EU leaders struggle for deal on energy crunch fix

Summary:

• Compromise possible on joint purchase of gas, energy prices
• Intense EU talks after Biden offers deal to supply LNG
• Mounting concern about impact of high energy prices on consumers
• No agreement expected on banning Russian oil and gas imports

European Union leaders struggled on Friday to agree on steps to ease the energy market crunch exacerbated by Russia's invasion of Ukraine, seeking difficult compromises on how to limit the impact for hard-hit consumers of soaring gas and oil prices.

Discussions on the second day of a summit in Brussels were "intense," an EU official said, while adding that the leaders of the 27 nations did appear to be moving towards an agreement on some of the points - in particular on joint gas purchases.

Proposals to cap power prices for businesses and households were much trickier, and there was no deal in sight on banning energy imports from Russia, Europe's top gas supplier.

The war in Ukraine has pushed energy prices to fresh record highs and prompted the EU to pledge to cut Russian gas use by two-thirds this year, by hiking imports from other countries and boosting renewable energy.

Russia supplies 40% of the gas the EU needs for heating and power generation and more than a quarter of its oil imports.

US President Joe Biden, who joined the first day of the summit in a show of Western backing for Ukraine and defiance of Russian President Vladimir Putin, pledged on Friday to supply EU countries with more liquefied natural gas.

"We're coming together to reduce Europe's dependence on Russia's energy," Biden said before leaving for Poland. "We should not subsidise Putin's brutal attack on Ukraine."

But EU leaders under mounting public pressure over the cost of living focused on the more immediate question of how to find new energy supplies quickly and whether to intervene in the market by capping prices.

"The EU is not only about big principles, big meetings and American presidents," Belgian Prime Minister Alexander De Croo told reporters on arrival for the talks.

Split on market intervention 

"Today is about the everyday issues of the people and that is the electricity and gas invoice of the people, and that's the impact we see today of that war in Ukraine," he said. "We are at war and in a war you need to take extraordinary measures."

He backed proposals by southern European countries for EU-wide intervention to limit gas price rises to shield poorer households. Opponents of the plan, including Germany and the Netherlands, say it would effectively use public funding to subsidise fossil fuel generation.

They argue that EU governments have already ploughed billions into tax cuts and subsidies to protect consumers and further spending should be focused on the shift to clean energy.

There appeared to be more agreement among the 27 on a plan for joint purchases of gas to tame prices.

"There is a solution," Slovenian Prime Minister Janez Jansa said before the talks. "It is common European purchases, common logistics, common building of gas storage capacity."

The European Commission has said it is ready to lead negotiations on pooling demand and seeking gas before next winter, following a similar model through which the bloc bought COVID-19 vaccines on behalf of member states.

The EU remained divided over whether to ban Russian oil and gas imports in addition to the slew of sanctions it has imposed on Moscow since the invasion a month ago.

Moscow calls its actions in Ukraine a "special military operation" to demilitarise and "denazify" Ukraine. Kyiv and the West say Putin launched an unprovoked war of aggression.

Europe's dependency on energy from Russia means the question of whether to impose an embargo, as the United States has done, is economically risky, and no decision was expected on Friday.

Poland's Prime Minister Mateusz Morawiecki said Germany, Hungary and Austria were among the most reticent about imposing a ban on Russian oil and gas.

It was unclear if a common position would emerge on Russia's demand this week that "unfriendly" countries must use roubles to pay for its oil and gas and if the Commission would get a mandate to tackle that.

The Kremlin's demand poses a dilemma for countries reliant on Russian energy because, by agreeing to it, they would be shoring up the rouble and channelling hard currency into Moscow - but refusal could mean their energy supplies dry up.