The GCC-Europe collaboration on hydrogen must blow off some steam
The relationship between the EU and the Gulf Cooperation Council is important, not least for new energies. Hydrogen is a critical piece in Europe’s complex decarbonization puzzle, and the GCC may have its answer.
Trading the clean gas is a cornerstone of the “strategic partnership” between both regions that the EU declared in May 2022. Meeting rooms from NEOM to Muscat host discussions with European representatives, and an ocean of agreements attests to their mutual intent.
Yet, many negotiations have stalled, revealing cracks in the partnership’s facade. Will this new alliance deliver on the promise of hydrogen trade, or will geopolitical quarrels and international divisions render it a pipe dream?
The economics are pretty simple: The GCC has abundant capital, world-leading expertise and infrastructure for energy exports and petrochemicals, swift decision-making and a wealth of resources.
While, in the long run, North Africa may take over the lion’s share of the EU’s hydrogen imports, building new pipelines or repurposing existing gas highways will take many years and intense diplomatic efforts, also among EU states.
On the other hand, the Gulf states are among the few players that can develop hydrogen in this decade. The EU-GCC hydrogen trade is a no-brainer.
EU energy conundrum
However, energy is hardly just an economic issue —particularly for Europe these days. Since Russia’s Ukraine invasion and its ruptured energy ties with the EU, the term “dependency” has likely become the most detested in Europe.
The continent’s quest for renewable energy is not solely driven by climate action but also by the wish to achieve technological leadership and strategic autonomy. Maintaining industrial strength remains a paramount concern for Europe.
Notably, the EU-GCC hydrogen trade sits at the frontier of a relationship between the world’s foremost energy hub and its largest common market area. With the shifts in energy and global order, scrutinizing partnerships is imperative.
The EU is considering sourcing 50 percent of its hydrogen from abroad, and Germany’s revised National Hydrogen Strategy expects two-thirds of its supply to be imported. Despite these strategies and signed agreements, Europe remains deeply divided on whom to import hydrogen from, or even whether to import it at all.
While the optimal answer could — and arguably should — be thoughtful diversification and reliance on solid first-movers, disagreements persist. These disagreements unfold at the EU level, among member states and even within them.
This discord adds to the slowdown caused by Europe’s cautious bureaucracy and its tendency to exercise extreme caution before making any move.
Europe’s ambition to reshape energy geographies into more “favorable” arrangements comes at a challenging time when relations between both regions are tense.
Despite the strategic partnership and numerous GCC nationals returning from their summer vacation in Europe, it has become apparent that some European voices wish to avoid engagement with the GCC altogether — be it due to cultural chauvinism, anti-Arabism or to express disapproval of the region’s increasing assertiveness and autonomy.
The resentment many European officials and media representatives showed toward Qatar’s excellently hosted World Cup has been seared into the region’s collective memory.
Yet, alienation also comes from the GCC states, which increasingly keep Europe out of the loop in many regional matters, from Syria to Sudan.
Together, both regions have fueled tacit mistrust toward each other. However, they have much to gain from increased collaboration — not least in hydrogen — and much to lose if the global order fragments at the current pace.
Failure as a perspective
So, what if the hydrogen partnership fails? The GCC may lose investments and efforts, but Europe could face more profound repercussions. The hydrogen market is bound to tighten, not least because of limited electrolyzer manufacturing capacities.
Despite considerable interest in exporting to Europe, both the GCC and European energy giants active in the Gulf are equally happy to deliver low-carbon fuels to other markets, and far-eastern off-takers outpace their European counterparts.
Most other prospective hydrogen exporters to Europe require time and investment the continent is not inclined to give, so the EU’s hydrogen ambitions —and the chance to decarbonize its industries — could become stranded if the EU-GCC partnership is not expedited. In effect, Europe would need to sacrifice either industrial leadership or climate action.
For the GCC, other options exist beyond hydrogen exports — for instance, “green goods,” such as steel or cement produced with clean hydrogen. For the economic development of the region, this would even be preferable.
When the EU establishes its carbon border mechanism — a tax on the carbon content of imports — GCC countries will stand ready to export these goods to Europe at a profit while creating industries and jobs locally.
Also, ship fuel and port services are a strong option. China and its neighbors might remain Europe’s foremost trading partners, which will translate into massive maritime transport for decades. The GCC is strategically located at the crossroads between the two pivotal regions and can establish a significant hub for ships to refuel with low-carbon gas along this route.
From words to hydrogen action
A collaboration between the old continent and the Gulf that is based on equality and mutual benefit is indeed worth saving. Still, it will require binding investment decisions or codifying the numerous existing agreements into enforceable directives and institutions.
Global, or at least regional, hydrogen governance can overcome the uncertainty and high transaction costs associated with the current modus operandi.
An institutionalized Hydrogen Alliance, uniting European importers and GCC exporters, is a viable solution. Such an alliance could piggyback on institutional structures currently being developed, such as the European Hydrogen Bank, potentially enabling and catalyzing the hydrogen transition. More importantly, it could slow down the widening geopolitical rift between the regions.
Eventually, the EU-GCC collaboration in hydrogen is a pragmatic venture. The EU strives for rapid decarbonization and industrial strength. The GCC builds new value chains, and both have proven to be reliable trade partners.
It can lead to more, though. For any of this to happen, a strategic hydrogen partnership between Europe and the GCC, much like any other relationship, needs trust, tolerance and — most importantly — actions instead of words.
• Dr. Dawud Ansari is a researcher at German Institute for International and Security Affairs.
• Dr. Abdullah Al-Abri is a consultant at the International Energy Agency.