European Commission President Ursula von der Leyen has acknowledged that the disappearance of cheap energy imports has undermined one of the foundations of Europe's economic model. The admission comes as European industries contend with energy prices she says remain two to three times higher than those faced by competitors in the United States and China.
INR Report: Based on reporting by RT HERE.
For years, Europe's access to relatively inexpensive energy was one of the foundations supporting its industrial economy.
Now European Commission President Ursula von der Leyen has publicly acknowledged that foundation has disappeared.
Speaking at the La Rencontre des Entrepreneurs de France business conference in Paris, von der Leyen said Europe's economic model had historically depended on several important advantages, including inexpensive energy imports.
Those pillars, she said, have now “disappeared.”
The significance of the admission lies not simply in higher household electricity or heating bills, but in the consequences for Europe's ability to manufacture goods and compete internationally.
According to von der Leyen, European energy prices remain two to three times higher than those in the United States and China.
That is a substantial structural disadvantage for industries in which energy represents a major proportion of production costs.
Europe Walked Away From Russian Energy
The transformation began following the escalation of the Ukraine conflict in 2022.
The European Union dramatically reduced imports of Russian oil and natural gas, while Brussels subsequently committed itself to completely phasing out Russian fossil fuels by 2027.
Before 2022, Russia had been one of Europe's most important energy suppliers.
Germany was particularly exposed.
Approximately 55 percent of Germany's natural-gas imports came from Russia before 2022, according to figures cited in the RT report.
Much of that gas arrived through pipelines, providing Germany's enormous industrial sector with comparatively inexpensive and dependable energy.
The loss of those supplies forced European economies to seek alternatives, including substantially greater quantities of liquefied natural gas.
LNG can be transported globally rather than being tied to pipelines, but the process requires gas to be liquefied, shipped aboard specialised vessels and then regasified at its destination.
Those additional stages can make it considerably more expensive than pipeline gas.
Germany Acknowledges the Cost
German Chancellor Friedrich Merz has also acknowledged the relationship between energy policy and industrial competitiveness.
According to RT, Merz said last month that Germany's self-imposed embargo on Russian energy was the principal cause of the country's continuing energy crisis, which has weakened the competitiveness of German industry.
That is particularly significant because Germany sits at the centre of European manufacturing.
Its economy has historically depended heavily on energy-intensive industries including chemicals, metals, machinery and automotive manufacturing.
If those industries face persistently higher energy costs than equivalent producers in the United States or China, the problem becomes more than a temporary inflation shock.
It becomes a question of whether European factories can continue producing goods competitively at all.
Macron Says Europe Is in ‘Emergency Mode’
French President Emmanuel Macron has raised similar concerns.
Earlier this year, Macron described the European Union as being in “emergency mode” over energy costs after Russian pipeline gas was increasingly replaced with more expensive LNG from the United States.
Europe's vulnerability may also be extending into energy security.
The Financial Times reported in June, citing projections from consultancy Wood Mackenzie, that the EU could enter the coming heating season with its lowest gas reserves in 15 years.
At the same time, geopolitical instability has placed further pressure on global energy markets.
RT reports that the US-Israeli war with Iran has added another layer of uncertainty and cost.
The combination leaves Europe facing a difficult balancing act: reducing dependence on Russian energy while ensuring households and industries retain access to sufficient supplies at internationally competitive prices.
Russian LNG Has Not Completely Disappeared
There is also an apparent contradiction between Europe's stated policy and what is happening in energy markets.
Some EU member states have resisted further restrictions on Russian LNG as Brussels moves toward ending long-term Russian energy imports.
At the same time, according to Bloomberg reporting cited by RT, the bloc has recently increased purchases of Russian LNG.
That does not mean Europe's overall energy relationship with Russia has returned to its pre-2022 position. Pipeline flows and the broader structure of European energy imports have changed dramatically.
But continued Russian LNG purchases demonstrate how difficult it can be to separate political objectives from the physical realities of energy supply.
