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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 of a struggle for energy security this winter that threatens to break EU unity and cause social unrest.

Fatih Birol, the IEA’s executive director, said he feared a “wild west scenario” if European countries moved to restrict their own trade or stop cooperating with neighbors amid mounting concerns about fuel shortages this winter.

“The implications will be very bad for energy, very bad for the economy, but extremely bad politically,” Birol said in an interview Thursday at the inaugural Global Clean Energy Action Forum in Pittsburgh. “If Europe doesn’t pass this energy test, it could go beyond the energy implications.”

European countries have become more fickle as they try to maintain a united front amid rising energy prices that have pushed the continent to the brink of economic recession. But the deepening crisis has raised fears that some countries might conclude Russian supply side-dealing agreements or restrict electricity exports to their neighbors.

There were “two scenarios,” said Birol, whose Paris-based watchdog agency is funded primarily by members of the OECD. “EU and members will work in solidarity and support each other. . . or there is another scenario, when everyone is for themselves.”

“One of the fundamental values ​​of the EU is solidarity. It will negatively affect the weight of the EU around the world,” Birol said of the latest scenario.

Norway’s neighbors to Norway last month criticized Oslo for “selfish” behavior as it considered pausing electricity exports while replenishing its hydroelectric reservoirs.

However, Andreas Bjelland Eriksen, Undersecretary of State for the Norwegian Ministry of Petroleum and Energy, denied that it would halt exports, but told the Financial Times that the country “simply prioritized filling reservoirs for the same reason as Europe’s gas (storage).” fills”.

The EU has faced opposition from Hungary and some other member states as it tightened sanctions against Russia in response to the invasion of Ukraine.

Birol also warned against European complacency after the continent managed to build natural gas reserves for the winter months, when demand peaks.

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

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.

“If we look around us, there is not much new gas” [projects] coming . . . And the pipelines in Norway, Algeria and Azerbaijan have reached 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 alternative suppliers.

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

“Russia has lost a good customer, and forever. This customer paid the money on time and did not cause any political problems,” Birol said.

The IEA chief rejected Russian efforts to replace the European gas market with exports to Asia. “You don’t sell onions on the market. You have to build pipelines, infrastructure, logistics. That will take at least ten years,” he says.

Russia would also struggle to maintain production as sanctions limited access to Western technology and the capital it needed to continue repairing aging oil and gas fields, Birol said.