Multipolarity and Connectivity
The Dark Side of Brussels’ Energy Regime: A Homegrown Energy Crisis

The European Commission and European Council have been intervening massively in the EU’s energy market for almost two years – without a proper legislative procedure, without involving the European Parliament and disregarding the Member States’ reservations of sovereignty, writes Ulrike Reisner.

The EU Commission, together with the European Council, has been intervening massively in the European energy market – without proper legislative procedure, without involving the European Parliament and with disregard for the Member States’ sovereignty-related reservations. A highly problematic tactic is being used here, namely the misuse of emergency clauses such as Art. 122 TFEU. This enables the Council to take measures by reaching a qualified majority on a proposal from the EC. What was intended as an emergency mechanism is becoming a permanent solution and is eroding the principles of the rule of law and democratic accountability in the Union.

On November 20, 2023, the European Commission adopted an amendment to the Temporary Framework for State aid measures to combat the ongoing energy crisis. This amendment extends a limited number of sections of the Temporary Framework to tackle the crisis within six months.

The EU Commission is therefore authorising state emergency measures in order to suppress high energy costs until summer 2024. This adjustment to the timetable for the expiry of some of the provisions of the Temporary Framework for Crisis Management and Governance of Change gives Member States the possibility to maintain their support schemes for the heating season this winter and to help businesses that continue to be affected by the economic disruption caused by the developments in Ukraine. Didier Reynders, EU Commissioner for Competition Policy, said in a statement:

The Temporary Framework for crisis management and managing change has proven to be a crucial tool to enable Member States to provide much-needed support to businesses in the face of this exceptional economic shock. The framework demonstrates that the Commission is willing and able to fully utilise the flexibility available under state aid rules when needed.

Member States can therefore continue to grant aid for “crisis management,” especially in the energy sector (e.g. measures to reduce demand for electricity, aid to compensate for higher energy prices). The Commission reiterates that Russian, Belarusian and Iranian entities subject to sanctions for actions undermining or jeopardising the territorial integrity, sovereignty and independence of Ukraine are excluded from the scope of these measures.

Intervention in the energy market

The Commission assures that these measures should help to stabilise the situation on the energy markets (particularly regarding gas and average electricity prices). However, the ongoing military conflict in Ukraine continues to harbour risks and the vulnerability of the energy markets has not yet been overcome.

This Temporary Credit Framework was adopted by the Member States on March 23, 2022 and has been amended and adapted several times since then. The following provisions in the area of emergency measures are of particular importance for the energy sector:

  • Council Regulation (EU) 2022/1369 of August 5, 2022 on coordinated measures to reduce demand for gas. Among other things, this regulates a voluntary 15% reduction in gas consumption and the possibility for the Council of the EU to declare a “Union alert”, which entails an obligation to reduce demand across the Union.
  • Council Regulation (EU) 2022/1854 of October 6, 2022 on emergency measures in response to high energy prices. For example, the regulation provides for a 10% reduction in gross electricity consumption in the member states, and a 5% reduction at peak times.
  • Council Regulation (EU) 2922/2576 of December 19, 2022 on greater solidarity through the better coordination of gas procurement, reliable price benchmarks and the cross-border exchange of gas with rules on demand aggregation and the joint procurement of gas.
  • Council Regulation (EU) 2022/2577 of December 22, 2022 establishing a framework for the accelerated deployment of renewable energy sources with rules on priority for the planning, construction and operation of installations and facilities to produce energy from renewable sources, their connection to the grid, the grid itself and storage facilities.
  • Council Regulation (EU) 2022/2578 of December 22, 2022 on the introduction of a market correction mechanism to protect Union citizens and the economy from excessive prices with rules on price monitoring and the introduction of a market correction mechanism.

At the end of March 2023, Regulation (EU) 2023/706 amended Regulation (EU) 2022/1369 to the effect that the period for reducing demand was extended until the end of March 2024.
The Influence of Politics on Energy: A Crisis of Market Relations
Konstantin Simonov
On July 2, the first day of the international conference Global Energy and International Political Risks co-hosted by the Valdai Discussion Club and Azerbaijans Center of Analysis of International Relations, experts discussed the impact of global political shifts on the world energy sector.

Elimination of the Member States’ retainment of sovereignty 

From the perspective of EU law, these regulations are based on a weak foundation. This is because the EU’s legal basis for the adoption of measures in the energy sector consists, on the one hand, of so-called “internal market competence” (Art. 114 TFEU), provisions from the Euratom Treaty, Art. 170 et seq. TFEU for trans-European networks and Art. 191 f. TFEU for environmental policy.

Secondly, the Treaty of Lisbon introduced a separate competence basis for the EU’s energy policy (Art. 194 TFEU). This energy policy is intended to ensure, among other things, the security of energy supply in the Union “in a spirit of solidarity between Member States”. Measures in this context are to be adopted by the European Parliament and the European Council “in accordance with the ordinary legislative procedure”; the Economic and Social Committee and the Committee of the Regions are to be consulted.

