The American alternative: lobbying in a billion-worth market
09 mars 2023 /
The war in Ukraine has jeopardised and reshaped the European energy sector, of which almost half is dependent on Russian gas imports. In this regard, it is of vital relevance to highlight the fact that fourteen Member States rely on Russia for more than 50% on its gas imports, which entails a high percentage of financing for Putin’s war within the neighbouring country. In this sense, the dilemma on this political agenda is evident considering that Russia is the largest gas exporter in the world. In the heat of the events in Ukraine, Europe questioned whether it should continue buying Russian gas to guarantee consumption or block its arrival, putting the energy security of the twenty-seven at risk.
However, this debate had already begun years before the war started, back when the new gas pipeline, known as Nord Stream II, was about to be launched. Among the different arguments put forward against its operationalization, we find those by the United States, which, along with Poland and certain Baltic States, pointed out the threats that this project posed to their common security. The US worried that the activation of the new pipeline would increase European energy dependence on Russia, as well as foster the bloc’s relations with Moscow, a fact worth highlighting considering that the US is the main producer of liquified natural gas (LNG) in the world. With all these pieces of the puzzle on the table, we understand the threats by the US not only to Russia after the invasion of Crimea in 2014, but also to the European Union in case of the commissioning of the new gas pipeline.
Both Germany and the EU needed Nord Stream II due to the high demand of the industry and domestic use, yet both were aware of the existence of the war drums already resonating on the eastern border. In this regard, the United States reiterated that Nord Stream II would never be put into operation should Russia attack Ukraine, for which reason it agreed with Germany that it would paralyse its launching if that was the case. This scenario materialised in February 2022, and a few months later, after reports from the United States about threats of future sabotage to Russian gas pipelines entering Europe, several explosions took place against the infrastructure in the Baltic Sea, resulting in a temporarily cut off gas flow. After several exchanges of accusations between the different parties, little is known regarding the authorship of the attacks.
Nevertheless, the Nord Stream II incident is only limited to a residual margin of the severe European energy crisis that the war has brought about. In this respect, the European Union and more precisely the European Commission, headed by Ursula von der Leyen, has deployed all possible legal and institutional resources to accelerate the project known as REPowerEU. This plan has two key objectives: in first place, the absolute disengagement of Russian gas by 2027, and secondly, the achievement of European energy security.
However, several difficulties arose from the proposal of the Commission. First of all, that the European Union is not an energy producer, hence, it needs to import energy resources from other countries; the second rests in the fact that there are potential incompatibilities regarding the ecological transition project known as the Green Deal, which seeks a model of environmentally sustainable economic growth. Despite the fact the Green Deal refers to a major framework for the entire energy sector, and REPowerEU is limited to an instrument within it, several voices have risen up against the latest plan pointing out certain incongruences.
Without dwelling on the latter point, let us continue with the alternatives left to the European Union and how US companies, through the European gas lobby, have been able to take advantage of the crisis in order to maximise their interests and monopolise the European energy agenda. By lobby we mean a pressure group in which its members share interests and come together to defend them by influencing policy-making processes. We can find groups of associations, NGOs, individuals, or as in our case, the fossil fuel lobby, a conglomerate of large gas and oil companies.
Before the war, there were several companies that spent millions of euros defending their interests in Brussels through formal and informal meetings, with all sorts of policy makers and political actors, including the President of the Commission. In this sense, between December 2019 and May 2022, there have been up to 500 meetings between giants from the industry and von der Leyen, and since the beginning of the war in February 2022 to May 2022, more than 100, which involves more than one every day.
This data does not come as a surprise, bearing in mind the exceptional nature of the current situation and the abrupt way in which events unfold, with the Commission trying to respond to the crisis. Among all the strategies deployed on the table we find the aforementioned REPowerEU plan. In line with this project, the Biden Administration has supported the EU in its seek for new sources of energy, as they showed in a Joint Statement a month after the war that was materialised in the EU-US Task Force on Energy Security on the third of November. In this sense, being the United States a world leading producer of LNG, Biden has authorised the increase of energy exports to Europe, enabling all terminals to operate at maximum level. It is worth mentioning some figures, as this situation has given the US, in just few months, a greater profit than of a whole year in 2021, where some of the leading American companies have doubled their profits and others like Cheniere have allocated 70% of their production to the European market this year, compared to 30% in 2021. However, there are several voices in Europe that have risen up against this operation, accusing the US of taking advantage of one of the worst crises in Europe. In this regard, up to fifteen leaders have complained due to the high price at which the US sells its LNG. Even the French President Emmanuel Macron has criticised the situation arguing the American gas is more expensive than the Russian one.
Notwithstanding, the United States has responded to the criticism alleging that it is the energy giants of Europe which buy the LNG as an intermediary, that sell it to its consumers at exorbitant prices. Among these companies, we find well-known names scattered throughout Spain, France, Italy and Germany, who would be at the same time lobbying in the key processes of the development of the REPowerEU strategy. Precisely, while the Commission designs its plan, we can see how these large corporations interfere in its proposals, consequently redrawing the future of the European energy sector in the short term.
In this sense, it is important to bear in mind that the lobby strategies have not only been deployed through a series of meetings with policy makers, but also these companies have played at the same time a leading role in the negotiation and design of the new legal and institutional instruments.
When the REPowerEU plan was first announced in March 2022, the Commission included the establishment of the EU Energy Platform, a coordination mechanism where Member States can voluntarily join together to negotiate and purchase alternative resources to the Russian gas, especially US LNG. A few months after the launch of said platform, under pressure and at the request of the fossil fuel industry itself, the Commission announced the creation of an Industry Advisory Group. This new group, composed of twenty-six representatives of those same companies previously mentioned, will directly advise the Commission on its own plan.
At the same time, the main firms of said European gas lobby are immersed in other international spheres of great power, such as the International Association of Oil and Gas Producers. This business group is also called upon to participate in the key decision-making processes that will decide the future of energy in the continent. Furthermore, it is in this same area that the main LNG companies in the United States are located. However, these contacts are not new, since 2014 relations between the US gas giants and officials from the Commission have been strengthened, reaching more than one meeting a week with an investment of up to 250 million euros in lobby. Another example of the strategies followed by the United States within the European market can be demonstrated with the relation between the American Petroleum Institute, the largest trade association for the oil and gas industry being one of the main lobbies in this area within the country, and the European ENTSOG lobby group created in 2013 which proposes Projects of Common Interest in the energy sector.
To sum up, it is possible to observe how the European energy sector has been severely shaken after the war, by having to cut ties with its main supplier of energy resources, Russia resulting in an energy insecurity that is suffocating the European economy and causing the impoverishment of its citizens. Among the plausible solutions, there is the Commission’s proposal, which has delegated significant amounts of the decision-making power to the large companies in the European fossil fuel sector, often hand in hand with the LNG producers in the United States. The Commission’s justification rests in the emergency of the situation, a scenario already witnessed during the management of the purchase of vaccines during the pandemic.
Lastly, regarding the last COP27 in November 2022, it would be interesting to monitor to what extent the Commission is able to reconcile the management of the energy crisis and the REPowerEU plan with the objectives of the Green Deal, as there are several voices that talk about a Green Betrayal.
[This article was first published in the issue 37 of the magazine]