EU Sharpens Torture Tools As Swiss Showdown Escalates Into Energy War

  • Date: 03/07/19
  • Ambrose Evans-Pritchard, The Daily Telegraph

Switzerland has become a victim of proxy diplomatic warfare over energy policy and national security.

The Grande Dixence dam: Swiss hydro power is crucial to plugging the gaps in Europe’s electricity supply – but is now part of the political battleground with Brussels CREDIT: GETTY IMAGES

Switzerland has survived the first battle of the bourses with the EU

Shares of Nestle, Novartis, and UBS will for now be traded on the SIX exchange in Zurich rather than in Frankfurt or London.  The sky will not fall because of that. 

But the clash with Brussels will become increasingly painful as the pressure ratchets up. The EU is determined to shut down the idiosyncratic “Swiss model”. It aims to bring the country within its legal and regulatory control once and for all under a new framework agreement. 

This means suspending 120 bilateral accords one by one as they fall due, progressively shutting the Swiss out of the EU’s economic, transport, and political system until they capitulate. It amounts to a sanctions regime.

Energy too is on the menu and this risks escalation into areas of national security. “Energy access for Switzerland is slowly deteriorating,” said Professor Paul van Baal from Lausanne’s  Polytechnique Fédérale.

The EU has pointedly excluded the country from EU legislation on power grids and network codes. The Swiss have to compete with one arm tied behind their backs in the electricity market. This raises costs and creates friction.

It is serious enough that intraday market volumes fell to almost zero at times last year. Nor can the Swiss control the ‘loop flows’ of power going from one EU state to another through its own territory, short of taking quasi-military action. 

Prof van Baal said renewable certificates are next on the list. Switzerland is likely to lose the equivalence status that allowing the country trade these contracts across the EU.

This slow squeeze is double-edged for Europe. Switzerland is a power hub. Roughly 10pc of the EU’s electricity passes through 40 connection points on its territory. “It is impossible to decouple that,” he said.

Swiss volts power the industrial heartland of the Lombardy. Most of Italy’s power lines from the rest of the EU pass through Switzerland.

Swiss hydro-power – 60pc of its electricity output – is ‘dispatchable’ and in a sense plugs the intermittency gap when the sun stops shining in Baden-Württemberg, Bavaria or Burgundy. It is the ‘Alpine battery’ for German and French solar.

Brussels is preparing others tools of suffocation. There are threats to withdraw mutual recognition for exports of medical equipment.  This has the character of a creeping blockade. “In theory the EU could cut off access to almost anything,” said Pieter Cleppe from Open Europe in Brussels.

“It is a worrying precedent that a country can be cut off like this for purely-political motives when it has not violated its obligations,” he said.

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