Brussels Briefing

Sep 29, 2022

The Energy President

Since taking office, Ursula von der Leyen has frequently brought the continent together in the face of unprecedented challenges. The current energy crisis may well decide her legacy as European Commission president.

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European Commission President Ursula von der Leyen speaks during the Ukraine Recovery Conference (URC2022), in Lugano, Switzerland, July 4, 2022.
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The pandemic has been a prologue for European Commission President Ursula von der Leyen, the dark horse consensus candidate to lead the European Union who has built one consensus after another in her first three years in office.

Energy, not the COVID-19 pandemic or even the war in Ukraine, may be the defining crisis of von der Leyen’s presidency, and the longest-lasting arena in which to create a legacy. The European Union must find a way to reduce its dependence on Russian oil, gas, and coal in time for winter, which may mean ramping up fossil fuels at the same time it is looking for ways to phase them out. If the European Commission can broker a Grand Bargain that keeps both these goals in play, her impact may outlast her tenure by generations.

The EU has in recent years drawn attention to its need for “strategic autonomy,” or independence in the sectors most important to its economy and quality of life. Financially, this has meant strengthening its banking regulation in a bid to avoid re-triggering the doom loop that caused countries in the eurozone to seek International Monetary Fund assistance in the previous decade. Now the focus is on shrinking a dangerous dependence on Russian gas without totally abandoning the fight against climate change and global warming.

Defining Its International Role

All of this means confronting the EU’s longstanding shortcomings in being a geopolitical actor. While the bloc has made great strides in becoming an economic and regulatory powerhouse, it has not left a mark on the globe commensurate with the strength of its single market. In failing to do so the EU has not taken sufficient action to define its international role, let alone achieve it. The pandemic exposed supply chain vulnerabilities that have shifted but not eased as quarantine blockades gave way to war-related snags. Nor, has the world stood still: “The number of acute and frozen conflicts in and around Europe has increased,” former director of the German Council on Foreign Relations Daniela Schwarzer noted.

Von der Leyen, a former German defense minister, took the helm at the EU’s executive in 2019 over the ambivalence of her own home country, which saw her as a dubious workaround to the lofty democratic goals of the Spitzenkandidaten process. The idea had been that by having pan-European political parties choose candidates for the bloc’s top executive post, ordinary citizens would feel more connected to the Brussels bureaucracy and that the European Parliament would take up a larger popular mantle. Instead, the EU field narrowed to a range of mostly German-speaking candidates, none of whom gathered much of a consensus.

Making Her Mark

Since taking office, however, von der Leyen has frequently brought the continent together in the face of unprecedented challenges. As her term began, she helped shepherd in both a coordinated vaccine development and an economic support package that, for the first time, allowed the EU to borrow at scale on public markets. In 2021, her commission put forward an ambitious proposal to make the EU climate neutral by 2050. And then in 2022, those climate goals were upended by Russia’s decision to invade Ukraine and the EU’s immediate need to secure its borders and overhaul its entire electricity market.

All this has taken place as the EU has been losing, not gaining, members, despite the talk of enlargement. The United Kingdom officially left the EU in January 2020, but its departure continues to drag out messily because of disputes over Northern Ireland, among other issues. Von der Leyen is now negotiating with the third British prime minister, Liz Truss, to hold office since she was elected, and initial meetings suggest preserving cordiality is the main deliverable on the table.

To make her lasting mark, the commission president will need to muster all of her political bona fides to keep the EU together. Already, the bloc is struggling with how to preserve economic and financial stability without ceding ground on its core rule-of-law values. Setting conditions for a democratic union may prove harder than untangling the math problem of high debts and low productivity that marked the EU’s previous existential turning point.

