EU economy and finance ministers are gathering in Brussels on Monday and Tuesday to discuss how to respond to surging energy prices and anticipated inflation amid the ongoing strikes and counter-strikes in the Middle East.
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“We are ready to take necessary and coordinated steps in order to stabilise markets, such as strategic stockpiling,” French Economy Minister Roland Lescure told journalists on Monday after chairing a meeting of G7 finance ministers.
Asked whether G7 finance ministers had agreed on releasing the system’s strategic stockpile, Lescure said: “We are not there yet.”
“What we’ve agreed upon is to use any necessary tools to stabilise the market, including the potential release of necessary stockpiles. The work is going to keep being done in the next couple of days”, the French minister said.
German Vice-Chancellor Lars Klingbeil said on Monday that his country is open to unlocking the oil reserve, but that “this is not the right time”.
The International Energy Agency’s member countries currently hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation.
Oil prices have rocketed since the Israeli and US attacks on Iran on 28 February, which killed some 40 Iranian leaders, including the country’s supreme leader, Ayatollah Ali Khamenei. The conflict has now expanded into other countries in the region, including Lebanon and Gulf countries, with retaliatory attacks by Iran hitting civilian energy facilities and US bases.
Mojtaba Khamenei, the former Ayatollah’s son, was elected as successor on Monday, providing continuity in leadership for the current regime.
The price for a barrel of Brent crude, the international benchmark, surged to $119.50 early on Monday, but later traded around $107.80 after the Financial Times indicated that the use of reserve oil to respond to the crisis was on the table.
Leading European stock market indexes started the week with a big sell-off, following a major drop across Asian markets and surging oil prices.
The war is showing no sign of de-escalation. On 4 March, Qatar announced the suspension of its LNG production; then, over the weekend, Israel struck Iranian energy infrastructure while passage through the critical Strait of Hormuz remained suspended.
Energy prices in Europe will be affected, and inflation is likely to rise in the coming months. However, some EU diplomats and the European Commission indicates that the current situation presents significant differences from the energy crisis Europe experienced when the war in Ukraine started in February 2022.
“Thanks to the decisive actions we have taken over the past years, Europe’s energy system is better prepared and way more resilient today. Our energy sources are more diverse and cleaner. Our coordination is stronger,” European Commissioner for Energy Dan Jorgensen wrote on X on 6 March.
He called on the bloc to double down on the energy transition and continue to expand clean and homegrown renewable energy and energy efficiency efficients, all while modernising Europe’s energy infrastructure.
Spanish Economy Minister Carlos Cuerpo told journalists on Monday that the EU should take inspiration from the response to the 2022 crisis as it formulates its response to the war.
A different crisis?
This crisis is also structurally different from the one that exploded in 2022, an EU government official told Euronews.
When Russia’s full-scale invasion of Ukraine began, Europe needed an “infrastructure reset” with a new portfolio of suppliers, the official said – whereas in the current case, “the release of reserves and re-opening of routes could see prices going down faster”.
However, the situation remains extremely volatile, as it is highly dependent on when the Strait of Hormuz will reopen and when production will resume in top LNG-exporting countries.
Discussions on Monday and Tuesday among EU ministers are expected to touch upon energy prices with the European Commission, while euro-area ministers are set to discuss with the European Central Bank how the war could impact inflation and the overall macroeconomic outlook.
While EU ministers are not expecting to put forward a common strategy on the table by the end of the meetings, the EU institutions will present an update of the situation. Most of the member states will likely present their remarks based on their national assessment of the war’s impact, an EU diplomat told Euronews.
Maria Tadeo contributed reporting.
