The war in Ukraine has suddenly shattered the political foundations of Germany’s longstanding energy partnership with Russia. But given today’s geopolitical complexities and the demands of the energy transition, it would not be surprising if pressure to rekindle the relationship eventually reemerges.
LONDON – Since the Ukraine war began in late February, Europe has faced a reckoning over an energy relationship with Russia that originated in the Soviet era. Nowhere has the shock been more profound than in Germany.
Germany’s reliance on Russian energy was premised on détente in Europe during the Cold War and then on peace after the Soviet Union collapsed in 1991. Despite crises that could have derailed it, the partnership proved robust through six decades of shifting US-Soviet and later US-Russia relations, most notably when the Soviet-backed Polish government introduced martial law in December 1981. But Russia’s full-scale war against Ukraine has suddenly shattered the partnership’s political foundations.
Although Germany still wishes to import large volumes of Russian gas, its government clearly has gone much further in supporting energy sanctions than it envisaged in the first week of the war. In the fifth package of EU sanctions, adopted on April 8, Germany accepted a ban on Russian coal imports. Later that month, Robert Habeck, Germany’s vice chancellor and minister for economic affairs and climate action, said that a ban on Russian oil was “manageable.” Now the European Union, as part of its sixth round of sanctions, is moving to phase out Russian sea-borne imports by the end of 2022.
But the scale of the shock Germany is experiencing should not be underestimated. The country’s long-term energy reliance on Russia arose from the acute energy-dependency predicaments it has faced for more than a century.
Like other major European powers in the early twentieth century (with the exception of Austria-Hungary), Germany lacked domestic reserves of oil. In contrast to Britain and France, it emerged from World War I with no empire in the Middle East. And it had no stake in any of the large Anglo-European oil firms; at the 1920 San Remo conference, France forced Germany to hand over Deutsche Bank’s share of the Turkish Petroleum Company, which held a monopoly concession in Mesopotamia.
Given those handicaps, Germany’s most obvious source of oil imports, once Stalin had resurrected its export capacity, was energy-rich Russia. But the logic of exchanging Soviet energy resources for German capital and technology was destroyed first by Hitler’s attempt to conquer the Soviet Union, and then by the onset of the Cold War. US President Harry Truman’s administration did not want any West European country to import oil from either the Soviet Union or the Western Hemisphere, leaving West Germany to rely on supply from the Middle East and Britain’s military capacity to guarantee it.
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The 1956 Suez crisis brought this interlude in the Soviet-German energy relationship to an end. After US President Dwight Eisenhower’s intervention helped to terminate the British-led war against Egypt, West Germany turned to Soviet energy supplies. And, because few of the subsequent North Sea fossil-fuel discoveries were in Germany’s territorial waters, there was no easy way to avoid more Soviet imports when, from the 1960s, gas became a significant energy source. For the Social Democrat-led governments of the late 1960s and 1970s, Soviet gas and West German pipelines to bring it to Western Europe became the material basis of Ostpolitik.
Because this relationship survived the return of the Cold War in the early 1980s, German firms and governments saw no reason why it would prove more problematic in times of peace. On the contrary, once Russian energy production was no longer controlled by the Soviet state, German energy companies had opportunities for partnerships that would eventually give them some production rights in western Siberia. Consequently, Germany had little interest in the liquefied natural gas (LNG) boom even before the United States had developed a new shale-based export capacity.
Today, Germany has no choice but to reduce its energy dependence on Russia – and the global economy was already in the grip of an energy crisis before the war started. At current levels of oil demand, the world economy cannot function without the 7.8 million barrels per day of petroleum products that Russia exported in December 2021. Regardless of the EU’s sanctions, therefore, the reality is that Germany will continue to import petroleum products that originate from Russian crude.
As for gas, European countries already faced overwhelming supply constraints relative to current demand last autumn. The world is now experiencing a China gas shock similar to the China oil shock in the mid-2000s. China’s LNG imports increased by about 20% in 2021 as a result of the post-pandemic economic recovery and the country’s deliberate shift away from coal to gas in heating. In December 2021, the EU’s natural gas import price was 18 times higher than in January 2020, the month before the pandemic hit Europe.
No matter how many LNG ports Germany can build quickly, German importers will have to compete for supplies with Asian countries. Despite the rhetoric from US President Joe Biden’s administration about American shale gas riding to the rescue, the industry currently lacks the capacity to meet a large increase in European demand for seaborne gas. The only short-term alternative within Europe itself is for the Dutch government to reverse its decision to wind down production at the Groningen gas field, which was once Europe’s largest.
In the medium term, attention will turn to the eastern Mediterranean as a potential source of new gas supplies. But this involves difficult issues concerning Turkey, and will require a quick settlement of pipeline disputes that have thus far proved divisive.
As Russia’s war against Ukraine continues, the EU now faces retaliatory energy measures from Moscow. But given today’s geopolitical complexities and the demands of the energy transition, it would not be surprising if pressure to rekindle the German-Russian energy relationship eventually reemerges.
