Speaking to journalists in London alongside UK Prime Minister
Boris Johnson, the German Chancellor Olaf Scholz said, "Germany is
actively working to get independent from the import of Russian oil and we will
be able to make it during this year.”
The statement seems to be aimed at pleasing the Anglo-sphere
which has taken much tougher and quicker measures on banning Russian energy
imports over Moscow’s military operation in Ukraine.
Germany is heavily reliant on Russian energy, in particular
gas. Back at home, there has been alarm among industry chiefs and politicians
saying it would lead to huge rises in energy prices as well as shortages of
energy to serve the country as well as ordinary households.
Any quick measures to completely shut the tap on Russian
energy may cripple Europe’s strongest economy. A German government source told
British media “what use to anybody is a weakened Germany?”
Berlin has already established a crisis team to deal with
the contingency plans, something that Germany's industrial sector has sounded
the alarm over saying they would be forced to shut production.
The
country announced its withdrawal from nuclear power after the 2011 Fukushima
disaster in Japan, and in 2019 said it would pull the plug on coal-fired
plants.
Businesses across the country are bracing themselves for
supplies to be cut either from Russian retaliation over Western sanctions or
Berlin joining the Western energy embargo on Russian oil and gas
supplies.
The owner of a hi-tech mechanical engineering company in the
country’s west spoke to media on condition of anonymity and refused to name his
company because of fears of appearing to support Russia’s military operation.”
He said, “If Russian gas is cut off, his business which has
been operating for a century now “will likely not survive”.
He also added that “It would be a disaster, one which would
have seemed almost unthinkable just two months ago, but which right now feels
like a very realistic prospect.”
Industry
managers and political leaders have warned that the damage which will be
imposed on Germany by abandoning Russian energy supplies would be far stronger
than any benefit it would bring to Ukraine.
Millions of German households without heat this winter is
one of the most concerning matter. The other major concern is the hundreds of
thousands of small and medium-sized businesses which are interlinked with
manufacturing giants, all dependent on gas to operate.
Both small and giant business companies are likely to suffer
with huge rises in energy prices as well as mass shortages.
The
German Institute for Economic Research (DIW) has come up with a model for how
Germany can free itself from Russian supplies by this year’s winter.
The popular think tank has suggested alternative suppliers
and lower consumption which means households will have to turn down thermostats
and use less warm water during what are usually long and very chilly winter
conditions in Europe.
The DIW report itself acknowledges that added supply alone
will not be enough to make up the current volume of Russian gas imports but
said it is possible if there is a clampdown on consumer demand.
That has been echoed by the German Economics Minister, Robert
Habeck, who has urged German households and industries to turn down the
thermostat. But the question is who will carry that burden?
German households are already suffering from high inflation
rates and energy prices had already soared before the crisis in Ukraine even
began.
A spokesperson for the economics ministry noted, “The
question of prioritization is a very difficult decision, requiring
consideration of a wide range of consequences.”
The Federal Network Agency, which claims to ensure fair access
to gas, electricity and other vital services, has sent a questionnaire to all
German businesses, essentially asking them to state their individual arguments
for the right to access gas.
Forced
by the high energy costs some businesses, such as the porcelain manufacturer
KPM, founded in 1763, are working overtime to produce as many goods as possible
before the Russian taps are turned off. “Who knows for how long we will have
gas?” its CEO, Martina Hacker, told German media. “We can’t produce porcelain without
it.”
Some analysts are envisaging an unpleasant battle between
different sectors over who deserves the energy most. There have been
discussions of dark scenarios over supply chains, which are already under
pressure amid the covid pandemic, collapsing altogether with businesses forced
into bankruptcy along with mass unemployment.
The chemical giant, BASF, the largest in the world and one
of Germany’s biggest purchasers and consumers of energy says around
40,000 employees would have to be put on short-time working hours or laid
off.
BASF said, "The consequences would not only be reduced
work hours and job losses, but also the rapid collapse of the industrial
production chains in Europe, with worldwide consequences.”
The German Chemical Industry Association (VCI), has also
warned that chemical plants are too complex, they "can't just be
switched off and on again like a microwave oven. Once chemical plants are shut
down, they remain silent for weeks and months. It said the disruption
would have a huge domino effect through almost all industries."
Other businesses are considering moving abroad to save their
business and workforce, something that will cause further harm to the German
economy.
The foreign affairs
commissioner of European Union, Josep Borrell has also warned ,“This isn't
just a German problem because the German economy is very closely tied to the
European economy."
Fitch Ratings has warned that replacing Russian natural gas
in Europe could be challenging in the short term and it will keep gas prices high.
According to the credit rating agency, Europe as a whole
import around 60% of its total natural gas demand, as Russia is supplying about
a third of the continent’s consumption, which amounts to 152 billion cubic
meters (bcm) by pipeline and 17 bcm as liquefied natural gas (LNG).
The Nord Stream 2 pipeline, which Berlin has now scrapped,
was meant to deliver from Russia as much as 70% of Germany’s gas requirements.
Russia accounted for 55% of Germany's gas imports in 2021 and 40% in the first
quarter of 2022.
Analysts say America would love to fill the void but there
are too many logistics problems down the road for Washington.
Alternatives supplies have been suggested but it looks very
difficult for Germany to shield its economy until it completely ends its
dependency on Russian energy.
Habeck has previously said that it would take around two
years. But he also admitted “we face turbulent days ahead” amid the expected
rise in gas prices.
BASF says a realistic time frame, for Berlin to wean itself
off Russian gas would be four to five years. Some experts have said it is more
likely to take until the end of the decade. That is unless Moscow itself does
not halt supplies very soon unless it receives payments in its own currency the
Ruble.
Germany finds itself between a rock and a hard place by
trying to join the Western sanctions alliance against Russia at the expense of
German households and businesses along with the country’s economy.
Those advocating the advance of peace talks between Kyiv and
Moscow amid the West’s pumping of weapons to Ukraine, which some experts argue
is prolonging the conflict; may help shape the direction Germany takes and what
is currently the largest economy in Europe.
