Ukraine is paying the price for Germany’s complacency

“Every euro, every cent that you send to Russia is bloody money,” Kyiv’s Mayor Vitali Klitschko told reporters yesterday as he again called on Europe to stop funding Putin’s war through trade. In light of the reports of horrific atrocities committed against Ukrainian civilians, the EU is responding with a new sanctions package. But Germany still blocks the way to an import ban on Putin’s most lucrative asset: gas.

Berlin needs to accept that there is a price to pay for its complacent energy policy over the last two decades. At the moment Ukrainians are paying it. The number of victims is as yet unconfirmed, but there can be no doubt that civilians in the town of Bucha, near Kyiv, were shot, raped and tortured by Russian soldiers in a war that is funded in part through German energy bills. Since 2014 alone, Berlin has sent 170 billion euros to Moscow to pay for gas, coal and oil imports.

But Germany is struggling to cut the Kremlin’s economic tentacles. Despite some reductions being made, Germany still imports 40 per cent of its gas, a third of its oil and half of its coal from Russia. Much of the country’s energy infrastructure is also majority-owned by Russian companies – from pipelines and refineries to storage reservoirs. Currently, the government isn’t even entirely clear who owns Gazprom Germania, the Russian energy giant’s subsidiary in Germany. It has now been put under state control.

The government is understandably anxious about attempting to unroot the insidious Russian energy network from its economic nervous system. The rest of Europe should be, too. Take the oil refinery in Schwedt, 120km north-east of Berlin. The Russian oil firm Rosneft is the majority shareholder. Should it sabotage or close its asset, the entire region around Berlin would be affected as well as Western Poland. The same applies to gas passed on to countries like the Czech Republic, Austria and the Netherlands.

There is no doubt that the economic price to pay for an embargo would be large. Christian Sewing, the chief executive of Deutsche Bank, warned that “a significant recession in Germany would be virtually unavoidable”’ Economy Minister Robert Habeck agrees. He thinks it is “too soon” for an embargo. In his view, Germany is already doing what it can as “every contract that is halted hurts Putin”.

But to the people of Ukraine, a harsh economic blow to Moscow cannot come soon enough. Other countries have recognised the urgency of the situation. Poland is pressing ahead with a coal import ban and has successfully pushed the EU into proposing this as a bloc-wide policy in a new sanctions package. Lithuania has become the first EU country to give up Russian gas entirely. Even Italy, which is in a similar situation to Germany in terms of energy dependency, has said that it “will not place vetoes on sanctions against Russian gas”. Only Germany’s “Nein” to an embargo remains.

Yet most studies predict an economic contraction of 3-4 per cent as a worst case scenario should Germany stop importing gas immediately. Gas prices could rise five-fold, but the supply for private households would remain stable if alternatives are fully exploited. Some experts like Benjamin Moll of the LSE have even suggested the sooner a ban comes the less economically painful it will be due to reduced demand in the summer, giving the state and markets more time to adjust.

In fact, most experts don’t predict a catastrophic scenario should energy imports from Russia grind to a halt tomorrow. Habeck, too, has reassured the country that if Putin cuts off gas, “we will withstand the pressure and find solutions”. The risk is to German prosperity, not stability.

Germany cannot keep funding Putin’s war machine to avoid the economic consequences of its own mistakes. In light of the situation in Ukraine, that is both morally wrong and politically short-sighted. Germany has spent decades rebuilding its reputation, with Eastern European nations in particular. Every day it stands by as Ukrainian citizens are murdered with bullets funded through its energy bills, it haemorrhages trust.

If Putin’s invasion is indeed to mark a watershed moment for Germany, then chancellor Olaf Scholz needs to prove it. Berlin could withdraw Moscow’s funds for this war tomorrow.


Katja Hoyer is an Anglo- German historian and visiting research fellow at King’s College London

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