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Energy crunch threatens to shatter European unity, warns IEA boss

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The head of the International Energy Agency has warned European countries against a scramble for energy security this winter that threatens to shatter EU unity and trigger social unrest.

Fatih Birol, the IEA’s executive director, said he feared “a wild west scenario” if European countries restricted their own trade or stopped collaborating with neighbours amid mounting anxieties about fuel shortages.

“The implications will be very bad for energy, very bad for the economy, but extremely bad politically,” Birol said Thursday in an interview at the inaugural Global Clean Energy Action Forum in Pittsburgh. “If Europe fails this test in energy, it can go beyond energy implications.”

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European relations have grown more fractious as countries try to maintain a united front amid soaring energy prices that have brought the continent to the brink of an economic recession. But the mounting crisis has prompted fears that some countries may cut side deals for Russian supply or restrict power exports to their neighbours.

There were “two scenarios”, said Birol, whose Paris-based watchdog agency is mainly funded by members of the OECD. “EU and members will work in solidarity, supporting each other . . . or there is another scenario, if everybody is for himself.”

“One of the founding values of the EU is solidarity. It will negatively affect the EU’s weight across the world,” Birol said of the latter scenario.

Norway’s Nordic neighbours last month blasted Oslo for “selfish” behaviour as it considered pausing electricity exports while it refilled its hydroelectric reservoirs.

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Andreas Bjelland Eriksen, state secretary in Norway’s petroleum and energy ministry, denied it would halt exports, however, telling the Financial Times that the country was simply “prioritising filling reservoirs for the same reason as Europe is filling its gas (storage)”.

The EU has faced opposition from Hungary and some other member states as it deepened sanctions on Russian in response to its invasion of Ukraine.

Birol also cautioned against European complacency after the continent succeeded in building up natural gas stockpiles ahead of the winter months when demand peaks.

Even if the continent avoided “negative surprises” in gas supply, such as a colder-than-expected winter, Europe would suffer “bruises” in the coming months, Birol said, including economic recession and “significant damage to household budgets”.

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The crisis for Europe would also last well into 2023, he said, given stagnant global supply and the likelihood of increased competition for liquefied natural gas from a recovering China and other importers.

“When we look around there are not many new gas [projects] coming . . . And the Norway, Algeria, Azerbaijan pipelines are near their maximum capacity. It will be another challenging period,” he said.

But Birol was also adamant that Moscow had “already lost the energy battle” with Europe as the continent seeks out alternative suppliers.

Most of Russia’s gas and oil exports had gone to Europe before the war, he said — but that was now over.

“Russia has lost a good client, and forever. This client paid the money on time and didn’t create any political problems,” Birol said.

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The IEA chief dismissed Russian efforts to replace Europe’s gas market with exports to Asia. “You are not selling onions in the market. You have to build pipelines, infrastructure, logistics. This will take at least 10 years,” he said.

Russia will also struggle to maintain output as sanctions restrict its access to the western technology and capital it needed to continue repairing ageing oilfields and gasfields, Birol said.

Video: How Putin held Europe hostage over energy | FT Energy Source
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