Russia is threatening the West with severe counter-sanctions

Nord Stream 1 has been in operation since 2011 and is currently running at 100 percent capacity, according to Nowak. 55 billion cubic meters of natural gas are pumped through the pipeline every year. The pipeline is 51 percent owned by the state-controlled Russian gas giant Gazprom and 49 percent by the German groups Wintershall Dea and Eon as well as the Dutch Gasunie and the French energy company Engie. The Nord Stream 2 parallel pipeline, stopped by sanctions, belongs solely to Gazprom.

The Russian government does not want to implement the gas stop immediately: “We have not yet made this decision. Nobody wins,” said Deputy Prime Minister Nowak. However, experts have doubts that Russia will actually take the step.

If Moscow stops its gas exports now, the country will permanently lose the trust it has built up over five decades as a reliable supplier, said the foreign policy spokesman for the SPD parliamentary group, Nils Schmid, to the Handelsblatt.

“The reputation as a safe provider would be ruined”

He added: “The reputation as a secure supplier would be ruined, and that has lasting consequences that Russia cannot financially want.” In the end, “Russia would rob itself of the foundations for a strong Russian state.”

The Russia expert Gerhard Mangott from the University of Innsbruck, who regularly takes part in the Valdai Forum founded by Vladimir Putin, also has his doubts: he was “surprised” that Nord Stream 1 was the focus of attention.

Because this is the only line that bypasses both Ukraine and NATO country Poland. In this respect, such a step is “incomprehensible”. The Yamal pipeline running through Poland or the Ukrainian gas transit would be paralyzed sooner. Mangott is certain: “So far, these have only been threats to put the Europeans under pressure.”

The Russian economy is dependent on raw materials. The Russian state budget is essentially filled from the taxes paid by oil and gas producers, from the dividends of the state-dominated energy companies Rosneft and Gazprom as well as taxes to the state that energy exporters have to pay above a state-set level of the oil price.

Energy commodities alone accounted for the lion’s share of Russian exports in 2021: crude oil brought $110.1 billion, oil products contributed $69.8 billion and natural gas $64.3 billion, according to Russian Customs.

Since oil and gas prices have risen significantly since then, Russia’s daily revenues from oil and gas exports are significantly higher. In addition, there were export revenues for hard coal in 2021 of 17.6 billion dollars.

However, the threatened gas boycott is only a counter-sanction that the Kremlin is preparing or has already implemented: According to a government decree, debts can only be paid in rubles. Among other things, this affects investors in Russian euro bonds – these government bonds are listed in euros or dollars.

Interest payments and repayments as well as the servicing of corporate loans are only processed through a creditor’s account with a Russian bank, the government also instructed. Foreign investors had already been banned from selling Russian securities in Russia.

Foreign companies and citizens from “unfriendly countries” – i.e. the countries that have imposed sanctions on Russia – are also no longer allowed to make transfers abroad in foreign currencies.

All companies based in Russia as well as foreign investors are now caught in a ruble trap. The Russian national currency is practically only convertible to a limited extent, and the exchange rate had already fallen sharply in the weeks before the Russian invasion of Ukraine.

expropriation of companies

Another threat in the room is that companies that stop their Russian production will be expropriated: The Secretary General of the ruling party United Russia, Andrei Turchak, called on Monday evening for the nationalization of the Russian subsidiaries of Western companies that are ending their business in the country. Such actions by Western companies are nothing more than “willful bankruptcy” and part of the West’s “war of sanctions”.

Deputy Prime Minister Andrei Beloussow, who is responsible for the economy, also made a corresponding demand: He called for accelerated insolvency proceedings for factories and branches that Western companies are now giving up. By appointing an insolvency administrator who could then also sell the works to Russian competitors, this would be a de facto expropriation.

As an alternative, Belousov suggests that foreign companies should spin off plants in Russia from their parent company and transfer them to their own Russian companies. Or hand these subsidiaries over to previous Russian partners, for example if a joint venture previously existed. But that would also be a “cold expropriation at dumping prices,” according to German companies in Russia.

“Many Russian entrepreneurs and business representatives are horrified and shocked,” reports Michael Harms, Managing Director of the Committee on Eastern European Economic Relations. “Because Russia’s future viability is being called into question by the harsh sanctions imposed by the West.”

SPD foreign politician Schmid also warns of this: “The threatened counter-sanctions would further strengthen Russia’s decoupling and its path to economic backwardness.” The Russian domestic market is “not very attractive due to a lack of purchasing power and is dead for years due to current developments”.

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