Tuesday, July 26, 2022

The Anatomy of Germany's Reliance on Russian Natural Gas

Just announced, Putin's cutting natural gas deliveries to Europe by 20 percent. At WSJ, "Russia to Cut Europe’s Gas Flow via Nord Stream to 20%."

And earlier, at Der Spiegel, "The Anatomy of Germany's Reliance on Russian Natural Gas":

The Americans warned Germany, as did the Eastern Europeans. But Germany just continued buying more and more natural gas from Russia. The addiction stretches back several decades, and it is full of misjudgments and errors.

Matthias Warnig. If you don’t know the name, he is a German natural gas executive. And a friend of Russian President Vladimir Putin's. The czar's loyal courier. Or the dark Rasputin of German gas policy. Whichever you like.

Warnig, CEO of Nord Stream AG, the company behind the Nord Stream natural gas pipeline that leads from Russia to Germany, is sitting in the lobby of a Berlin hotel in early May. He has the self-confidence of a man who has his own initials stitched onto his shirts. Or, should we say, Warnig had that self-confidence? Was a friend of Putin’s? Thought that he knew Russia?

It almost certainly isn't good for your self-confidence when you end up on an American sanctions list and can no longer withdraw money from the cash machine as a result – and even the online shop where you used to order your coffee capsules has cut ties with you. But even more than self-confidence, say those close to him, Warnig has lost his self-conviction.

Just a week prior to Putin's invasion of Ukraine, Warnig was in Moscow. Even at that late date, he still thought that Putin wouldn’t simply throw away all that Warnig had been working toward for half his life: The Baltic Sea pipeline Nord Stream 2. Investments adding up to over 9.5 billion euros. The German-Russian energy partnership that also played a significant role in Germany's reunification – at least in Warnig's view. Now, he is faced with digesting his radical misjudgment of his friend Vladimir.

Peter Altmaier is also intimately familiar with Germany's natural gas imports and the reliance on Russia that expanded year after year. The mutual dependence – money for gas. Altmaier, sitting in a Berlin beer garden on a recent afternoon, approaches it with the sobriety of the historian he always wanted to be. But instead of pursuing his academic inclinations, he became former Chancellor Angela Merkel's environment minister, her chief of staff and, in his last cabinet position, economics minister, a post he held until the end of 2021.

No, Altmaier says, he wasn't wrong about Putin, insisting he had long suspected the Russian president might be dangerous. He says that when Putin marched into Georgia in 2008, he jettisoned any illusions that he might still have held about what the Russian president was capable of: pure brute force. But Altmaier erred nonetheless, not believing that it would ever be possible for Germany to come up with the idea of withdrawing from Russian gas on its own accord. He wasn't prepared for it, and neither was the country he helped lead. In a sense, he is the personification of the German-Russian schizophrenia – political opponents but natural gas allies – which was to guarantee cheap natural gas as a bridge to a new era. Gas was seen as the buffer for Germany's shift to renewable energies, a shift that only made halting progress during Altmaier's tenure as economics minister. Today, he finds himself forced to admit that he miscalculated regarding the time Germany had at its disposal to make the shift.

Jürgen Hambrecht also knows plenty about natural gas, in the way a junkie knows all about the drug he yearns for and knows precisely how to obtain it. Hambrecht was a natural gas addict. Or rather, the company that he led for many years was addicted: BASF, the multinational chemicals conglomerate based in Ludwigshafen, one of the largest consumers of natural gas and energy in the republic. Hambrecht receives his guest in the BASF restaurant, where the pairing of a glass of Riesling with the fish is no mistake – just as Hambrecht fails to see where his company might otherwise have committed errors. BASF was a main driver of Germany's gas romance with Russia, and actively helped bring the gas into the country through its subsidiary Wintershall. Good, cheap tonic, mainlined through a pipeline and transformed into chemicals by BASF and used as energy for the country.

It's just that Germany's political leaders, Hambrecht believes, went down the wrong path. First, the phaseout of nuclear energy, and then the phaseout of coal, amounting to an overreliance on natural gas from Russia. What should be done now? Hambrecht doesn't see liquefied natural gas and green hydrogen, both of which won't really be available within the decade, as real alternatives. "We can't just turn off the gas," Hambrecht warns, and he is also opposed to a natural gas embargo. At BASF alone, the jobs of some 40,000 people depend on reliable natural gas inflows. What Hambrecht has trouble understanding, though, is how Germany could have made such huge mistakes in its energy policy...

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