Sanctions against Russia: Why German companies reject an immediate energy embargo

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Thyssenkrupp boss Martina Merz:

"If the natural gas reserve falls below a certain threshold, this means for Thyssenkrupp and many other companies: switch off and shut down."

Photo: Rolf Vennenbernd/ picture alliance/dpa

The pictures went around the world over the weekend: Hundreds of corpses, some tied up, lie on the streets and in the rubble of the Ukrainian city of Bucha.

In view of these barbaric war crimes against the Ukrainian people, the discussion about an immediate energy embargo against Russia has been rekindled.

But Economics Minister

(Greens, 52) and Chancellor

(SPD, 63) continue to reject an immediate stop to gas, oil and coal supplies from Russia.

The economic effects on Germany are too devastating.

Germany should not be independent of Russia in its coal imports until the end of the summer, and then also independent of Russian oil by the end of the year.

The situation is more complicated with gas, where the exit could probably not succeed until summer 2024 at the earliest, according to the Federal Ministry of Economics.

In the gas-hungry chemical and pharmaceutical industries in particular, but also in the steel, ceramics and glass industries, there are major concerns about a sudden lack of Russian energy.

The companies essentially cite four arguments as to why they are against an immediate delivery stop.

1. Germany falls into a deep recession due to an energy embargo

According to data from the Federal Institute for Geosciences and Natural Resources, Germany received more than 50 percent of its natural gas requirements from Russia last year.

In the meantime, the proportion of Russian deliveries has fallen, but is still significant at around 40 percent.

Many companies therefore fear a massive economic slump if the gas supply were to be stopped overnight.

BASF boss

(60) explains that many companies would have to file for bankruptcy in the event of an embargo because they simply could no longer produce.

Unemployment would rise rapidly as a result.

"That could bring the German economy into its worst crisis since the end of the Second World War and destroy our prosperity," he said in an interview with the "FAZ".

The chemical group BASF is the largest gas consumer in Germany.

Evonik CEO

(53), who is also President of the German Chemical Industry Association (VCI), warned in no uncertain terms: "In the event of a Russian energy embargo, German industry and especially the chemical industry would have to prepare for a drastic , prepare for a dramatic scenario," Kullmann told radio station WDR 5.

Is that correct?

Economists agree that an energy embargo would plunge Germany into a recession.

However, it is unclear to what extent the economy in this country would collapse.

The economist

(50), for example, considers such a measure to be justifiable.

"The delivery stop would shrink the German economy by 2 to 6 percent, not by 20 percent as is being rumored in many places," she said on the ARD program "Anne Will".

She explained to the newspapers of the editorial network Germany: "We could deal with it if Russia's President

(69) literally turned off the tap."

Germany went into the pandemic with a government debt ratio of 60 percent, now it is around 70 percent.

"

Researchers at the University of Bonn also came to the conclusion in an analysis that the consequences of an embargo for the German economy would be clear but manageable.

According to the study, gross domestic product (GDP) would fall by 0.5 to 3 percent in the short term.

"Politicians underestimate the fact that industry and consumers will adapt to higher prices," explained

, a professor at the University of Bonn, when presenting the analysis.

For example, switch to other energy sources or reduce consumption.

The President of the Institute for Economic Research (DIW),

(51), on the other hand, warns of "dramatic" economic effects should all Russian energy supplies be stopped.

In the “Passauer Neue Presse” he pointed out that the economy had not yet overcome the Corona crisis.

"The German economy is currently fragile, so a shock like this would hit us hard."

, director of the employer-oriented Institute of German Business (IW), also

fears drastic effects.

"We would paralyze the entire economic structure and we would decide not to have the basic industry that is so important in Germany."

Germany's private banks see it similarly.

"If there were an embargo, there is a high probability that the German economy and probably also the European economy would fall into a recession with long-term consequences," said Deutsche Bank boss

(51), who is also president of the federal association

German banks (BdB) is.

2. Significant supply chain disruptions

The industry is already suffering from the disruptions in global supply chains caused by the corona pandemic and the war in Ukraine.

If primary products from energy-intensive sectors such as the chemical, pharmaceutical or metal industries fail, this inevitably affects other sectors as well.

"Without natural gas from Russia, steel production would not be possible at the moment," said the Steel Industry Association, which represents German heavyweights such as Thyssenkrupp and Salzgitter.

And steel is the basic material and starting point for almost all industrial value chains.

"If steel fails as a preliminary product, the vehicles will not only lack chips and wiring harnesses, but also the steering rods," predicted Eon boss

(55) in the "Tagesschau".

Even car windows could no longer be delivered - natural gas is the most important energy source for the glass industry.

3. Russian gas cannot be replaced immediately

According to many companies, there are still no alternatives, especially to Russian gas supplies.

Many industries are currently dependent on a constant supply of energy.

For example, a galvanizing plant, which protects steel from corrosion, cannot simply be shut down.

The zinc must be permanently kept liquid at a minimum temperature of 420 degrees Celsius.

Glass production also involves high temperatures that must be maintained at all times so that the glass does not solidify.

Liquefied Natural Gas (LNG), which is traded as one of the main alternatives to gas, has to be imported from countries such as the USA, Qatar or Canada.

Economics Minister Habeck has already concluded a long-term energy partnership with Qatar.

However, the infrastructure is still lacking in this country, and the construction of appropriate terminals in Wilhelmshaven, Stade and Brunsbüttel will take years.

Even with the floating LNG terminals, which can be set up much faster, it will probably still take until winter 2023 before the liquid gas can be imported in large quantities.

The situation is similar with hydrogen, especially with green hydrogen, which is produced from water using renewable energies and is therefore fossil-free.

"It will be at least 2030 before natural gas can be replaced by green hydrogen in the metal industry, for example," said

(65), President of the Steel Industry Association, recently to the "Handelsblatt".

According to Thyssenkrupp boss

(59), a minimum purchase from Russia is therefore essential in the coming months.

"If the natural gas reserve falls below a certain threshold, this means for Thyssenkrupp and many other companies: shut down and shut down," Merz said in an interview with SPIEGEL.

A delivery stop should therefore not happen overnight.

4. It hurts us more than Vladimir Putin

Like the governments of Germany, Austria and Hungary, many companies also believe that sanctions are counterproductive if they cause more damage to the initiator than to the intended target.

In an interview with the Handelsblatt ,

(60) was critical of whether an embargo could really end the war in Ukraine.

"If you weaken yourself massively, you won't win," said Appel.

In the event of an embargo, he fears a collapse of parts of our industry.

This "didn't help Ukraine either".

Other countries have already implemented an import ban on Russian energy supplies.

The Baltic state of Lithuania, which has a population of 2.8 million, stopped importing gas from Russia at the weekend.

Canada, Great Britain, Australia and the USA had previously decided to boycott Russian energy.

Here the sanctions have even led to a Russian oil tanker having to turn around in the middle of the Atlantic, according to information from the "New York Times".

The buyer of Russian crude oil has apparently changed his mind in the short term in view of the sanctions.

mg with news agencies