Germany condemned Russia’s invasion of Ukraine. It increased its defense budget and sent weapons to the Ukrainian army. It has unleashed a barrage of sanctions on Russia and some of its billionaires. This week in Hamburg, German authorities seized a superyacht belonging to the family of Alisher Usmanov, a Russian industrial oligarch who is closely associated with President Vladimir Putin. However, Germany’s role as the largest buyer of Russian oil and gas from the European Union continues to be largely unhindered, making it virtually the No. 1 EU financier in Mr Putin’s horrific war and civilian slaughterhouse. Germany’s dependence on Russian energy explains why the coalition government, led by Chancellor Olaf Solz, has resisted cutting off Russian oil and gas. He knows that doing so would plunge the EU’s largest economy into an exhausting recession – and turn off the lights and possibly his political career. How did Germany become so overly dependent on Russian energy? While former Chancellor Gerhard Schroeder has been described as one of Putin’s useful idiots on the energy front, it was his successor, Chancellor Angela Merkel, from 2005 to the end of last year, who adopted the Putin-friendly stance. Mr. Schroeder and intensified it. Mrs Merkel has kept a low profile since retiring, saying she spent her time writing her memoirs. She broke her silence earlier this month to insist she “supports” her decision to block Ukraine’s bid to join NATO at the military alliance summit in Bucharest in 2008. She issued the statement the day after Ukrainian President Volodymyr Zelensky suggested that his country was under siege as a direct result of the decision, which was backed by then-French President Nicolas Sarkozy. Ms Merkel did not apologize for pursuing Mr Putin’s disastrous policy of appeasement by taking as much of his oil and gas as possible. Germany’s energy risks are the highest in the EU, as it is the country most dependent on Russian oil and gas. Prices for both goods began to rise even before the start of the war on February 24. As a result, German inflation, at 7.3 percent in March, reached its highest level in more than 40 years. For Germany, the only worst thing about financing Putin’s war by paying record or near-record prices for Russian hydrocarbons is not paying for them at all. Russian exports could disappear if Mr Putin responds to EU sanctions by closing the taps. He already insists that payments be made in rubles, not in euros or dollars. Germany and other EU countries consider the payments in rubles a violation of the terms of the contract. Germany’s submission to Mr Putin began in earnest under Mr Schroeder, the Social Democrat chancellor from 1998 to 2005. He became Mr Putin’s friend and, in a television interview in 2004, referred to Mr Putin as a “perfect democrat”. . . » His affection for Russia in general and for Putin in particular has confused some European and German opposition leaders, although some political generals have suggested that his stance was merely an enhanced version of his. Young Ostpolitik – German for the New Eastern Policy. The policy, which began in the 1960s, long before the end of the Cold War, argued that forging greater economic and political ties with Russia would create greater continental security by bringing Russia to the European stage. Mr Schroeder added a strong commercial element to politics by establishing Germany as the top customer for Gazprom PJSC, the Kremlin-controlled gas giant that is the world’s largest gas exporter. He was one of the main champions of the first Nord Stream pipeline, which delivered gas directly from Russia to Germany, bypassing Ukraine. Within weeks of his 2005 election defeat, he became chairman of Nord Stream’s shareholder committee – convincing evidence that he was one of the Kremlin’s most favored European allies and lobbyists. There is no way he could have been appointed without Putin’s approval. Since then, Mr. Schroeder has been firmly integrated into Russia’s vast hydrocarbon industry. He is chairman of Rosneft Oil Company, the state-controlled oil giant, and was nominated to Gazprom’s board before the war began. He is expected to take up the post in June, although he is under political pressure not to go anywhere near the company. Merkel took a more skeptical and cautious approach to Mr Putin, but eventually allowed herself to be absorbed in Mr Putin’s big geo-economic energy game. He supported the construction of Nord Stream 2, the twinning of the first Nord Stream pipeline that would double Russia’s capacity to export gas to Germany (the pipeline was fully built but Mr Scholz canceled its certification process when the war broke out). The crucial thing is that in 2011, immediately after the Fukushima nuclear disaster in Japan, he approved of Mr. Schroeder’s decision to close all of Germany’s nuclear power plants when he could easily have overturned it – he had sharply criticized the former chancellor’s move. . He ignored warnings from the West, especially from the United States, that the plant shutdown – the last three reactors due to close this year – would make Germany dangerously dependent on Russian gas, oil and coal. They were right. Today, about 40 percent of Germany’s natural gas comes from Russia, imports that cost it nearly $ 1 billion a week. Russia also supplies about a third of Germany’s oil and half of its coal. There is no doubt that hydrocarbon sales directly fund Russia’s war against Ukraine. In 2021, about 35 percent of Russia’s budget revenues came from oil and gas sales, according to the European Center for Economic Reform. Germany is trying hard to wean itself off Russian hydrocarbons, but given its over-dependence on fuel, this process will take many years. But it will happen, at great cost. Germany, meanwhile, is both a financial supporter of the war and a victim of surprisingly bad decisions that have made it dependent on Mr Putin’s energy exports. Mr Schroeder deserves some responsibility, Mrs Merkel even more so. The war will be crucial in reassessing its often praiseworthy role as Europe’s liberal economic and democratic star. Your time is precious. Deliver the Top Business Headlines newsletter to your inbox in the morning or evening. Register today.
