With winter approaching, the question of how to curb Europe’s soaring energy costs and set a price cap on gas imports to the region has been under the spotlight during a recent informal summit of EU leaders in Prague, an indication of the widening rift in terms of global gas prices between the U.S. and the EU.

German Chancellor Olaf Scholz proposed a plan on the sidelines of the informal summit to lower natural gas prices by forming a buyers’ alliance with Asian countries including Japan and South Korea, Politico reported on Friday. The German proposal comes amidst growing calls for imposing a gas price cap among EU member states plagued by the high-priced LNG imports from the U.S. and others. 

Against the backdrop of Europe’s worsening energy crisis, the conflict of interests between the U.S. and the EU has not only tested their relationship, but also pointed to a sign of the waning and shaky power of the U.S. global hegemony.

While the Biden administration may want to use the Russia-Ukraine conflict to strengthen and expand its network of allies, an insurmountable obstacle is the huge divergence of interests between them over LNG. Due to the West’s sanctions against Russia, the EU has no choice but to import large amounts of LNG from the U.S., while American energy giants are reaping huge profits from Europe’s energy crisis. And it is inconceivable for American businesses to give up this kind of once-in-a-lifetime opportunity.

As a result, the EU’s annoyance with the U.S. profiting from its difficulties is growing. Last week, French President Emmanuel Macron said European nations should join with Asian economies to demand that the U.S. and Norway show greater friendship by selling gas at lower prices, while Germany’s economy minister accused the U.S. and other “friendly” gas supplier states of astronomical prices for their supplies, according to media reports.

Fundamentally speaking, European countries’ dissatisfaction with soaring LNG prices from the U.S. lays bare the fact that the U.S. interests are in conflict with the interests of many other countries around the world. Though mostly at the expense of the interests of other countries, these conflicts actually reflect the decline of the U.S. hegemony, reminding that it is no longer the time where they call the shots with no pushback. 

For instance, the U.S. government on Friday published a sweeping set of export control rules, including a measure to cut China off from certain semiconductor chips made anywhere in the world with U.S. equipment. By extending restrictions to non-U.S. companies, the U.S. is actually asking others to succumb to its strategic interests by sacrificing their own economic interests in terms of trade with China and industrial chain development. 

But what the Biden administration has failed to realize is that they no longer have the command power over global industrial chains and supply chains because their strategic goals are at odds with the interests of global development. This also explains why the OPEC+ organization announced the decision to cut oil output last week despite stiff U.S. opposition. It is no one but America’s own decision to abuse its dollar hegemony, bringing down the tech iron curtain, and reaping profits from allies’ crisis that sowed the seeds of a loss of global prestige.

The Russia-Ukraine conflict and the Western sanctions against Russia have led to many problems, involving many conflicts of interests, not only between the U.S. and the EU, but also between the U.S. and other countries. A prominent manifestation of such conflicts is the damage on the interests of other countries. As more and more countries recognize the need to stand up to the conflicts of interests and defend their own interests, it may become an important sign of America’s weakening hegemony.

Investors are keeping a close watch on the deepening crisis in the European Union, as soaring gas and electricity prices threaten to shatter any semblance of policy cohesion in the 27-member bloc, at a time when borrowing costs between member countries are beginning to diverge.

 

European Cohesion Shatters

 

Meanwhile, tensions have flared after the German government last month unveiled a €200 billion ($306 billion) support package aimed at helping the country’s households and businesses cope with surging energy bills.

This initiative sparked a furious backlash from other EU countries, who accused Berlin of using its fiscal muscle to provide massive subsidies to benefit German producers, giving them a huge competitive advantage and undermining the integrity of the single market.

Although other EU countries have come up with packages to support their households and businesses, few – especially those in the south and the east – have the financial resources to match the generous German subsidies. France and Italy are now pushing Brussels to come up with a scheme that would allow European countries access to subsidized loans to help companies that are hard-hit by the energy crisis. But Germany and the Netherlands are unenthusiastic about this proposal.
The growing political tensions come as Russia’s decision to cut off gas supplies to Europe via the key Nord Stream 1 pipeline has pushed energy prices sharply higher.
This surge in energy costs has helped push inflation in the eurozone to a record 10 percent in September.
Meanwhile, EU countries are deeply divided on how best to drive down energy prices.
Some countries, including France, Italy, Poland and Belgium, are in favor of introducing a cap on the price of gas, although there is little agreement on how the cap would work.
But other countries – including Germany, the Netherlands, Austria and Luxembourg – are skeptical, arguing that a gas price cap will boost consumption and encourage global gas sellers to abandon the European market and look for higher prices elsewhere.
Instead, Berlin is hoping that negotiations with Norway and the United States will help bring down gas prices, which are significantly higher in Europe than in Asia and the United States.
The only sign of consensus is that Germany has now backed down on its former opposition to setting up a European consortium to buy gas on world markets.
Meanwhile, the fracturing European consensus over energy policy is only adding to investor fears that the eurozone faces a replay of the disastrous debt crisis that played out between 2010 and 2012.
Courtesy: Global Times & Financial Review