Bros says the situation we are facing is not a market failure, but a regulatory one. Bros was involved in the liberalization of the French market and its integration into the European internal energy market. The liberalization process must take place and then control must be given to a regulatory body that is completely independent. At the moment, countries are left to their own devices and can make a medley of different decisions about their own energy integrity, provided they fall roughly within the European guidelines. “If you start messing with this concept, you’ll get to where we are,” he says.
Some countries favored cheap gas over diversified gas – EU energy directives state that each country must have at least three different sources of gas supply, with the idea that countries try to divide their supply as evenly as possible, but some countries, including Germany, rely on Russia as their main supplier for its cheap energy. Bros believes this decision was made in the knowledge that if things went wrong, the backlog would be picked up by other European countries. “It’s not liberalization if it’s a concept where anyone can do whatever they want,” Bros said. “If we had followed all the rules, we should have been stronger.”
There is also the problem that what should be a united front is often not so harmonious. Nord Stream 2, an extension of the original Nord Stream pipeline that carries gas from Russia to mainland Europe and lands in Germany, was supported by Germany and Austria. But it was opposed by other European countries, including Poland, Ukraine and the Baltic states. In the end, the plans were shelved, but only after Russia launched the invasion of Ukraine.
Of course, one of the problems was seemingly unavoidable: any disruptions outside of Europe were not taken into account. “It includes everything internal,” Gladkykh says. “It doesn’t cover all the external factors that are sometimes unpredictable.” That includes an illegal invasion by Russia of a sovereign country, Ukraine, and the resulting backlash and economic sanctions that war causes. “Germany in particular insisted on the idea that trade will encourage change in Russia],” she says. “How naive that seems from today’s perspective.”
Part of the problem with the internal European energy market guaranteeing security of supply is that it predicted a faster shift to renewable energy than actually happened. “There was chronic underinvestment and the capacity tranche was just too slow,” she says.
Gladkykh, who worked for the Ukrainian government when Russia cut gas supplies to Ukraine in 2014, isn’t sure whether a market structure would have isolated Europe from the external shocks triggered over the past six months. But the market structure we have in place means that countries already struggling with their own critical supply shortages are forced to pass up gas, moving it further down the supply chain, even when they desperately need it themselves. It’s a group-level blessing – no country is completely cut off from energy – but a nation-state-level curse, because countries are expected to give a little bit to make sure everyone gets some, even if they are it’s not enough. Thousands of gas pipelines crisscross Europe, connecting the countries and extracting gas when it arrives on the continent. “If you have an interconnected domestic market, the more connections there are, the better the security of supply because other countries can help each other,” says Imsirovic.
It is not clear whether this charitable approach will survive the coming difficult winter. Germany’s predicament is an example of “poor decision-making, really,” Gladkykh says, but they’re not alone. The cold is coming for all European countries, and the idea that countries are all involved in this may disappear when the going gets tough. “I think this crisis will stop the liberalization and integration process, and we will return to each state looking at its own security of supply and energy markets,” he says. “I think this is the end of the single gas market theory in Europe. Vladimir Putin is playing exactly this game.”
