Through its partnership with North Africa and other producers

Southern European countries seek to exploit the energy crisis to their advantage

Germany restarted coal-fired power plants.

archival

For months, European Union member states have been busy trying to diversify their energy supplies, amid dwindling flows of Russian gas, and the real risk of a full cut by Moscow as long as the war in Ukraine continues.

But with winter fast approaching, energy prices soaring, and the European Union struggling to come up with a coordinated strategy, the scramble for gas could end up leaving an important imprint on the balance of power within the bloc.

Over the past 15 years, at least - as the EU has dealt with the 2007-2009 financial crisis, multiple government debt crises, and the pandemic - Germany and other EU members have negotiated, from a position of strength, with the more financially fragile Mediterranean countries.

But the pressure of Russian gas is now leaving Germany and other countries in the northern part of Europe particularly vulnerable, while Italy and Spain find themselves, this time, in the role of rational partners called to the rescue.

Meanwhile, Italy reduced its dependence on Russian gas and increased its imports from North Africa.

Spain has always been more dependent on African gas and imports, a trend that could now turn into influence.

In this context, Simon Tagliapatra, a fellow at the Bruegel Research Center in Brussels, said, "It is usually southern Europe that asks for northern solidarity, but this time, the situation is the opposite, and this certainly has political repercussions."

Last month, Spain's Environmental Transition Minister Teresa Rodriguez made clear that the EU's classic dynamics have been turned upside down.

Despite rising gas and electricity prices in Spain, they are still well below the record levels seen in Germany and other northern markets.

Historically, Germany was the largest importer of Russian gas in Europe, which accounted for more than half of its total domestic consumption.

Now, German gas imports are declining, and families face additional energy surcharges, running into hundreds of euros a year.

Several German factories are already slowing production, but if Russia stops its gas supplies completely, Berlin will have to cut its national gas consumption by 29 percent, according to a study by the Bruegel Center on Friday.

And the Russian energy giant, Gazprom, announced that gas shipments through the Nord Stream pipeline will stop completely for a few days, starting on August 31, for "maintenance", which led to a rise in European gas prices.

Diversify partners

Meanwhile, senior officials in Berlin have openly admitted that over-reliance on Moscow for energy was a mistake, and they seek to wean the country off Russian gas, fast.

Germany has restarted stalled coal power plants and is building its first infrastructure to process liquefied natural gas imported by sea.

But Germany also needs to diversify its trading partners, and southern Europe is very high on its list.

With six LNG terminals operating in Spain and one in Portugal, accounting for about a third of Europe's processing capacity, the Iberian Peninsula's dependence on Moscow was low, with just over 10% of total Spanish gas imports coming from Russia. In 2020, according to Eurostat.

When Russia offered a cheap and plentiful alternative to LNG, that was a problem.

And now, as Spanish officials note, it's a plus.

Berlin is now calling for a new pipeline to bolster the weak links between the Iberian Peninsula and the rest of Europe, and to revive a project that was postponed in 2019 amid environmental concerns, funding issues and a lack of support from France.

This plan has always had the support of Spain and Portugal.

But in a sign that solidarity will have a price, Madrid is asking the EU to foot the bill, arguing that the new infrastructure will improve "the security supply in the rest of Europe."

German officials have recently hinted that they hope for a stronger energy partnership with Italy, which, despite being the second largest importer of Russian gas in Europe historically, has moved quickly to diversify its supplies since the start of the Ukraine war.

In recent months, with the decline of its consumption of Russian gas by about 50%, Italy has increased its imports of liquefied natural gas from various North African countries and the United States, to expand its strong capacity to reconvert to LNG.

It has also moved to boost pipeline imports from Azerbaijan and Algeria, which have overtaken Russia, as Italy's largest supplier of gas.

"Italy was starting from a favorable position, because it already had the infrastructure: re-converting plants to LNG, transport ships, and pipelines connecting it with Algeria, Libya and Azerbaijan," Tagliabitra said.

He said that the Italian energy company Eni's strong ties with North African countries helped, too.

Southern European countries have already benefited greatly from joint efforts.

In the first six months of this year, Spanish exports of natural gas, via existing routes through France, outperformed those of 2020 and 2021 combined, while Italian gas exports rose between January and May, by 578 percent, compared to the same period last year.

The big question is to what extent will this comparative advantage in the energy game translate into leverage on many of the issues that divide the bloc, including financial resilience and immigration?

a big deal

The countries of the south of the continent have an extra card to use, too, at other negotiating tables;

"In the European Grand Bargain, this is an important thing," explains Tagliabitra.

This could be particularly tempting for Italy, where a coalition of hard-right and largely EU-skeptical parties is expected to win a general election scheduled for late September.

The alliance pledged to adopt more flexible public spending rules and to renegotiate parts of Italy's pandemic recovery plan, funded by the European Union.

And when it comes to immigration, the hardline stance of parties such as the Italian Brothers of Giorgia Meloni and Matteo Salvini's League is also likely to put them on a collision course with EU leaders.

Salvini frequently clashed with Paris and Berlin during his tenure as interior minister in 2018 and 2019, when he pushed for more burden-sharing - a demand Madrid has regularly demanded - and refused to allow migrant ships to dock in Italian ports.

For Klaus Fiestesen, a macroeconomic economist at Pantheon, Spain and Italy are more likely to use their newfound influence to push for more cooperation with the EU on migrants rather than seek greater financial flexibility, an issue where they do not need any Big changes in the status quo.

"Budget rules have been suspended during the pandemic, and they won't be back any time soon," he added.

In this regard, "if politicians in Italy or Spain use energy as a way to restore power within the European Union, I think they will overplay their cards because they have already got a very good deal."

• The pressure of Russian gas is now leaving Germany and other countries in the northern part of Europe particularly vulnerable.

• Italy reduced its dependence on Russian gas and increased its imports from North Africa, a trend that could now turn into influence.

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