Germany in the Nord Stream 2 dilemma – Morning Briefing Plus

Hello dear readers,

When it comes to commitment to the Russian energy industry, you can always rely on Gerhard Schröder: A few hours after EU Commission chief Ursula von der Leyen said in the Handelsblatt: “Gerhard Schröder is paid by Russian energy companies and represents their interests”, it became known: The SPD politician and friend of Russian President Vladimir Putin has now also been nominated for the supervisory board of the state-owned company Gazprom – Schröder has so far been a supervisor at Rosneft and the German-Russian pipeline consortium Nord Stream.

Meanwhile, gas supplies from Russia are less reliable. According to our energy reporter Klaus Stratmann, the levels in German gas storage facilities have long fallen below a critical limit. Gazprom is still supplying gas, but only as much as is absolutely necessary to meet long-term commitments. The company is raising doubts about its own reliability, said von der Leyen in an interview with Moritz Koch, head of the Handelsblatt office in Brussels.

The interview was picked up by many international media – especially the statement by der Leyens that “Nord Stream 2 cannot be taken off the table in view of the sanctions, that is very clear”. Whether the pipeline can go into operation depends “on the behavior of Russia”.

It’s a tricky situation for Germany. Western allies are surprised to note the Chancellor’s silence in the Ukraine conflict. Missing persons reports are already circulating on Twitter.

At the same time, Germans are becoming aware of how delicate the energy policy course they have taken in their country is. For years, Russia has been supplying more and more gas, coal and crude oil to Germany, and in hardly any other large industrialized country is the dependency as great as in Germany. If, as feared by the EU and NATO, Russian gas supplies are stopped in the event of a war in Ukraine, then it will be cold in Germany – in a very literal sense, as our Friday title also shows.

And dependency on Russia will only increase: when all nuclear power plants and coal-fired power plants are shut down, the gap will have to be filled with dozens of new gas-fired power plants for many years to come.
The debate about liquid gas from other parts of the world and an expansion of renewables is right – and overdue. But honesty also means that every step away from Russian gas will make energy more expensive in Germany.

What also moved us last week:

1. When Olaf Scholz flies to Washington on Monday, some journalists will also accompany him. My colleague Martin Greive is also there. He considers the meeting between Scholz and US President Joe Biden to be more than a classic inaugural visit. “It is a special meeting in times of great crisis diplomacy,” says Greive. Scholz has been criticized internationally for his silence, and some in the US Congress already consider the German Chancellor to be “unreliable”. For the chancellor, there is a lot at stake in Washington: the West must send a signal of unity to Moscow. And like Merkel, Scholz must gain the US President’s trust in order to be able to take more initiative in Russia policy.

2. Inflation was the second big topic of the week. Surprisingly, inflation in the euro area rose to a record high. The reaction of the ECB was therefore eagerly awaited, which then turned out to be disappointing. ECB boss Christine Lagarde only hinted at a rate hike for 2022 in a vague way. “The ECB missed the opportunity to send a clear signal,” comments my colleague Michael Maisch. This puts Lagarde’s credibility at risk. Or in the words of Allianz chief advisor Mohamed El-Erian: “The ECB must be careful not to maneuver itself into a dead end.”

3. Rising prices have long been causing sharp conflicts in the economy – The situation in the food industry is particularly dramatic, where the price war between manufacturers and retail chains is escalating. Because the manufacturers want to pass the increased prices on to the dealers – but they block it. “Negotiations are being tougher than ever at the moment, there has never been a situation like this,” reports the top buyer of a large food retailer to the Handelsblatt.

You might notice that later when you stand at the checkout in the supermarket. If you want to get in the mood for it now, you can find out here which products are currently becoming more expensive the fastest – and which ones will not be available in the near future.

4. It’s easy to get lost in the UK with so much bad headline news coming out of London. Is British Prime Minister Boris Johnson still in office? And if so: for how long? Our London correspondent Carsten Volkery explains the situation in a highly readable “Partygate” report.

5. Since Wednesday morning, 30 police officers, tax investigators and prosecutors have been searching the offices of the accounting firm PwC. As our investigative team learned, it is about cum-ex investigations and the major Swedish bank SEB. An unusual event – and another chapter in one of the biggest scandals in German economic history.

6. They are among the best-known investors in the world: Warren Buffett and Cathie Wood represent two extreme positions with their investment approaches. Wood believes in future trends and fast-growing tech companies — which has been going well for a while. Buffett was ridiculed for his strategy – he missed trends and his method was outdated, critics said. But in uncertain times on the stock market, Buffett suddenly leaves the once celebrated investor behind – with a very old recipe, as my colleague Astrid Dörner reports.

7. And then there is the crisis that has now gripped the entire economy: Recently, even one of my favorite restaurants in Düsseldorf had to close temporarily – because of a lack of staff. But the shortage of skilled workers is not only slowing down the economy. Due to a lack of engineers, IT experts and craftsmen, many projects of the traffic light coalition are likely to wobble in the near future.

For the restructuring of the energy supply, the construction of hundreds of thousands of apartments and the digitization of administrations, what is needed above all are workers who are already lacking in the economy today. Perhaps the shortage of skilled workers is the best illuminated – but in any case the most stubbornly ignored crisis of our time.

8th. The Olympic Games started yesterday evening in Beijing with a spectacular show. But the celebration was not remarkable because of the rousing choreography, the impressive fireworks or the cute children’s dance groups, my colleague Dana Heide from Beijing just wrote to me. “It was rather the political environment that made the kick-off event a bizarre play far removed from reality”. While the controversial IOC boss Thomas Bach appealed to the nations to leave “peace a chance” and “Imagine” by John Lennon blared out of the huge loudspeakers, Vladimir Putin’s troops stood on the border of Ukraine. Just before the opening, of all days, Putin and China’s head of state and party leader Xi Jinping announced that they would close ranks. It was also remarkable who was absent from the pompous celebration: hardly any heads of state or government from democratic countries had come to Beijing. Instead, autocrats en masse.

PS: I would like to draw your attention to a very special event: next week, Die Zeit, WirtschaftsWoche, Tagesspiegel and Handelsblatt are inviting you to the Europe 2022 conference for the second time, at which we will discuss the future of Europe with top-class politicians and CEOs will speak. You can stream the entire event live here, starting at 9.30am Monday. I am particularly looking forward to interviews with French Economy Minister Bruno Le Maire and EU Competition Commissioner Margrethe Vestager. Please write to me if you have any questions for either of them ([email protected]).

I wish you a pleasant start into the weekend.

It greets you cordially
Yours Sebastian Matthes

Editor-in-Chief of the Handelsblatt

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