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LONDON – Since the Ukraine war began in late February, Europe has faced a reckoning over an energy relationship with Russia that originated in the Soviet era. Nowhere has the shock been more profound than in Germany.
Germany’s reliance on Russian energy was premised on détente in Europe during the Cold War and then on peace after the Soviet Union collapsed in 1991. Despite crises that could have derailed it, the partnership proved robust through six decades of shifting US-Soviet and later US-Russia relations, most notably when the Soviet-backed Polish government introduced martial law in December 1981. But Russia’s full-scale war against Ukraine has suddenly shattered the partnership’s political foundations.
Although Germany still wishes to import large volumes of Russian gas, its government clearly has gone much further in supporting energy sanctions than it envisaged in the first week of the war. In the fifth package of EU sanctions, adopted on April 8, Germany accepted a ban on Russian coal imports. Later that month, Robert Habeck, Germany’s vice chancellor and minister for economic affairs and climate action, said that a ban on Russian oil was “manageable.” Now the European Union, as part of its sixth round of sanctions, is moving to phase out Russian sea-borne imports by the end of 2022.
But the scale of the shock Germany is experiencing should not be underestimated. The country’s long-term energy reliance on Russia arose from the acute energy-dependency predicaments it has faced for more than a century.
Like other major European powers in the early twentieth century (with the exception of Austria-Hungary), Germany lacked domestic reserves of oil. In contrast to Britain and France, it emerged from World War I with no empire in the Middle East. And it had no stake in any of the large Anglo-European oil firms; at the 1920 San Remo conference, France forced Germany to hand over Deutsche Bank’s share of the Turkish Petroleum Company, which held a monopoly concession in Mesopotamia.
Given those handicaps, Germany’s most obvious source of oil imports, once Stalin had resurrected its export capacity, was energy-rich Russia. But the logic of exchanging Soviet energy resources for German capital and technology was destroyed first by Hitler’s attempt to conquer the Soviet Union, and then by the onset of the Cold War. US President Harry Truman’s administration did not want any West European country to import oil from either the Soviet Union or the Western Hemisphere, leaving West Germany to rely on supply from the Middle East and Britain’s military capacity to guarantee it.
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The 1956 Suez crisis brought this interlude in the Soviet-German energy relationship to an end. After US President Dwight Eisenhower’s intervention helped to terminate the British-led war against Egypt, West Germany turned to Soviet energy supplies. And, because few of the subsequent North Sea fossil-fuel discoveries were in Germany’s territorial waters, there was no easy way to avoid more Soviet imports when, from the 1960s, gas became a significant energy source. For the Social Democrat-led governments of the late 1960s and 1970s, Soviet gas and West German pipelines to bring it to Western Europe became the material basis of Ostpolitik.
Because this relationship survived the return of the Cold War in the early 1980s, German firms and governments saw no reason why it would prove more problematic in times of peace. On the contrary, once Russian energy production was no longer controlled by the Soviet state, German energy companies had opportunities for partnerships that would eventually give them some production rights in western Siberia. Consequently, Germany had little interest in the liquefied natural gas (LNG) boom even before the United States had developed a new shale-based export capacity.
Today, Germany has no choice but to reduce its energy dependence on Russia – and the global economy was already in the grip of an energy crisis before the war started. At current levels of oil demand, the world economy cannot function without the 7.8 million barrels per day of petroleum products that Russia exported in December 2021. Regardless of the EU’s sanctions, therefore, the reality is that Germany will continue to import petroleum products that originate from Russian crude.
As for gas, European countries already faced overwhelming supply constraints relative to current demand last autumn. The world is now experiencing a China gas shock similar to the China oil shock in the mid-2000s. China’s LNG imports increased by about 20% in 2021 as a result of the post-pandemic economic recovery and the country’s deliberate shift away from coal to gas in heating. In December 2021, the EU’s natural gas import price was 18 times higher than in January 2020, the month before the pandemic hit Europe.
No matter how many LNG ports Germany can build quickly, German importers will have to compete for supplies with Asian countries. Despite the rhetoric from US President Joe Biden’s administration about American shale gas riding to the rescue, the industry currently lacks the capacity to meet a large increase in European demand for seaborne gas. The only short-term alternative within Europe itself is for the Dutch government to reverse its decision to wind down production at the Groningen gas field, which was once Europe’s largest.
In the medium term, attention will turn to the eastern Mediterranean as a potential source of new gas supplies. But this involves difficult issues concerning Turkey, and will require a quick settlement of pipeline disputes that have thus far proved divisive.
As Russia’s war against Ukraine continues, the EU now faces retaliatory energy measures from Moscow. But given today’s geopolitical complexities and the demands of the energy transition, it would not be surprising if pressure to rekindle the German-Russian energy relationship eventually reemerges.