Germany, urged to ‘stop Putin’s war machine,’ resists Russian energy embargo – awsforwp

The professor, Rüdiger Bachmann, is a co-author of a paper published this month that’s galvanizing support for banning Russian energy imports. It’s one of several studies finding that such a move would harm the German economy but ultimately be manageable.

Those findings contrast with warnings from Scholz that an embargo would wreak havoc on the economy and risk social unrest. The chancellor voiced his displeasure with the experts in an interview with the broadcaster ARD, saying it was “irresponsible to add up mathematical models that then do not work.”

“They get it wrong!” he exclaimed.

The standoff is at the heart of an intensifying debate in Germany over how quickly the country can wean itself off Russian oil and natural gas, and what sort of sacrifices the government should ask of the public.

Germany relies on Russia for about 55 percent of its natural gas and 35 percent of its oil. Proponents of a boycott say it’s essential to act quickly to deny Moscow financing for its war in Ukraine. Scholz, though, has insisted on a more incremental approach.

He has promised to disentangle his country’s energy system from Kremlin-aligned companies and, in a significant shift, scuttled the Nord Stream 2 gas pipeline – a move the United States had urged for years. But the chancellor, a Social Democrat who leads a left-liberal coalition government, has ruled out an immediate embargo, claiming it would plunge Europe into recession and threaten “hundreds of thousands of jobs.”

“Russia is observing this discourse in Germany very closely,” said Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs. “Seeing statements about mass unemployment and GDP loss gives confidence to Russian leadership, gives them leverage and gives them the sense that they have a powerful tool on their hands.”

The United States – which last year received about 3.5 percent of its oil from Russia and none of its natural gas – moved earlier this month to ban oil imports from Russia and recently committed to routing more liquefied natural gas to its European allies. The European Union, in turn, has vowed to cut Russian gas imports by two-thirds by the end of this year and end the bloc’s dependence on Russian fossil fuels before the close of the decade. But even as Russian President Vladimir Putin continues his assault on Ukraine, the US government has not been able to persuade the EU to join an embargo, which finds support in Poland and the three Baltic states while facing resistance from countries including Italy, Hungary and, above all, Germany.

Ukrainian President Volodymyr Zelensky has implored German leaders to see the issue in moral terms, rather than “through the prism of the economy.”

In the prime-time television interview, Scholz bristled not at an emotional appeal, but at the competing economic analysis.

To Bachmann, who studied in Germany and the United States and has been a professor of economics at Notre Dame since 2014, the rebuke from the chancellor – nicknamed the “Scholzomat” because of his ordinarily understated style of communication – was a validation of sorts.

“It shows that we got to him,” Bachmann said in a phone interview from his office in South Bend, Ind. “He could have handled this in a more relaxed way, saying, ‘Thank you to our great economists, but what they have given me contains too many uncertainties, and we’re not willing to pay this price.’ ”

Scholz’s impatience with the expert analysis offers a window into the bind he faces. A recent poll showed that a majority of the country wants the government to respond more proactively, with 55 percent of those surveyed by the broadcaster ZDF favoring an embargo. But geographic differences are stark. A poll of three federal states in the former communist east came to the opposite conclusion, finding that more than two-thirds of respondents in Saxony, Saxony-Anhalt and Thuringia opposed cutting off Russian energy supplies.

While industry groups warn against an embargo, saying the debate is “playing with fire,” opinion makers in Berlin are mobilizing for one. When a public appeal was published this month arguing that Germany’s responsibility to avert war meant “absorbing the consequences of a short-term energy boycott,” it quickly drew the support of lawmakers, business leaders, academics and civil society representatives.

“Looking back on its history, Germany has repeatedly vowed that there must NEVER AGAIN be wars of conquest and crimes against humanity,” states the appeal. “Today the hour has come to honor this vow. We must try everything to stop Putin’s war machine with our political and economic means. “

Numerous members of the German parliament’s main opposition party, the Christian Democratic Union, added their names. Katja Leikert, who sits on the foreign affairs committee, said Russia’s assault on its neighbor means that “we have to look beyond short-term business interests and see what is at stake for us in the long run if we do not stop Putin’s aggression . ”

As Europe’s largest economy, she said, Germany should use its leverage “before he attacks further countries.”

But the Social Democratic vice chairman of the parliament’s economics committee, Hannes Walter, defended the government’s approach. “I really understand the arguments,” he said in an interview, “but we do not have the renewable energy at this point for our industry to survive an embargo.”

The economics and climate minister, Robert Habeck, recently flew to the Persian Gulf area to seek deals with Qatar and the United Arab Emirates for alternative sources of natural gas. Last week, he told reporters that German reliance on Russian oil had dropped from 35 percent to 25 percent, gas from 55 percent to 40 percent and coal from 50 percent to 25 percent.

Habeck, a member of the Green Party, said that Germany could be independent of Russian coal by the fall but that finding alternative sources of gas would take longer, into 2024. Meanwhile, he maintains that if an immediate embargo caused the country’s gross domestic product to shrink by as much as 5 percent, as he has suggested is possible, it would have devastating consequences for German livelihoods.

Bachmann and his co-authors, representing three countries, came to a different conclusion. They project that the GDP loss would be somewhere between 0.5 and 3 percent, a contraction on par with the one experienced in 2020 as a result of the coronavirus pandemic.

“The question is then whether the government is prepared to use the tools it developed during that crisis, such as short-term work programs and government support for threatened industries,” Bachmann said.

The analysis, he said, was not intended to serve as a rallying cry for an embargo but as an explanation of its consequences if one should go into effect, including at the Kremlin’s direction. The paper’s title is “What if?”

Sebastian Dullien, the director of Germany’s Macroeconomic Policy Institute, said the model leaves out too many factors and fails to account for the “depths of the recession we would see.” One problem, he said, is that the analysis relies heavily on the possibility of substituting available resources and labor from certain sectors to others. “But there’s an amplifying effect throughout the economy,” he said.

Another study, from the German National Academy of Sciences Leopoldina, said Germany could manage without Russian gas if the state bought alternatives itself and relied more on coal. But it acknowledges uncertainties, including how cold the coming winter will be.

The government also has challenged the notion that Russian energy exports are funding the war. Scholz’s spokesman, Steffen Hebestreit, said Monday that money flowing into Russia was “not usable” because of sanctions, arguing that “what Russia can then do with that money is strongly restricted.” But Kluge, the expert at the German Institute for International and Security Affairs, said restrictions do not entirely prevent use of these resources, for instance on imports from willing partners such as China.

This week, the German Council of Economic Experts, an advisory panel that evaluates government policy, will release an economic forecast expected to address rising energy prices and a future without Russian oil and gas. One of its members, Veronika Grimm, said existing analysis suggests the consequences of an embargo would be serious but “feasible.”

“We have to be clear what ‘feasible’ means,” she said. “We are able to cope with it if it is seen as necessary to our national or Europe’s future security.”

Bachmann, the Notre Dame professor, said he does not envy the chancellor’s having to weigh those security objectives against economic consequences. “Times are tough for the chancellor right now,” he observed.

Vanessa Guinan-Bank contributed to this report.