EU leaders to debate economy woes as Russia squeezes gas supplies

By Jan Strupczewski

BRUSSELS (Reuters) - European Union leaders will turn on Friday from celebration over Ukraine's start on the road to membership of their bloc to consternation over Russia's squeeze on their gas supplies, soaring prices and sputtering economies.

On the second day of a summit in Brussels, the leaders of the 27 nations will place the blame for a spike in inflation and sagging growth across the globe squarely on Russia's invasion of Ukraine that began four months ago to the day.

They will also call on the EU's executive to come up with energy supply solutions in response to Moscow's "weaponisation" of gas imports now that a dozen European countries have been thumped by cuts in critical supplies from Russia.

"We have to adjust to the new reality," said one EU official ahead of the talks. "It is only a matter of time before the Russians close down all gas shipments."

The first day of the summit ended on a triumphant note as the EU formally accepted Ukraine as a candidate to join the bloc, a gesture of solidarity with the war-buffeted country and a message to Moscow that it intends to reach deep into the former Soviet Union as it expands further.

However, Kyiv's journey to membership will take many years and the EU leaders' most immediate concerns are the severe economic strains that, coming on the heels of the COVID-19 pandemic, risk popular discontent in their own countries.

In a draft statement seen by Reuters, the leaders will stress that their economies remain fundamentally strong and pledge to stay united in response to the challenges posed by the war in Ukraine.

The bloc responded with uncharacteristic speed and unity after the launch of the war in Ukraine, which Moscow calls a "special military operation", imposing a slew of sanctions on Russia even though some - such as an embargo on oil imports later this year - will have repercussions for their economies.

However, some member states have resisted deeper sanctions, particularly Hungary, whose prime minister, Viktor Orban, cultivates closer ties with the Kremlin than others in the bloc.

On Thursday, a top aide to Orban told Reuters that there must be no further EU sanctions on Russia.

Inflation in the 19 countries sharing the euro currency has shot to all-time highs above 8% and the EU's executive, the European Commission, has slashed its economic growth forecast to 2.7% this year from 4% expected before the invasion.

The Commission said on Thursday that a dozen EU countries had been affected by cuts to gas supply from Russia.

While they have so far been able to fill the shortfall, they were preparing in case of further supply cuts by Moscow, the main gas supplier to Europe.

European officials believe the Russian cuts are in retaliation for the EU's support for Ukraine. Moscow has denied the squeeze in gas deliveries to Europe is premeditated.

In their statement, the leaders will request the Commission seek to secure energy supply at affordable prices to cope with "the weaponisation of gas by Russia".

Last month they asked the Commission to explore, in cooperation with other countries, ways to bring soaring energy prices under control, including through import price caps.

The Commission has so far not produced any proposals as the issue is highly complex and divisive, with some countries uncomfortable imposing price caps they fear could disrupt the market and make a bad situation worse.