The European Commission nevertheless maintains that the planned phase-out will proceed.
According to the RT report, Brussels intends to end Russian energy imports even in circumstances involving physical shortages or potential power cuts.
The Competitiveness Question
The central economic issue is increasingly straightforward.
If European businesses must pay substantially more for energy than their American and Chinese competitors, somebody ultimately bears that cost.
Companies can absorb it through lower profits.
They can attempt to pass it to consumers through higher prices.
They can reduce investment.
They can relocate energy-intensive production.
Or, in some cases, they can cease operating.
For an economy, each possibility carries consequences.
Lower investment reduces future productive capacity. Higher prices weaken competitiveness. Factory closures eliminate jobs and industrial capability. Moving production overseas can make an economy increasingly dependent on imports.
This is why energy policy cannot easily be separated from industrial policy.
Cheap, reliable energy is not merely a household cost-of-living issue. It is one of the fundamental inputs into a productive economy.
Sanctions and Their Economic Trade-Offs
Russia has consistently argued that European sanctions against its energy sector have been self-defeating and have damaged European competitiveness.
That is Moscow's position and should be recognised as such rather than treated as an independent conclusion.
Russia has meanwhile redirected substantial quantities of its energy exports toward other markets, particularly Asia.
Europe's policymakers would argue that reducing reliance on Russian energy also carries strategic and security benefits that cannot be measured purely through electricity or gas prices.
That is the policy trade-off at the heart of the issue.
A country may rationally decide that accepting higher energy prices is justified to reduce dependence on a supplier it regards as strategically dangerous.
But the economic cost does not disappear because the policy has a geopolitical objective.
Von der Leyen's comments effectively acknowledge that cost.
Energy Is Ultimately an Economic Input
Europe's experience demonstrates something easily overlooked during debates over energy policy.
The relevant measure is not simply where energy comes from.
It is whether sufficient energy remains reliable, secure and internationally competitive in price.
For industrial economies, the three considerations are intertwined.
Extremely cheap energy that can be suddenly withdrawn presents a security problem.
Secure energy that is prohibitively expensive presents an economic problem.
And inexpensive energy without sufficient supply presents a reliability problem.
A durable energy system therefore has to balance all three.
Europe is now attempting to rebuild that balance after removing one of the major sources around which its previous industrial model had developed.
Does This Affect New Zealand?
The European experience carries a particularly relevant lesson for New Zealand.
New Zealand's circumstances are very different. It has substantial renewable electricity generation and was never dependent on Russian pipeline gas in the manner of Germany and other European economies.
But the economic principle is identical.
Energy price, security and availability ultimately affect national competitiveness.
New Zealand businesses compete internationally against companies operating in countries with very different energy costs. If domestic electricity, fuel or industrial energy becomes structurally more expensive than competitors' supplies, that difference eventually appears somewhere in the economy.
It can appear in food production, freight costs, manufacturing margins, export prices, household bills or decisions about whether businesses invest here at all.
The issue is particularly relevant as New Zealand considers its own energy resilience.
The closure of crude-oil refining at Marsden Point increased reliance on imported refined fuels, while recent moves to expand diesel and aviation-fuel storage there are intended to provide greater supply resilience.
At the same time, New Zealand faces continuing questions about electricity generation, transmission investment, natural gas availability and the energy requirements of future industry.
Europe provides a useful warning against treating those questions independently.
An energy policy can achieve one objective while producing unintended consequences somewhere else.
The national-interest test should therefore be measurable: Does New Zealand have sufficient reliable energy, at internationally competitive prices, to support households and a productive economy while maintaining acceptable security of supply?
Europe's experience suggests that answering only part of that question can become extraordinarily expensive.
Source
RT, 28 August 2026
Loss of cheap energy harmed EU economy – von der Leyen
Additional reporting cited by RT: Financial Times, Bloomberg and Wood Mackenzie
Independent reporting. Original context. Credited sources.