Money and Markets

Spain can solve the problem of Europe's reliance on Russian natural gas, its prime minister says

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Spanish Prime Minister. Pedro Sanchez.
  • Spain's prime minister spotlighted his country as the "answer" to the EU's reliance on Russian gas.
  • He noted Spain is home to half 37% of the EU's capacity for turning LNG into natural gas. 
  • Oil and natural gas prices have been flying as the EU considers an oil embargo on Russian imports. 
  • For more stories visit Business Insider.
Spain has the answer to Europe's problem of finding an alternative to Russian gas, its prime minister has said.

The European Union believes it is facing a coming supply shock, as President Vladimir Putin uses its reliance on Russian supply to counter the bloc's economic sanctions over Ukraine.

"Spain and the Iberian peninsula — and I would say Southern Europe — we have a chance to provide an answer to this energy dependence on Russian fossil energy," Sanchez told CNBC on Monday. Sanchez pointed out that his country has 37% of the EU's total capacity for regasification — the process by which liquefied natural gas is converted back to natural gas — and the Iberian peninsula concentrates close to 50% of that LNG extract for the EU.

"The only problem that we have is the interconnections. That is why I think it was very important that the commission made a clear statement that we need to increase and to intensify the interconnections from the Iberian peninsula with the European energy market," he said.

The EU usually gets 40% of its natural gas needs fulfilled by Russia, which is the region's biggest supplier, alongside Norway, Algeria and others, according to official figures.

The 27-member bloc has come under pressure to halt its imports of gas and oil from Russia, to stop the flow of revenue to Moscow. But its dependence on gas supplies make it difficult to turn off the spigot without risking economic harm.

Russia cut off gas supplies to Poland and Bulgaria in April, after the countries refused to bow to President Vladimir Putin's decree that payments must be made in rubles — a move the European Commission's chief has described as "an instrument of blackmail".

After that move, the commission told EU member states to prepare for a supply shock and full disruption of Russian gas supplies, Euractiv reported.

Sanchez also noted that Spain has a "very strong presence in renewables," which he believes are more competitive than gas.

"Renewable energy,  hydrogen energy efficiency, is not only a great ally for countries and economies to tackle climate-change efforts, but also — in this very complex and very uncertain geopolitical scenario — that will provide us means to increase our resilience and autonomy," he said. Spain was recently embroiled in a spat with Algeria after it re-exported gas to Morocco. The move came as Algeria cut ties with Morocco last year after accusing the country of hostile actions. 

Oil and natural gas prices have skyrocketed in the wake of Russia's invasion of Ukraine, as Western allies placed sanctions on Moscow. The EU is now looking to come to agreement on an embargo on Russian oil imports, following similar bans by the US and UK.

Asked whether the embargo will come soon, Sanchez was optimistic.

"We are now negotiating the second batch of economic sanctions, but I believe we will have that agreement soon," he said. 

"This is something that of course is going to cost us, and is already doing so, because we are suffering through this hike of gas and oil and electricity prices."

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