Germany sends mixed signals on breaking addiction to Russian energy

Like fellow motorists around Europe, Berliners grit their teeth at the petrol pump these days. As Russia’s war on Ukraine sends prices spiralling, few in Germany’s northeast know that nine out of 10 cars here run on fuel drawn from west Siberian oil wells.

For 60 years the “druschba” or “friendship” pipeline has carried 2.5 million barrels of crude oil daily on a 5,327km journey to a refinery in Schwedt, two hours northeast of Berlin. Once a joint East German-Soviet operation, the refinery was privatised in the 1990s and now has as its majority shareholder the Russian state-controlled company Rosneft.

Germany draws a third of its coal and a quarter of its oil from Russia, and it is also Russia's largest gas customer worldwide

One quarter of Germany’s total crude oil requirements, according to one analysis, are met by Russia, the Schwedt refinery and the “friendship” pipeline.

But with the German-Russian friendship now in tatters, Berlin is feeling pressure from EU and international allies – in particular the US – to join a boycott of Russian energy.

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So far Chancellor Olaf Scholz has refused, calling it a “conscious decision” to remain in business with Russia. That is a pragmatic way of framing Germany’s unique dependency, with its roots in modern German politics.

Germany draws a third of its coal and a quarter of its oil from Russia, and it is also Russia’s largest gas customer worldwide. Germany’s Russian gas bill has grown in the last decades to more than half of the total thanks in large part to the first Nord Stream undersea pipeline. A second Nord Stream pipeline is completed but remains in limbo, paused by Mr Scholz last month.

But his government is sending mixed signals on how – or when – Germany will break its Russian energy addiction. On Sunday, federal finance minister Christian Lindner told Berlin’s Tagesspiegel newspaper that Germany’s “energy supply should not be questioned from our side without necessity”.

Instead Mr Lindner is readying a state intervention in the market to drive petrol prices below €2 per litre, quite an ideological leap for the leader of Germany’s liberal Free Democratic Party (FDP).

Different tone

Striking a very different tone on Sunday was federal economics and energy minister Robert Habeck.

“We are working every day, really every day, to reduce the dependency on Russian oil, coal and gas,” the Green politician told the Frankfurter Allgemeine’s Sunday edition. “If it works we will be independent of Russia coal in the autumn and all but independent of oil from Russia by year-end. With gas it’s a bit more complicated.”

It’s complicated because, seduced by the convenience and the low cost of Russian gas, Germany declined to explore alternatives. Now his ministry is fast-tracking two liquefied natural gas (LNG) terminals on its northern coast just as Russia threatens to cut pipeline gas deliveries.

That strikes fear into German politicians’ hearts because of facilities like Rehden, 100km west of Hanover. Western Europe’s largest gas storage facility is as big as 910 soccer fields and can deliver enough gas to supply two million households for a year at full capacity. But it’s almost empty.

Seven years ago a subsidiary of BASF, the German chemicals giant, sold the Rehden facility, and another near the Dutch border, to a subsidiary of Gazprom.

Since Russian troops crossed into Ukraine, Germany has performed three previously unthinkable u-turns

While Germany’s average gas depot storage capacity is currently around 40 per cent – a historic low, but just enough to get the country through a four-week cold snap – Germany’s Russian-owned storage facilities have capacity use as low as 4 per cent.

That has driven suspicion that Gazprom, with close ties to the Kremlin, is keeping inventories low to stoke fears of a big freeze, particularly as Germany closes its last nuclear power plants this year.

Resilience

“It was naïve and starry-eyed to allow this great dependency,” said Norbert Röttgen, foreign policy spokesman for the opposition Christian Democratic Union (CDU) and a Merkel-era cabinet minister.

“Russia and Gazprom are fulfilling all their contractual obligations but they could supply more gas. If our reservoirs are not fully filled we are limited in our resilience.”

Since Russian troops crossed into Ukraine, Germany has performed three previously unthinkable u-turns: it paused Nord Stream 2; delivered weapons to Ukraine; and announced a €100 billion military spending plan.

An argument that the high cost of cutting the umbilical cord to Russia pales in comparison to the high price in the immediate future if Germany does not distance itself from its naive stinginess in the recent past is gathering force.

“German energy politics was only ever about one thing: raw materials should be cheap,” said economist Michael Hüther to the Welt am Sonntag, “and Russian gas was just that.”

THE PICTURE ELSEWHERE ACROSS EUROPE

While other European capitals talk about ending their dependency on Russian energy, Warsaw will be free of Russian gas by September. Work is almost completed on a new Baltic pipeline to bring Norwegian gas to Poland via Denmark and, since 2015, a liquefied natural gas (LNG) terminal in the Baltic coastal town of Swinoujscie has opened the country to deliveries from Qatar and the US.

Though it still draws two-thirds of its oil from Russia, Poland is demanding EU partners follow suit – at least on gas.

“Russia has attacked Ukraine with its army, which is committing war crimes,” said Polish prime minister Mateusz Morawiecki. “That is why we need to cut the oxygen from this war – money from the oligarchs, from oil, gas and other commodities.”

A new EU plan aims to free the continent from Russian fossil fuels before 2030, beginning with gas. The energy race is on, but EU member states have very different starting points.

Like Germany, Italy has considerable dependency on Russian gas. In 1980 it supplied almost half of its gas needs from more than 100 offshore platforms in the Adriatic. In the four decades since its gas consumption has doubled but its domestic share has shrunk: now 46 per cent comes from Russia.

It has no nuclear plants, a struggling renewables sector and limited gas alternatives – a new pipeline from Algeria, three LNG terminals for deliveries from Qatar but still reserves for just eight weeks.

Other large EU countries are less vulnerable. Pro-nuclear France only obtains a quarter of its gas supply from Russia, with Norway – at 35 per cent – its largest supplier. Spain is not a major customer for Russian gas either, focused instead on Algeria and the US.

Further north dependency on Russia gas hits 90 per cent in Finland and Latvia, while the lowest dependency can be found in Netherlands, Romania and Ireland.