation of a next-generation-EU Revival Fund worth 750 billion Euro, to cope with the aftermath of the pandemic in the EU, which marked the first-ever formation of a common Euro-denominated EU bond in Europe's history.
From then on, the common debts of the EU can and will be monetized by her central bank, the ECB, resembling and competing with the similar federal-government debt monetization by the Fed (aka QE) in the US.
It's much more crucial for the ECB to monetize the common EU bonds than to monetize the individual EU national bonds.
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Today, due to all the current EU problems created by the ongoing Ukraine War, a similar meeting should urgently be reconvened, and a much greater amount of common relatively long-term EU notes and bonds should be newly issued to the global financial markets, and the raised funds should be allocated pro-rata to the affected EU nations, to help
(i) subsidize the energy bill payments of the affected EU households, to prevent them from taking to the streets,
(ii) lend at zero or very low interest rates to the affected EU corporations which have adversely been affected by the sky-high energy prices,
(iii) give or lend at low interest rate to the affected energy utilities to cope with their margin calls in the energy derivative markets,
(iv) finance the coming rearmament of NATO and the gradual replacement of US military troops by local NATO troops in the whole area of NATO,
(v) the foreign buying of the new EU common bonds means a massive inflow of capital into the EU, and hence the Euro will be greatly supported, and so will soon re-appreciate to above parity with the US dollar.
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There's really no need to create incentives for the EU residents and corporations to use less energy, because an arguably better idea is for the EU as a whole to import more expensive energies from the non-Russian rest of the world in the coming decades, year-in and year-out, by turning the whole of EU into a net deficit trading block like today's US, thereby keeping pumping Euros to the rest of the world.
The Euros so pumped out will gradually form a Euroeuro (offshore Euro) market that will be competing healthily with the current Eurodollar (offshore US-dollar) market.
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The new common Euro-bonds so issued and circulated, which will also be competing fiercely with the good old US treasuries in the global financial market, can
(a) similarly serve as one of the world's most-craved-for safe financial assets,
(b) suitably be monetized by the ECB (since over-monetization will lead to runaway inflation in the EU countries, as in today's US).
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In the past , one main impediment to the formation of a new EU Fiscal Union resembling the US Treasury has been the objection from the northern EU core countries which never want to subsidize the problematic southern peripheral EU countries (like the 5 PIIGS countries).
But today, thanks to the energy crisis caused by the Ukraine War, even the core EU countries like Germany and France are nolw in big trouble, and so the coming inter-EU-nation transfer payments wil be more fairly distributed among all the needed EU countries than previously thought.
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Note that the resulting transformation of the whole EU trading block into a net-importing "nation" in the coming decades will also help rebalance today's unbalanced global economy, since today's US can no longer afford to continue to act as the world's unique major net-importer.
If so, the ECB will also be as star-like as today's US Fed.
Which also means, the current crisis in the EU is actually a blessing in disguise for the whole European continent.
(The eventual breaking out of the Ukraine War can therefore be viewed as the US's attempt to stop the EU from forming a vital common Fiscal Union of her own.)
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- vic lai Sep 12, 2022
  
  It goes without saying that the EU's coming massive net energy imports from other non-Russian countries, year-in and year-out, should be paid almost all in Euros, and no longer in US dollar.
  The current Euro crisis can be cleverly turned into a chance for the EU to deepen the coming internationalizatin of the Euro.
  Which also means, the EU can actually decelerate her ongoing pace of expensive replacement of old and dirty fossil energies by new and clean renewable energies.
  ---
  The past failed lesson of internationalization of Japan's Yen is that, the manufacturing capacity of Japan alone, however massive, had not been strong enough to help internationalize her Yen.
  Even if the foreigners can use their obtained Yens to buy Japan's cars, the total amount of cars that can be produced by Japan, even as big as 10 million cars per year, was always limited by the highest productive capacities of Japan's car manufacturers themselves, and some foreign countries may not want Japan's cars or other Japanese exported merchandises.
  But almost every foreign country under the sun needs energy of one kind or another, and the past failure of Japan to link her Yen to Saudi's oil and other energies in the global energy markets should have been the main reason for the eventual failure of the Yen's successful internationalization during Japan's economic heyday.
  ---
  So, if China's Yuan and the EU's Euro want to challenge the global supremacy of the US dollar, both of them have to link themselves to the global energy products, just like Russia's current linking of her gas to her Ruble.
  It seems very likely that China is going to link her Yuan to the oil (gas, food, and other commodities) produced by both Saudi Arabia and Russia, and so the EU should catch up with China.
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  - vic lai Sep 13, 2022
    
