GERMANY HAD been dragging its heels on a proposed European energy embargo on Russia since the invasion of Ukraine. On May 2nd Christian Lindner, the finance minister, and Robert Habeck, the economy minister, signalled that the government was prepared to support an EU ban on Russian oil imports. German backing enabled the European Commission to announce, on May 4th, that it would propose such an embargo for the end of the year, though the 27 member governments must all agree. Yet for industry-heavy Germany, oil presents a far smaller problem than gas. German politicians say that a sudden ban on Russian gas imports would be unfeasible. How dependent on Russian energy is Germany?
Besides renewables, Germany’s only domestic source of power is lignite, a dirty type of coal that makes up about 9%, and declining, of primary energy consumption (ie, that which comes directly from natural resources, such as oil or firewood, rather than secondary processes, like electricity). But the vast majority of the fossil fuels that the country burns are imported, as is the uranium that powers its three remaining nuclear plants. Oil and gas combined account for around 60% of primary energy, and Russia has long been the biggest supplier of both. On the eve of the war in Ukraine it provided a third of Germany’s oil, around half its coal imports and more than half its gas.
This dependence dates back more than half a century. In the 1960s heavy industry in what was then West Germany wanted cheap energy and was prepared to supply the Soviet Union with the necessary pipelines to pump gas. West German governments, meanwhile, were keen to soothe political relations with the Soviets. They later extended economic ties under the banner of Wandel durch Handel (change through trade), culminating in the construction of Nord Stream 1 and Nord Stream 2, gas pipelines that directly connect Germany to Russian gas under the Baltic Sea, bypassing Ukraine. Before the war Olaf Scholz, the chancellor, in effect mothballed Nord Stream 2, which had not yet begun operations.
Russian coal and oil is already being phased out. The share of German oil imports coming from Russia has declined from 35% to 12% since the start of the war. Coal imports have fallen from 50% to 8%. On April 26th Mr Habeck said that all preparations for an end of Russian oil in Germany should be in place within days. The government has also begun to seize Russian-owned energy assets. On April 4th Germany’s network regulator took charge of a gas-storage facility owned by a Gazprom subsidiary. Parliamentarians are preparing a law to expropriate Rosneft’s main refinery in the country.
Germany remains highly dependent on Russian gas. The share coming from Russian fields has been reduced from 55% to 35% since the war. Further reductions will be painful. The first problem is that Germany receives all of its gas via pipelines and does not yet have any working terminals to import liquefied natural gas (LNG). In mid-April the finance ministry put aside €2.5bn ($2.6bn) to lease floating terminals that could be working by winter. It has also committed to speed up the construction of proper terminals, but these will not be ready for years. Until then, Germany must import LNG through other countries.
Second, the supply chains of Germany’s industry are vulnerable to a shortage of gas and to high energy prices. If Russian supplies were cut off, gas would have to be rationed by late winter, according to an analysis by six leading economic-research institutes. They estimate that a full embargo on Russian energy would cut GDP by 2-6% (Germany’s covid recession caused a 4.5% drop). Most Germans thus favour the government’s approach of gradually weaning the country off Russian gas.
Like other countries in Europe, Germany has not invested enough in diversifying its gas and oil supplies. The result is a dependence on Russian energy that prevents it from agreeing to swift sanctions on the country. Its leaders may be warming to the idea of an embargo on oil, but its dependence on gas will last for a while yet.
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