The Member States reserve sovereignty here with respect to their right to determine the conditions for the utilisation of their energy resources themselves, as well as their choice between different energy sources and the general structure of their energy supply. 
This combination of an ordinary legislative procedure and the granting of some sovereignty to the Member States is essential in ensuring compliance with the principles of the rule of law and democratic accountability.
Now, however, these basic principles of the rule of law are being thrown overboard. The European Commission and European Council have been intervening massively in the EU’s energy market for almost two years – without a proper legislative procedure, without involving the European Parliament and disregarding the Member States’ reservations of sovereignty.

This has been possible because the cited emergency measures were not based on Art. 194 TFEU, but on Art. 122 (1) TFEU, which provides for the following:

Without prejudice to any other procedures provided for in the Treaties, the Council, on a proposal from the Commission, may decide, in a spirit of solidarity between Member States, upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products, notably in the area of energy.

In contrast to the ordinary legislative procedure, the European Parliament is not involved at all in the application of Art. 122 para. 1 TFEU – not even in the form of a right to be heard or a right to information. The Committee of the Regions and the Economic and Social Committee are also not involved. In addition, neither the Member States’ reservation of sovereignty nor the principle of unanimity in the European Council apply to measures of a fiscal nature – a qualified majority is sufficient. 

In fact, five of the six emergency measure regulations mentioned above were not adopted unanimously: Poland voted against Regulation (EU) 2022/1369, Regulation (EU) 2022/1854 and Regulation (EU) 2023/706; Slovakia voted against Regulation (EU) 2022/1854; Hungary voted against Regulation (EU) 2022/2577, Regulation (EU) 2022/2578 and Regulation (EU) 2023/706; the Netherlands and Austria abstained from the vote on Regulation (EU) 2022/2578; and Italy abstained from the vote on Regulation (EU) 2023/706.

Rule of law concerns

The EU’s energy policy competence and the associated objectives are clearly defined in Art. 194 (1) TFEU. These include the functioning of the energy market, the security of the energy supply, the promotion of energy efficiency and the development of renewable energies as well as the promotion of the interconnection of energy networks. According to Art. 194 para. 2 TFEU, the EU is authorised to take measures to achieve these objectives. However, such measures must not infringe the sovereign right of the Member States to determine their own national energy sources and the structure of their energy supply. This so-called reservation of sovereignty prevents the EU from intervening directly in the aforementioned areas of energy policy.

However, this is exactly what has been happening for almost two years now. The Commission and Council are systematically and abusively applying Art. 122 (1) TFEU, even though

  • the democratic link to the sovereign (the community of the peoples of the Member States) is interrupted.
  • fundamental principles of the rule of law are being undermined, including a proper legislative procedure and appropriate control mechanisms.
  • the Member States’ reservations of sovereignty in their own energy supply are eliminated.
  • the “spirit of solidarity” is limited to a qualified majority of European Council votes; and
  • the European Commission can perpetuate this institutionalised abuse by extending the measures.

The energy crisis is artificially created

If emergency measures are based on Art. 122 (1) TFEU, it must be justified that the conditions for the choice of this basis of competence exist; there must therefore be a precarious economic situation or a threat thereof, which is why the intervention of the EU is deemed necessary; and there must be a connection between the cause of the precarious economic situation and the objective to be achieved by the measure.

However, the Commission and the Council are making a significant contribution to ensuring that the conditions for this “precarious economic situation” (energy crisis) do not change:

In June, for example, the European Council banned the purchase, import or transfer of crude oil and certain petroleum products by sea from Russia to the EU as part of the sixth sanctions package. This is based on the argument that most of the Russian oil delivered to the EU is transported by sea, meaning that this embargo should affect almost 90% of Russian oil imports to Europe.

The member states have also set an oil price cap. This has applied to crude oil since December 2022 and to petroleum products since February 2023 and can be adjusted over time

However, the home-made extension of the energy crisis in the Union also includes the import ban on all types of Russian coal, the ban on new EU investments in the Russian mining sector, the ban on the export of certain oil refining technologies or the termination of the possibility for Germany and Poland to import Russian pipeline oil.

Further measures that the Commission and the Council have been taking for some time to implement this form of “energy dictatorship”, and the interests that are being served, are the subject of the second part of this analysis.

Norms and Values
Winter Is Coming: Social Expectations from the First Military Winter in Europe
Jacques Sapir
The sanctions taken against Russia by EU countries are generating a major “boomerang effect,” one which could lead to a global energy crisis. The shock will probably be felt by the EU economy this winter and afterwards. It is therefore at this time that crucial political questions will arise regarding the expediency of the EU countries’ policy towards Russia, writes Valdai Club expert Jacques Sapir.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.