    Better still, the new natural gas transportation ports, regasification facilities, and gas- and oil-powered electricity power plants (which will all be financed by new massive issuance of common EU treasuries by the EU) should all be located at the PIIGS countries, with newly-built gas and oil pipelines (and with China-like new extra-high-voltage electricity transmission lines) connecting the southern EU countries with the rest of the EU, which in essence means
    (i) turning the southern EU countries in the future into the new Canada (economic hinterland) of the rest of the EU, replacing Russia's traditional role in this respect,
    (ii) for the EU trading block as a whole, turning the southern EU countries all into net trading surplus countries, and the rest of the EU into net trading deficit countries, relative to each other.
    ---
    (A) Doing so, the good old weakness of the original design of the Euro will be resolved once and for all, since the originally less competitive southern EU countries no longer need to indulge in persistent internal devaluation to try hopelessly and painfully to regain their external competitiveness vis-a-vis the originally much more competitive northern EU countries, and as a result the yearly deficit spending of the southern EU countries can be much reduced without plunging their own economies into economic recessions.
    (B) This also means the ECB will only need to monetise the common EU treasuries if the need arises, and the central bank will have no need to cater for the individual national government treasuries, and so the potential wide interest rate spreads between the government treasuries of the southern EU countries and the German Bunds will pale into insignificance.
    The size of the common EU treasuries will grow over time to gradually challenge the ongoing dominance of the US federal government treasuries in the global financial markets.
    (C) Note that, in the future, the EU trading block as a whole may not always be a surplus trading block relative to the rest of the world, and will still be a net surplus trading block when the global energy prices remain subdued.
    (D) Germany will no longer be able to sustain her traditional macroeconomic policies of having small government and surplus government budgets.
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    - vic lai Sep 13, 2022
      
      On surface, the most pressing problem facing today's EU countries is the energy shortage and her energy's over-dependency on Russia, but in actuality, the Continent's genuine pressing problem is, like Japan's, her persistent lagging behind in the innovative development of non-energy-consuming ICT industries relative to that in today's US and China.
      The ongoing energy crisis in the EU shows that many EU countries in general, and Germany in particular, have still been relying on heavy-energy-consuming heavy chemical industries or the like, some of which, in order to continue to survive, are now being forced to quickly migrate to other energy-cheaper countries like today's China.
      ---
      For one thing, we can hardly name some well-known world-brand ICT multinational corporations that are now headquartered in the EU.
      The coming 5G, 6G and AI industries seem to be mostly fiercely competitive games played between the US and China alone.
      Both the EU and Japan seem to be left far behind.
      This, not the current energy crisis nor dirty geopolitics there, should be considered the EU's most pressing problem that has to resolved quickly and seriously.
      ---
      In addtition to all the new energy facilities mentioned upstairs, another big and ambitious amount of low-interest Euro-denominated common EU bonds should be newly issued by the EU countries, to fund an ambitious say 10-year-long real technology investment program, so that the EU as a whole will not be left far behind in the coming highly-competitive global Marathon ICT technology race.
      ---
      - Carl Buzawa Sep 14, 2022
        
        The problem of course is there is no one in power that cares about :Europe” as a whole. Germany followed its course of dependence on Russian energy because it benefited GERMAN industry both as a cheap source of fuel/ chemical feedstocks and the Russians recycled money by buying German cars m trucks planes etc. They basically told tge rest of the EU to “get lost” when they fretted about over reliance on a known aggressor. Meantime all of ‘Northern Europe simpky don’t want to “monetize” the Euro for fear that in their mind the spendthrift “South” Italy, Greece, Portugal Spain and even to a lessor extent France will resume spendthrift ways. Similarly, in reverse clearly the PIG nations want to not cut back on other spending but get their hands on Northern Europe’s better credit. Further, even within countries in the EU, the Greens are forcing countries that should know better to mothball perfectly good nuclear plants”. The assumption that the Europeans will magically want to issue trillions of Euro denominated bonds is not realistic in my mind.
        
