Energy Schemes: the EU Commits to Economic Suicide
The trade balance of large European countries dramatically collapsed in the first six months of 2022, condemning “export champions” to becoming export-deficit nations. In Germany, the largest EU economy, exports decreased by 13%, while imports increased by 27%. The trade surplus plunged from €96 to €36 billion year on year. Imports of energy from Russia were down by 24%, but the cost rose by 51%.
France, the second largest economy, had a trade deficit of €71 billion, a 39% increase from the second half-year of 2021. Italy, the second largest manufacturer of the Eurozone, suffered the first trade deficit in ten years, with €13 billion minus, against a €29 billion plus in the first six months of 2021.
The common factor in the worsening of the trade balance of EU countries is the rising cost of energy. Although imports from Russia decreased in volume, their cost and their impact on the trade balance increased. At the same time, Russian gas imports were replaced by the more expensive LNG. And the devaluation of the euro against the US dollar contributed to making imported energy more expensive.
With such figures on their desks, one might expect European leaders to come up with effective measures to improve the situation. But none have come so far.
The German case is the most worrying, given the country’s economic weight. Growing protests from middle-sized enterprises and major industrial companies as well as consumer associations, over the rush out of coal, gas, oil and nuclear power, have so far been dismissed by the government. It is still claimed in Berlin that the Green Deal, with its exclusiveness on “renewables” (solar, wind, biomass), is the right strategy, and that if problems arise in securing the energy supply, “alternatives” to Russian gas – such as LNG from the United States – will be available.
Economics Minister Robert Habeck (Green Party) did announce a temporary revival of some coal mining and coal-powered generation of electricity to help bridge supply gaps, but the words have not been followed by concrete measures.
And then, there is the pipe dream known as the Midcat (Midi-Catalunya) gas pipeline which Chancellor Olaf Scholz recently discussed with the leaders of France, Spain and Portugal. It involves reviving the project for a pipeline between Spain and France across the Pyrenees, which was agreed on in 2013 between the two countries but never built, and even abandoned as “too costly” in 2019. The entire project, as now discussed, would deliver gas from the Atlantic coast of Portugal (mainly LNG imported from the U.S.) to Central Europe, including Germany, via Spain and France. But its total capacity would not make up for the volumes imported from Russia. And it would not be operational before 2024 – provided construction begins straight away. Another related option would be to extend up to Germany the underwater pipeline linking Algeria to southern Spain.
There is a much more reasonable solution at hand, however. Germany could give up its irrational opposition to nuclear power, and break with Anglo-American geopolitical games by deciding to finally open the Nord Stream 2 pipeline, which could begin supplying natural gas in no time.