Why Germany Can’t Just Pull the Plug on Russian Energy

Last year, Russia supplied more than half of the natural gas and about a third of all the oil that Germany burned to heat homes, power factories and fuel cars, buses and trucks. Roughly half of Germany’s coal imports, which are essential to its steel manufacturing, came from Russia.

Russian gas, oil and coal are embedded in the German economy and way of life. The roots run deep.

The first natural gas pipeline connecting what was then West Germany to Siberia was completed in the early 1980s. The legacy of the Cold War can still been seen in the energy infrastructure in Germany’s east, which remains directly linked to Russia, making it harder to get oil from other providers into that part of the country.

Today, those entanglements loom large as European leaders debate whether energy should be included in more sanctions on Russia amid growing evidence of atrocities committed by Russian troops against Ukrainian civilians. Officials in Germany, Europe’s largest economy, are caught between outrage at Russia’s aggression and their continuing need for the country’s essential commodities.

“It was a mistake that Germany became so heavily dependent on energy imports from Russia,” Christian Lindner, Germany’s finance minister, said Tuesday, heading in to talks with his European Union colleagues in Luxembourg.

But as evidence of suspected atrocities mounted, he indicated that Germany would be willing to support sanctions on Russian coal — a shift from Berlin’s insistence over the past weeks that sanctioning energy would hurt Germany more than Russia.

From the heads of leading chemical and steel companies to the makers of gummy bears, business leaders have warned that without a steady supply of gas, oil and coal, their production would grind to a halt.

Natural gas heats German homes and generates power.

Robert Habeck, Germany’s minister for economy and energy, placed Gazprom’s Germann subsidiary under state control until September.Credit…Michael Kappeler/DPA, via Associated Press

Nearly half of all German homes are heated with natural gas, which is also used to generate power including in heavy industry. Germany’s powerful labor unions in the chemical, mining and pharmaceutical sectors have warned that serious reductions in gas imports could lead to substantial job losses.

A group of economists at the Leopoldina National Academy of Sciences said in a report last month that a short-term stop of Russian gas deliveries would be “manageable” if the country could increase its reliance on other energy sources.

Robert Habeck, Germany’s energy minister, is scrambling to do just that, making trips to Qatar and Washington to secure energy partnerships. Already Germany has been able to reduce its dependence on gas from Russia by 15 percent, bringing it down to 40 percent in the first three months of the year, the energy ministry said.

But industry leaders have pushed back against imposing sanctions on Russian natural gas. Turning off the taps would cause “irreversible damage,” Martin Brudermüller, the chief executive of BASF, the chemical producer based in southwestern Germany, warned. Making the transition from Russian natural gas to other suppliers or moving to alternative energy sources would require four to five years, not weeks, he said.

“Do we want to blindly destroy our entire national economy? What we have built up over decades?” Mr. Brudermüller said in an interview with the Frankfurter Allgemeine Zeitung last week. “I think such an experiment would be irresponsible.”

The country’s makers of chocolates, snacks and sweets have also warned that gas shortages would spell doom for their ability to produce the high-energy food.

“Gas is the most important energy source in most companies in the German confectionery industry,” the Association of the German Confectionery Industry, or B.D.S.I., said in a statement. “The companies in the German confectionery industry produce food and are therefore of outstanding importance for supplying the population in Germany, especially during food shortages or other emergencies.

Over the weekend Lithuania announced it had halted all imports of gas from Russia starting in April. But natural gas accounts for only 11 percent of the energy consumed by the Baltic country of 2.8 million people, while Germany relies on gas for 27 percent of its energy needs.

Only this year did the German government pledge 500 million euros to help build a terminal needed to directly import liquefied natural gas, as part of efforts to replace the 56 billion cubic meters that Germany imports every year from Russia. LNG is an alternate source of natural gas, a means of transporting it across seas over long distances.

In addition to supplying a vast amount of gas, Russia owns and operates thousands of miles of pipeline and several key storage tanks in Germany through subsidiaries of its state-owned energy conglomerate, Gazprom. Among them is Astora, which owns the largest underground storage tank for natural gas in Western Europe.

