Poland defies imposing the solidarity mechanism on the gas market. However, if the worst case scenario occurs and Russia completely halts its supply, there may be no other choice. Nevertheless, Brussels and Warsaw may again part ways before the elections – writes Wojciech Jakóbik, editor in chief at BiznesAlert.pl.
Poland upends a rule it was fighting for
The SOS security of supply regulation provides rules for the protection of sensitive customers such as schools, hospitals, etc. in the event of a gas supply crisis in Europe, based on the principle of solidarity, which Poland has defended in the past, when it was not clear whether Germany would help it if Russia turned off the gas tap. The principle of energy solidarity made it possible to revise the SOS regulation in 2017, so that Germany had to supply gas to sensitive customers in Poland instead of pumping it to the Katharina warehouse. The same principle was used by the Court of Justice of the European Union, when it gave a ruling in Poland’s favor in a dispute over Gazprom using a branch of the Nord Stream 1 gas pipeline from Russia to Germany called OPAL. The Court ruled that no EU country could make decisions in the energy sector to the detriment of another, so the Russians could not monopolize this pipe.
When the situation changed in the era of the energy crisis fuelled by Russia, and it is Germany that may need Poland’s help, Warsaw’s position hardened. The Poles reject the mandatory reduction of gas consumption proposed by the European Commission, and together with Hungary have blocked this possibility in the Council of the European Union. Unlike Budapest, which hopes for close relations with Russia’s Gazprom, Warsaw has its own reasons for blocking the legislation.
“Energy security is the exclusive competence of states and we will never agree on handing it over to European institutions. No one can force us to regulate gas or impose other restrictive measures. Moreover, we do not want to make decisions on restrictions in other countries from Warsaw,” said the Minister of Climate and Environment Anna Moskwa in the Sieci weekly when commenting on the discussion about the plan to share gas reserves in the European Union. “This is not on the table, and we will certainly never agree to such an action. First of all, the European Commission failed to push through the mandatory demand reduction at the last Council. It will be voluntary, and the decision in this regard is made by each country,” said the head of the ministry.
Frustration in Warsaw
In practice, the SOS regulation is implemented on the basis of bilateral agreements between member states that determine the rules and compensation on emergency gas supplies. Poland has not yet signed a bilateral agreement with Germany on solidarity measures in the event of a gas supply crisis, although the German Climate Ministry reported talks on this issue did take place. Berlin is to sign such contracts with Austria, the Czech Republic, Switzerland and Italy.
Poland’s reluctance to make a decision on this matter may be a negotiating tactic, as the talks have become a source of frustration for Warsaw. Poles argue that their propositions for suspending the European Emissions Trading System, or at least reforming it to help companies at a time of crisis by, e.g. removing the possibility of speculations, remain unanswered. On top of that no concessions have been made on the Fit For 55 package, even though member states across Europe are allowed to stick to coal for longer provided that they minimize its use. The Poles claim that Germany is working hard behind the scenes to torpedo all of their initiatives. Hence the resistance to compulsory consumption reduction.
Another aspect is the sovereignty rhetoric that is important for the ruling camp in Warsaw before the parliamentary elections of 2023. The leader of the ruling coalition Jarosław Kaczyński complained in the Sieci weekly that the government has made too many concessions to the European Commission in the dispute over the rule of law. He decided to tighten the course, which was more flexible after the attack of Russia on Ukraine. A similar way of thinking guides Warsaw’s approach to the dispute over the security of gas supplies. Warsaw warns that the Commission wants to obtain competences which, in Poland’s opinion, lie exclusively within the competence of the member states in accordance with the Treaty on the Functioning of the European Union.
Our negotiators argue that the decision on compulsory consumption reduction cannot be taken by a qualified majority, as decisions on the energy mix of member states should be unanimous. The Poles claim that putting a limit on gas consumption would increase the usage of other fuels, which would impact the set of power and heat sources in a given country, i.e. its energy mix. Therefore, Warsaw wants to keep its veto power on this matter. However, such a solution would allow the aforementioned Budapest, which is Russia’s Trojan horse, to torpedo an effective response of the European Union in case Russia would completely stop supplying its gas, which is likely in the coming heating season.
Interestingly, Poland had no resistance to entering a higher level of coordination in the electricity market, where it often uses imports to balance the situation on the domestic market. On 28 of June the German Minister of Economy and Climate signed a memorandum of understanding with his counterparts from Austria, Hungary, Poland, the Czech Republic and Slovakia on support in the event of a market crisis. “The parties also reaffirmed their readiness to support each other in crisis situations and to develop new, effective mechanisms to support each other in case of an emergency. In order to best prepare for emergencies, the parties also expressed interest in conducting joint exercises and simulations,” Poland’s Climate Ministry explained in a commentary for BiznesAlert.pl. Any problems with the security of energy supply in Poland will in the future, as in the past, be compensated via neighboring markets, such as Germany. The same could happen in the gas market. This winter the Germans may need help, but Poles may need it in the next one.
Poland goes to the polls
Perhaps there is room for an agreement between Brussels and Warsaw. It could involve concessions on climate policy expected by the Poles in exchange for an agreement on a new mechanism on limiting gas consumption in case of an emergency introduced by the EC. However, the narrative about sovereignty will be a challenge as it is important considering the coming pre-election battles in Poland, which are forcing Warsaw to continue the dispute with Brussels. The lack of flexibility on the other side does not make it any easier to talk.