Can Germany Wean Itself Off Russian Gas?
BDI President Siegfried Russwurm said the boycott would have ramifications for the whole of Europe as the continent’s gas network has not been designed for gas flows from west to east — referring to the Netherlands and Belgium, which operate liquefied natural gas (LNG) terminals that could theoretically handle new supplies from the United States, Qatar and Norway.
Christoph M. Schmidt, president of the Leibniz Institute for Economic Research, doubted the accuracy of the predictions that the boycotts would be manageable.
“It is currently almost impossible to make reliable statements about the magnitude of the associated economic consequences,” he said.
Several industrial sectors have cautioned that a severe disruption to manufacturing and supply chains could lead to massive job losses. They include the mining, chemical and energy union (IG BCE), the steel industry association (WV Stahl) and groups representing the metals and electrical sectors.
Utility Firms Warn of ‘Massive Damages’
The lion’s share of the burden from any energy boycott would be shouldered by Germany’s utility sector, whose representatives warned of huge economic and social ramifications.
Leonhard Birnbaum, the chief executive of the German utility giant E.ON, told the TV news program Tagesthemen that, without Russian gas, the economy would suffer “massive damages, which should be avoided if in any way possible.”
Kerstin Andreae, chair of the German Association of Energy and Water Industries (BDEW), said an embargo would create “immense, almost devastating challenges.”
Andreae said coal power generation would need to be ramped up, while households and commercial users would have to cut their energy usage. According to BDEW, domestic gas use could be cut by 15%, commercial use by about 10% and industrial use by 8%.
Michael Hüfner, from the Cologne Institute for Economic Research, warned in a recent op-ed for Tagesspiegel that an embargo would mean “the end of raw material production” in Germany.
Russian Imports Falling, Will Drop Further
Even if it can’t manage a total boycott, Germany’s government reports that it has already reduced its dependence on Russian gas. By the end of this year, it aims to cut Russian gas imports by half and halt them completely within two years.
German Economy Minister Robert Habeck has traveled to other major gas exporters Qatar and Norway in recent days to shore up future energy supplies. However, Germany has no terminals to receive LNG imports, the main alternative to Russia’s natural gas — which is currently mostly piped in. The earliest the new facilities can come on stream is 2026.
A sudden disruption to the energy supply could also come from Russia, which last week announced that it would only accept future payment for fossil fuels in rubles. However, European countries have signed contracts with Moscow to pay in euros and have rejected demands for a currency switch.
Though Russia has so far met its contractual obligations, wholesale gas prices have risen again recently in anticipation that the Kremlin might be the one who switches off the taps.
Nik Martin is freelance journalist. Insa Wrede is economic editor at DW. This article, edited by: Uwe Hessler, is published courtesy of Deutsche Welle (DW).
