La Jornada: Petrocrisis brings the European Union and Latin America closer

The urgency of stopping the imminent impact on economies due to accelerated warming of the Earth, as well as the high fuel prices triggered by the war between Russia and Ukraine, and later by the war in the Middle East, led to the energy transition being a key component in trade agreements between both hemispheres.

Through its Global Gateway investment and international cooperation strategy, the European Union plans to allocate at least half of a total portfolio of 45 billion euros to the financing and training of projects that produce clean and renewable energy in Latin America and the Caribbean.

The intention: achieve decarbonization; That is, the process to reduce and gradually eliminate emissions of carbon dioxide and other greenhouse gases into the atmosphere.

“For us, the transition towards indigenous energies is a matter of national security. We need international agreements and partners, and that is where the European Union looks towards Latin America as a region where around 70 percent of electricity is produced through renewable resources, where trade relations are being diversified, with the agreement with Mercosur, with Mexico and other countries.

“Paraguay, Costa Rica and Uruguay generate more than 90 percent of their electricity from renewable sources, other countries in the Caribbean and Central America continue to be highly dependent on fossil fuels,” according to the Economic Commission for Latin America and the Caribbean (ECLAC).

“We are going to have much more important relationships with Global Gateway projects,” commented an official from the European Commission, within the framework of a meeting with Latin American journalists in this capital, in which the participants requested that their positions and names be omitted.

Mercosur (Southern Common Market) is a regional integration block of Argentina, Brazil, Paraguay and Uruguay to promote free trade between their countries, and coordinate economic policies.

Regarding Mexico, the official referred to the expectation that exists for the Modernized Agreement on Economic Partnership, Political Coordination and Cooperation Mexico-European Union (Modernized Global Agreement) that President Claudia Sheinbaum Pardo signed on May 22 together with her EU counterparts, Antonio Costa, president of the European Council, and Ursula von der Leyen, president of the European Commission.

The EU is the second most important foreign investor in Mexico and, as a bloc, the third trading partner.

However, the Global Gateway projects to support Mexico’s energy transition have not yet been defined, since the conversations have just begun, indicated sources from the European Commission, although 24 projects have already been defined for the region, where Brazil, Colombia, Bolivia, Chile, Peru, Costa Rica and the Caribbean stand out.

“In an unpredictable world, with some unpredictable leaders, with unpredictable policies, many international actors, including the European Union, look for reliable and stable partners,” said one of the officials in a meeting with the media.

“For this reason, trade agreements, such as Mercosur or the one signed with Mexico, are extremely important for us (…) they have energy and the energy transition as a key component of our relations,” he added.

And, although the EU is not now facing a crisis situation, of security of supply, as happened in 2022, when Russia invaded Ukraine, because around 60 percent of its oil imports came from Russia, the bloc is beginning to face two problems: on the one hand, prices are higher in Europe. When Russia invaded Ukraine, a megawatt/hour of gas cost 316 euros, and although it later went down, it remained high, settling at 52 euros.

The megawatt/hour (Mwh) is a unit of energy that is equivalent to one thousand kilowatts/hour. Natural gas is usually measured in volume (cubic meters) or in thermal units, but one Mwh of gas is approximately equivalent to 100 cubic meters of natural gas.

“Regardless of whether the crisis ends today, we are going to see high prices in the next six or eight months, because the markets need time to rebalance,” explained an expert from the European Commission.

Dependency worries

Pondering the situation, “the cases of kerosene and airplane fuel are actually much more dizzying.” It is a flammable and transparent liquid obtained by distillation of petroleum that is used as aircraft fuel.

“Yes, there is a significant dependence on the EU; around 30 percent of our imports come from the Middle East; if we add to this 10 percent of what is refined, for example in India, or in other countries, we are looking at 40 percent of our imports coming from the region,” explained another source.

“For this reason, right now the EU is already taking a series of coordination actions with several member states to prevent planes from being able to take off,” he added.

The European bloc is a net importer of fossil fuels, since it buys 55 percent of the energy it needs from other countries. Of that proportion, 99 percent comes from fossil fuels. With this, the energy bill for gas and oil imports in the region represents more than 365 billion euros each year or one billion euros per day.

“But that bill has increased by more than 50 billion euros in the past 45 or 50 days, since the conflict in the Strait of Hormuz began.”

Renewable and nuclear

Given the high costs, the 27 countries united in the old continent seek to make renewable and nuclear energy the absolute priority in the coming years.

Since 2022, the EU has developed more renewable energy than in the previous 10 years.

“We are facing an absolute acceleration of the incorporation of renewable energy sources in the European Union. Today, most of the electricity generated in the bloc comes from renewables, the challenge is to incorporate them into the electrical networks,” said an expert.

Blackouts have occurred in the Iberian Peninsula because the generation of renewable energy is so much that the system is not capable of absorbing it.

Meanwhile, nuclear energy is a safe, indigenous source of electricity that will have a lot of weight in the coming years. It operates in France, while Poland, Slovakia, Romania, Bulgaria and Greece are betting on this type of nuclear power plants.