As a result of the euro crisis of 2010-2015, the EU has gained experience debating the tradeoffs between rescue money, moral hazard, and financial contagion. Fears that aid recipients would use their aid money to make ever more irresponsible financial decisions were replaced by a shared pragmatism that a loss of market access in one euro member state can hurt financial credibility for everyone. Stingy and stigma-laden bailout procedures were gradually replaced by new institutions that brought political accountability and technocratic responsibility. By the time the pandemic hit, fiscally conservative and fiscally precarious countries were able to unite around the shared conviction that joint borrowing would not only raise joint funds, but improve both joint and individual credibility.

Helping the Center Hold

In contrast, the EU remains existentially challenged by governments in countries like Hungary and Poland, where free speech and a reputable judiciary are in question. The EU has signaled a willingness to withhold funds, but even interim steps are fraught. In the case of Poland, for example, the EU in June 2022 approved the country’s overall recovery plan pending completion of various milestones. No money has yet been disbursed, but the top-level approval is already being challenged due to concerns over the Polish court system, a bind that suggests Europe may struggle to find the right balance of carrot and stick.

Von der Leyen herself is trying to hold steady at the center. On the eve of the Italian elections that looked set to bring a new right-wing government to power, she told an American audience that the EU had the tools to act “if things go in a difficult direction.” The comment raised eyebrows and drew pushback from Italian politicians, while showing that von der Leyen was willing to expend some political capital to try to help the center hold.

In her 2022 State of the Union speech, von der Leyen sought to connect to EU citizens while also leaving room to negotiate among the member states, drawing on the strength of response to the February invasion of Ukraine. “A whole continent has risen in solidarity,” she said in mid-September. “Europeans neither hid nor hesitated.”

While conducting most of her speech in English, von der Leyen reinforced her points with a multilingual delivery. She used German to discuss the labor market, the need to allow more workers in from abroad, and to support medium-sized companies and international trade conditions. Meanwhile she turned to French to discuss the EU’s energy outlook, especially a future hydrogen-based network that could supplant the fossil fuels in use today. English, the common language used increasingly since the EU expanded eastward and to the Baltics, was the language of choice for the EU’s security priorities.

Security takes multiple forms in the current environment. The EU must roll out a new round of COVID-19 boosters to protect its citizens against the pandemic’s latest turn. It must continue to support Ukraine without fueling further Russian aggression or overreaching in promises to consider EU enlargement. And it must act fast to avoid power rationing or other acute consequences of the new energy marketplace.

Moving on Multiple Fronts

As the EU proceeds with an eighth round of Russia sanctions, as indicated by foreign ministers, it is likely to consider further curbs on energy markets. The bloc in June already agreed to phase in a total ban on oil imports starting in December, having ended coal imports in August. Now it is considering other steps like implementing immediate price caps on Russian oil, as proposed worldwide by the G7.

No sanctions have been imposed on natural gas so far. Instead, Russia itself has been withdrawing supply from EU markets in a bid to push back against its former willing customers in the hope of weakening their support for Ukraine. More than once, Gazprom has shut down the critical Nord Stream 1 pipeline, ostensibly for maintenance but perceived in Europe as economic blackmail. The EU has increased its stores of natural gas, filling its reserves to more than 80 percent ahead of an October 1 goal, but more hurdles remain.

Von der Leyen is now asking the EU to move on multiple fronts to haul itself in a different direction. In September, she asked member states to reduce energy consumption further, increase investment in renewable energy, and consider price caps on Russian natural gas, although that last in particular may not gain support from big member states. She is also supporting an effective windfall tax on energy companies currently benefiting from sky-high wholesale prices, in a bid to raise more money to support vulnerable populations. This levy, which will technically be sold as a “solidarity contribution” to avoid getting caught up in tax-related unanimity requirements, will be tough to implement fairly and without jeopardizing the very alternative energy sources the EU is trying to support.

It will be a difficult balance. Yet the EU cannot step back from the challenge, nor will global events allow it to. When Russia invaded Ukraine, von der Leyen’s tenure took a different turn. The EU’s next challenge will be how to keep its values and its borders intact—and in the short run just to keep the lights on.

Rebecca Christie is a non-resident fellow at Bruegel, the Brussels-based economic think tank.