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Carl Buzawa Sep 11, 2022

Author Gros is correct. We in the USA have often seen many seemingly nonsensical governmental reactions to suddenly scarce commodities. One party attacks the "monopolists" that purportedly increase the price of oil and gas because "they are a monopoly" the other party excuses meaningful change other than continued appeals to "drill baby drill". Neither party at first adopts sensible solutions both for the short and long term

In fact it seems that democratic governments around the world have a great deal of difficulty explaining to their population the need for short term sacrifice to obtain long term gain-in Europe's case BOTH freedom from Russian gas and oil AND long-term switch to more renewables, both nuclear (for base) and solar/wind/water.

In Europe the situation is now acute due to the "leadership" of Germany (special thanks to the totally unapologetic Schroeder and Merkel) to switch off their nuclear plants/shut down their coal industry without a clear backup to Russia and largely ban fracking.

At this stage alternatives I suspect are limited to effect anything meaningful this winter. As Gros suggests perhaps targeted incentives to consumers to save energy should be used. In the USA although we certainly still waste energy we have for many years successfully used tax credits and direct subsidies to the poor to support increased insulation around water heaters, homes, etc as well as limited direct price subsidies for fuel itself. Those might be needed this Winter. At the same time perhaps crash programs to restart German nuclear reactors can go forward despite "Green" objections. That way the worst harm, blackouts and people freezing can be limited. The wealthier can afford to pay for their government's mistakes in the short term by paying grossly inflated fuel bills and supporting policies that provide for energy long term-including more renewables, more nuclear plants, and more terminals for LNG rather than needing coal fired plants.

Perhaps that pain will in the long run be a teachable moment for the elites not to let their countries rely on countries run by dictators for their key supplies
- K Harris Sep 14, 2022
  
  Agree 100%. If only Merkel had listened when she was warned that leaving Germany dependent on Russian energy was a really bad idea. Had she understood the risks, she might have agreed to build the LNG terminals Germany will badly need now. My spouse’s family in Germany (as well as their neighbors) are collecting firewood to burn this winter to try to stay warm. It’s surreal. Merkel left her successor holding the bag, to his credit, he is doing what he can now. Of all the mistakes Merkel made, and there were many, this was the most incomprehensible.
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alex Finch Sep 8, 2022

Just what is going on in Europe? The large Austrian oil company OMV is currently under corruption investigation because it’s heavy reliance on Russian gas was allegedly the result of political intervention against the advice of the ex-CEO Roiss, who resigned, or was pushed out, in 2015. This seems to be the way things work in Europe, where „independent“ Austria still has no Freedom of Information Act, where government confidentiality has been fiercely protected by the politicians, and tolerated by the EU, to the detriment of voters. Roiss‘ advice at the time was not to rely on just one but rather three suppliers of gas, yet powerful pro-Russian Austrian politicians had apparently other agendas. German politicians made the same „mistake“. Many European ex-politicians ended up working for Russian companies on big salaries. Why should anything change in Europe?
Putting a cap on gas and electricity prices is highly counterproductive when higher profits are needed to rapidly transition away from Russian energy. Maintaining instead consumer discretionary spending to further keep zombie businesses alive, is money that would otherwise be desperately needed to finance the transition. Powerful government propaganda and government controlled media in Europe will eventually pivot public sentiment back to Russian gas. As a result of corruption and poor policies Europe will suffer a further deterioration of living standards going forward. Will things change? Not while EU members are still allowed to operate with no Freedom of Information, despite scandal after scandal. The fact that about 50% of the population left school at only age 16 may explain the prevailing ignorance, gullibility and current shortage of skilled workers in Austria. The EU has become a joke, a clown act.
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