The Chancellor said: “It must remain our goal that Russia does not win this war.”
(Photo: Reuters)
Dusseldorf At the end of this week it is difficult to say whether the pictures of the horrific massacre in Bucha mean another turnaround in the Ukraine war. However, something else has become very clear these days: the West will not be able to avoid taking further, tough steps against Russia. Steps that Germany will also feel painfully. The coal embargo that has just been imposed is just the beginning. A boycott of Russian oil supplies is only a matter of time. And it is becoming increasingly difficult for the federal government to resist a gas boycott.
Since the beginning of the war, Europe has transferred 35 billion euros to Russia for energy imports, calculates EU foreign policy chief Josep Borrell. And in Washington, Paris and Warsaw, people are wondering what else needs to happen for the federal government to finally give in. Whether or not you support a total energy embargo, that is the reality of foreign policy.
But there is also another, an economic reality. And that is all too often reduced to an economic debate. Of course, the economic slump after a gas boycott would have serious consequences, nobody denies that. Not even Green politician Anton Hofreiter, who explained a few days ago that a gas boycott could be managed with energy savings, speed limits – and rescue packages like in the corona crisis.
However, this is a daring comparison. Because although the industry was only at a standstill for a few weeks in spring 2020, this lockdown led to major production losses and problems in the global supply chains. In the event of a gas boycott, we are talking about months for some companies and sectors, and some economists even expect years of standstill in extreme cases. After all, only a third of Russia’s gas deliveries to Germany can be replaced in the short term with liquid gas from other parts of the world.
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Michael Hüther, director of the German Economic Institute, estimates that we will be dependent on Russian gas for at least another two years. It is an illusion that the state can support entire industries for so long with bailout billions and short-time work. In addition, it is questionable what would remain of the core of German industry after a month-long production stop: Glass manufacturers, the steel industry, chemicals and also large parts of the automotive industry can hardly compensate for a loss of gas supplies – they would have to throttle production, or even shut it down completely in an emergency.
The economist dispute
A dispute has broken out among economists about the consequences of an energy boycott. The problem: The hastily assembled macro models of science do not adequately reflect the complex micro-reality of the economy. The impact of a gas boycott on this country’s closely intertwined industrial network is difficult to calculate. For example, complex plastics production would be unthinkable without the chemical industry, which, for example, supplies important parts for the wind power industry, which in turn is the most important building block in Germany’s green transformation.
The automotive industry, on which millions of jobs depend, is even more closely intertwined. “To ignore all these realities in the current debate would be criminally ignorant,” writes Handelsblatt chief economist Bert Rürup.
It’s not just about an economic slump, it’s about a structural break that endangers the German business model: around 23 percent of the value added comes from industry – and a large part of the services also depends on the manufacturing sector.
But it is also true that the pressure on Germany is growing. This is understandable given a Russian campaign that is taking on the traits of a war of annihilation. The much more effective oil boycott should therefore come after the coal embargo. A penalty tax on Russian gas exports is also long overdue. The proceeds from this could flow into a fund for the reconstruction of Ukraine. Helping to repair the material damage is the least the West has to do. If this doesn’t stop Putin’s campaign, Germany will not be able to avoid agreeing to a gas boycott – despite all the economic consequences.
More: How German companies are preparing for the energy boycott