EU to Tackle Energy Security as Ukraine Transit Deal Nears End

(Bloomberg) -- European Union nations on Monday will discuss preparations for the winter with the gas transit agreement between Russia and Ukraine set to expire and the bloc trying to phase out reliance on fossil fuels from Moscow. 

At the first meeting with Denmark’s Dan Jorgensen as the bloc’s new energy commissioner, ministers are set to weigh options to lower prices and strengthen the competitiveness of EU industry during the green transition.

“Energy affordability remains a pressing concern, with volatile prices driven by geopolitical tensions, supply chain disruptions, and reliance on fossil fuel imports,” Hungary, which will be chairing the meeting in Brussels as the holder of the rotating EU presidency, said in a document shared with energy ministers. 

Strengthening EU industries during the clean transition has risen to the top of the European political agenda after a backlash triggered in part by an unprecedented energy crisis that pushed power and gas prices to records two years ago following the Russian invasion of Ukraine. 

During Monday’s ministerial meeting, the commission will update member states about preparations for this winter as the intergovernmental transit deal between Kyiv and Moscow, which was the basis for Russian pipeline gas shipments to Europe, comes to an end on Dec. 31.

The termination of the agreement between Ukraine and Russia has already been priced into European gas markets, and the region will be able to find alternative supplies, according to an assessment by the EU’s executive branch seen by Bloomberg News earlier this week. 

While European fuel prices are a far cry from the peaks reached during the crisis in 2022 — thanks to increased imports of liquefied natural gas that replaced most of the Russian flows — they remain elevated, with many households and businesses struggling with high bills. 

The continent’s benchmark futures hit their highest levels in a year earlier this month as the market balance remains fragile, and even small disruptions have been sparking jitters.

The EU has long argued that member countries still importing Russian gas via the Ukraine route — most notably Austria and Slovakia — can do without the supplies. The commission has said it won’t enter into negotiations to keep the route open. 

Nevertheless, gas buyers from Slovakia and Hungary are continuing negotiations to keep gas flowing after the transit deal expires, with the proposal involving a swap deal between Azerbaijan and Russia.

With the new European Commission just beginning a five-year term, it aims to unveil a new Competitiveness Compass initiative on Jan. 15. The policy paper will explore ways the 27-nation bloc could increase its security and cut dependencies, following up on a report that former European Central Bank President Mario Draghi published in September.

In the next stage, bloc’s executive arm will aim to issue a Clean Industrial Deal on Feb. 26 — a detailed strategy for keeping its industries competitive, which will also include a plan to ensure affordable energy. During its first 100 days, it will also present a roadmap to phase out Russian fossil fuels, which still account for around 15% of EU imports.

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