- Russia’s decision to cut gas flows to Europe has left Norway as the European Union’s biggest gas supplier.
- In this context of energy shortages, Jonas Gahr Støre has adopted a critical diplomatic role.
- The recent gas price proposal may cool down the relations between Støre and his counterparts in the EU and the UK.
Why is Støre hot?
Answer: Because of Norway’s recently acquired position as the largest gas supplier to European countries.
In order to understand Prime Minister Støre’s position, it is important to establish his interest in protecting Norway’s wealth from suffering an economic downturn as a consequence of a potential gas price cap put forth by the European Union. In the fallout of the ongoing war on Ukraine, Russia decided to decrease the amount of gas being delivered to European countries.
This action, a counterattack in response to the sanctions imposed on the country due to the invasion of Ukraine, granted Norway the opportunity to become the largest supplier of gas to the EU. Although not a member of the union, Norway is a member of the European Economic Area and the Schengen flying space, which vouches for the diplomatic and fruitful partnership between the country and the EU.
On August 24th, it was reported that Norway had overtaken Russia as the main gas supplier to both the UK and the EU. A month earlier, Norway’s natural gas exports hit a record high of 128.4 billion crowns ($13.26 billion) in July 2022, which translates to a striking 40% increase from the previous five years.
The sanctions imposed on Russian gas as a retaliation for the invasion of Ukraine have allowed Norway to overtake Russia as the main gas supplier to the UK and EU countries. Since the beginning of the Russian gas restrictions, Norway has emerged as a reliable solution to the energy scarcity problems faced by the EU and the UK. The Nordic country, under the leadership of Prime Minister (PM) Jonas Gahr Støre, stepped into its newly acquired position with the aim of assisting neighbouring countries by increasing national gas production to maintain the current exportation level. The increase in exportation levels resulted in an equivalent increase in gas prices among the countries at the receiving end of Norwegian pipelines.
Norway’s new role as the continent´s main gas supplier has created a (lower) level of competition without precedent in the gas market, which has been translated into soaring gas prices. To explain, the general trend of shifting from fossil fuels to renewable sources of energy, alongside the current inflation and the energy shortages because of Russia’s actions, represents a multitude of reasons behind the current rise in gas prices.
Meanwhile, within Europe, several countries have proposed measures to tackle the soaring prices in the electricity and gas sectors. On September 8th, the newly appointed UK Prime Minister Liz Truss announced a limit on the country’s energy bills and set the energy price cap at £2,500. The following day, a proposal to implement a possible gas price cap on gas imports was agreed upon by the European Union´s 27 energy ministers during an extraordinary council meeting. Furthermore, the members of the Union have also proposed new energy policies at the domestic level; potentially stirring up trouble for Støre.
What is changing Støre’s temperature?
Answer: The proposals to put a cap on gas prices at the European level present a potential setback for Norway’s economy and Støre’s political future.
At the start of the European energy crisis, Støre presented himself as a leader of a country generously willing to offer assistance to its neighbours. In fact, Støre was behind the growing calls in Norway for an increase in the production of natural gas for exportation to European countries suffering from energy shortages. As a result of Støre’s cooperation-friendly stance, European Commission President Ursula von der Leyen initiated a series of meetings to strengthen the EU-Norwegian partnership. Prior to potential political agreements, it is significant to recognize that Equinor, Norway’s state-controlled, largest gas company, has been at the forefront of supplies to EU countries as well as the UK—a fact that Støre will not forget.
Nonetheless, the non-stop increase in the costs of both gas and electricity in Europe has pressed senior EU officials to search for possible solutions to the soaring prices. After an in-depth analysis of the current situation, the energy ministers of the union´s member states agreed that the most feasible measure would consist of a credible cap on gas prices, which would have significant implications for Støre’s desired projections of his country’s wealth and the state budget.
Luckily for Støre, on September 14th, European Commission President von der Leyen, announced that the potential cap on gas and oil prices would not be implemented; as of the present moment. The step back on the proposal, which was agreed upon during the extraordinary meeting of the council of energy ministers held the previous week, can be understood by taking into consideration the recently elevated status of Norway within the EU political considerations.
Following the discussion of the council meeting, Støre expressed his scepticism towards the potential outcome of the cap proposal, arguing that the idea of a maximum price for gas would not solve the Union´s main problem: a lack of sufficient gas. He also mentioned the policy could lead to “unwanted consequences” in the EU´s partnership with the gas business, notably with companies such as Norway´s Equinor.
At first, Støre demonstrated a hesitant openness toward the negotiation of a potential cap, but his initial scepticism has since evolved into a total rejection of the policy. While disappointing news for the European Union, Støre’s change of heart is comprehensible upon the consideration of potential influences and pressures exerted upon him at the domestic level, which range in origin from businesses to the general public. Following a meeting with Norwegian gas giants, Støre announced his scepticism towards the European measure, as well as potential long-term gas contracts between the companies and the EU.
The announcement was received with a positive attitude from the business sector, with which Støre has shown himself to be close. Additionally, the prospective outcomes of the contracts would have a great positive impact in Norway’s economy. Moreover, after Støre´s statement about a frugal national budget sparked criticism from the country’s population, extra revenue from gas sales to EU member states was positively received.
What is driving Støre?
Answer: Prime Minister Støre attempts to protect Norwegian state-owned gas companies from aggressive EU policies that could impact their future prospects in the European market.
Støre, albeit belonging to Arbeiderpartiet (Norway’s Labour Party), has been regarded as a politician closer to the centre-right than the centre-left on the political spectrum. His former youth affiliation with the Conservative Party, alongside his current business-friendly politics, have been perceived as reasons behind his shift to the right within the Labour Party. His particular background and recent shift can help to explain his focus on protecting Norwegian businesses´ interests in the current political and economic landscape.
Norwegian gas giant Equinor´s chief executive Anders Opedal has said that the [Norwegian] government is in a better position than the oil and gas companies to alleviate the impact of the present energy crisis and its consequential soaring prices on Norway’s population. Opedal has also indicated that it would be better for the government to take measures towards wealth distribution as well as higher taxation of energy companies should the taxes be used as a means to ease the rising costs for consumers.
These declarations, alongside Støre’s political positioning, can be conceived as driving factors behind Støre´s ultimate rejection of the EU’s cap on gas prices proposal. Additionally, Støre’s decision to prioritise his country’s wealth over appeasing his European counterparts could be expected to have a positive impact on his image at the domestic level.
What does this mean for you?
Answer: Støre´s decisions regarding Norway´s gas supply to EU countries can have a deep impact on the European and UK markets.
The implications of Norway’s new position as the leading gas supplier to the UK and European Union have been made clear by the increased number of potential contracts that the Scandinavian country has been offered in recent months as well as the EU’s decision to not implement a gas price cap.
As such, the flow of Norwegian gas into Europe (and the UK) can be seriously affected by the position PM Støre decides to take regarding the gas price cap issue. Notably, with ownership of two-thirds of the business, the Norwegian government remains the largest stakeholder in Equinor, Norway’s biggest gas company and therefore the EU’s biggest supplier.
The possibility of a frosty relationship between Norway and its European counterparts during the critical time of an energy shortage and at the prelude of looming winter brings chilling implications for the political, economic and social spheres of Europe. Therefore, it can be concluded that Støre’s input on the continent’s politics and the economic market has reached a level of influence not experienced by any Norwegian Prime Minister preceding him.
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