Gas crisis has to power EU reforms

The European Union has rightly put top priority on trying to secure an early end to the Russia-Ukraine gas dispute that has left millions of EU citizens short of fuel.

It must now put the same effort into implementing much-discussed energy reforms to limit the risks of a future supply shock again threatening the health and even the lives of its people.

The crisis must serve as a catalyst for persuading the 27 members to stand by the vulnerable countries of central and eastern Europe, where dependence on Russian gas runs up to 100 per cent.

This is not a matter of charity. The large EU countries which have put their trust in bilateral gas deals with Russia – notably Germany, France and Italy – have seen that if a supply shock is big enough they too will be hurt. Italy is among the countries suffering shortages, despite the cosy ties between Rome and Moscow. A bit more solidarity will make everybody more secure.

First, the union must redouble efforts to expand cross-border gas and electricity links so the energy-rich can support the energy-poor. While costs are an issue, the real obstacle is the reluctance of utilities to invest in adequate cross-border inter-connectors for fear of losing market share.

Next, the union must diversify gas sources. Gazprom, the Russian state-controlled monopoly, has 25 per cent of the EU market, with 80 per cent of its gas coming through one episodically unstable country, Ukraine. With North Sea reserves shrinking, the EU must increase links with north Africa, the Middle East and the Caspian, including the proposed Caspian-EU Nabucco route. With new pipelines taking years to complete, the EU must also invest more in liquefied natural gas terminals. Private companies should be encouraged to raise the funds but if public money is needed it must be forthcoming: energy security is a vital public good.

Third, the current crisis should be an excellent argument for accelerating investment in renewable and nuclear energy.

Fourth, the EU must seize the opportunity to boost energy saving, particularly in eastern Europe, where the equivalent of billions of cubic metres of gas is wasted every year in energy-inefficient homes, offices and factories.

With the world’s biggest gas reserves, Russia will be an essential element in the EU energy market for years to come. EU importers have no choice about continuing to co-operate with Gazprom. But they equally have no choice about mitigating the risks that co-operating with Gazprom involves.