ENERGY SECURITYCan Germany Wean Itself Off Russian Gas?

By Nik Martin and Insa Wrede

Published 29 March 2022

Experts are divided on how quickly Germany could cut imports of Russian energy and stop funding President Vladimir Putin’s invasion of Ukraine. How vulnerable would such a move leave Europe’s largest economy?

Germany remains under intense pressure to cut its reliance on Russian energy in the wake of the invasion of Ukraine. Though the United States, the United Kingdom and Canada have halted imports of fossil fuels from Russia, Germany has tried to temper expectations that such a move could happen quickly.

Chancellor Olaf Scholz told Germany’s parliament last week that a sudden embargo on Russian energy imports “from one day to the next would mean plunging our country and the whole of Europe into a recession.”

The reason, of course, is Germany’s much higher dependence on Russia for its energy needs: up to 55% of gas and 34% of oil supplies, according to the Agora Energiewende think tank in Germany.

But patience is wearing thin as Germany is effectively funding Russian President Vladimir Putin’s war machine. Europe’s largest economy spends hundreds of millions of euros daily on Russian energy.

Since the war in Ukraine began on February 24, the European Union has paid out €21 billion ($23.3 billion) for fossil fuel imports from Russia, according to the Helsinki-based Center for Research on Energy and Clean Air (CREA).

Several analysts believe that Berlin must now take greater strides to halt the Kremlin’s military ambitions by joining the energy boycott, without severely damaging its export-oriented economy.

Energy Boycott Would Be ‘Manageable’
In March, a group of scholars from the German National Academy of Sciences Leopoldina calculated that the effects of a short-term halt to the supply of Russian gas would be “substantial but manageable.”

They said Germany’s gross domestic product would drop 0.5%-3%, compared with a 4.5% fall in the first year of the pandemic. But the academics noted that finding alternative sources of oil and coal would be easier than for gas.

A study by the German Institute for Economic Research published Tuesday predicted a similar output drop and a further spike in inflation, which had already reached 5.5% in February. The report’s authors cautioned that as there has never been an embargo on this scale, “any assumptions are subject to uncertainty.”

In a recent interview with the Tagesspiegel newspaper, the German economist Rüdiger Bachmann acknowledged that the cost to economic growth would be “huge,” but added that it’s “nothing that you can’t counteract with economic policy measures, even if the damage were twice as large.”

Business Chiefs Warn Against Boycott
Leading opposition to a boycott is the Federation of German Industries (BDI), the country’s main business-lobby group, which warned last week that the move may have “incalculable consequences.”