Mr. Habeck on Monday announced that he was placing Gazprom Germania, Astora’s parent company and Gazprom’s main subsidiary in Germany, under state control until at least September. The move was seen as a crucial step in wresting power over gas supplies back from Russian hands.

Russia’s Rosneft has a stake in the PCK oil refinery in Schwedt, in the former East Germany.Credit…Hannibal Hanschke/Reuters

Oil traverses Cold War-era paths into Germany.

More than a third of all oil refined in Germany comes from Russia, much of it flowing directly to facilities in the country’s former Eastern states through Cold War-era pipelines.

The Russia-Ukraine War and the Global Economy

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Rising concerns. Russia’s invasion on Ukraine has had a ripple effect across the globe, adding to the stock market’s woes. The conflict has already caused​​ dizzying spikes in energy prices and is causing Europe to raise its military spending.

The cost of energy. Oil prices already were the highest since 2014, and they have continued to rise since the invasion.  Russia is the third-largest producer of oil, so more price increases are inevitable.

Gas supplies. Europe gets nearly 40 percent of its natural gas from Russia, and it is likely to be walloped with higher heating bills. Natural gas reserves are running low, and European leaders worry that Moscow could cut flows in response to the region’s support of Ukraine.

Food prices. Russia is the world’s largest supplier of wheat; together, it and Ukraine account for nearly a quarter of total global exports. Countries like Egypt, which relies heavily on Russian wheat imports, are already looking for alternative suppliers.

Shortages of essential metals. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.

Financial turmoil. Global banks are bracing for the effects of sanctions intended to restrict Russia’s access to foreign capital and limit its ability to process payments in dollars, euros and other currencies crucial for trade. Banks are also on alert for retaliatory cyberattacks by Russia.

So replacing Russian oil means not only coming up with replacements for a massive amount of crude — Germany purchased 27 billion tons from Russia in 2021 — but also figuring out how to transport it to those refineries in the country’s east. No pipelines cross the former boundary that divided East and West Germany.

Germany has started to diversify its oil supply, bringing the Russian share down to 25 percent from 35 percent in the first three months of this year.

Starting the middle of April, the Leuna refinery in eastern Germany will be processing only half as much Russian oil as it has in past years. Instead, crude brought in from other countries is being transported by truck and rail from western Germany, the economy ministry said.

But the PCK refinery in another eastern German town, Schwedt, is majority owned by the Russian energy company, Rosneft, which has been less willing than the Leuna refinery to let Germany out of contracts for future oil deliveries from Russia. German media have reported that the energy ministry is looking into whether a state takeover could be justified in the name of energy security.

A coal mine in Russia. After Germany closed its last coal mine in 2018, it relied on Russia to provide roughly half of its hard coal imports.Credit…Eduard Korniyenko/Reuters

Coal dependency has been cut in half, but Germany still needs Russia.

Coal is the easiest of the three energy sources to replace. Still, Germany has relied on Russia to provide roughly half of its hard coal imports, after closing its last coal mine at the end of 2018.

Over the past six weeks, Germany has been able to shift delivery chains and sign new agreements, to cut its dependency in half, the economy ministry said. Now 25 percent of the country’s coal needs are being met by Russia. It plans to halt imports of the fuel altogether by the end of summer.

Until then, however, Mr. Habeck, the economy minister, has insisted that Germany needs a steady supply of energy to uphold its role as the region’s economic engine. That may be especially urgent now as Europe is called on to help provide energy and supplies to Ukraine, which last month connected its electricity grid to Europe to ensure stability despite the war.

Germany, after some reluctance, has also been supplying Ukraine with weapons, which Mr. Habeck pointed out required steel produced in Germany factories that are powered by coal, which still includes imports from Russia.

“We are being asked to supply Ukraine with raw materials,” Mr. Habeck told ZDF public television last week. “We need an intact infrastructure to be able to do that.”

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