Energy embargo: Germany's situation with gas delivery stop - There is a way out

Created: 04/15/2022, 23:11

By: Lisa Mayerhofer

An energy embargo would turn the situation in Germany upside down.

According to experts, a gas supply freeze “can only be sustained as a joint European effort”.

Berlin - Without any Russian gas - the EU country Lithuania is already doing that, but Germany is far from it.

Since April, the Baltic state of 2.8 million people has been covering all of its needs via a liquefied natural gas terminal in the Baltic Sea.

According to the Economics Ministry, however, the Federal Republic will probably need at least until the summer of 2024 to become largely independent of Moscow when it comes to the raw material.

However, reports of atrocities by Russian troops against the Ukrainian population have now revived the debate about an immediate freeze on purchases.

In an unprecedented legal act, Germany has also taken control of Gazprom Germania - the Federal Network Agency is now temporarily in charge here.

The federal government wants to ensure security of supply.

But how would the situation in Germany develop in the event of an energy embargo?

Energy embargo: the extent of the consequences is disputed

According to economists, the consequences would be significant, but their extent is disputed.

Economists at the union-affiliated Hans Böckler Foundation, for example, expect a delivery stop to cause greater damage than many colleagues assumed.

In the worst scenario, in which energy costs rise rapidly as a result of an embargo, there would be a “decline in gross domestic product by more than six percent” in 2022, according to a special analysis by the Foundation’s Institute for Macroeconomics and Business Cycle Research.

That would be a greater slump in overall economic output than in the Corona crisis year 2020.

One thing is certain: an energy embargo would turn the situation upside down.

"If this were to happen, 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 the President of the Association of German Banks, Deutsche Bank CEO Christian Sewing.

In his estimation, a sensitive downturn could hardly be avoided.

The "economic wise man" Veronika Grimm, on the other hand, believes that an embargo could be a tried and tested means of establishing and stabilizing security in Europe - even if this means an economic slump.

The decisive factor is whether this danger can be contained by withdrawing the income from the energy business from Russian President Vladimir Putin.

"The question must be whether an energy embargo or other measures that reduce payments to the Putin regime are necessary for security reasons and increase the likelihood of containing the conflict."

The federal government has so far rejected an embargo.

Chancellor Olaf Scholz had made it clear several times that from Berlin's point of view, entire branches of industry in Germany would be threatened in such a case.

Gas embargo: Economy fears for competitiveness

In fact, the gas-hungry chemical and pharmaceutical industries, but also the steel, ceramics and glass industries would suffer greatly from an energy embargo.

Raphael Hanoteaux from the organization E3G said with regard to a Russian gas supply stop: “German industry, for example, would lose its competitiveness.” The reason for this is closures in the industry and even higher prices.

"A short-term and unlimited delivery stop would have massive negative effects not only on the chemical-pharmaceutical industry by autumn at the latest, but also on the entire production network of the industrial country Germany via its function in the value chain," says Wolfgang Große Entrup, Managing Director of the German Chemical Industry Association .

While oil can sometimes be obtained from other regions, there is no short-term replacement for gas.

Gas supply in Germany: low levels

However, things are not looking good in Germany, especially when it comes to gas supply.

Even before the Ukraine war*, the filling levels in this country were significantly lower than in previous years.

The database of the Gas Infrastructure Europe network gave the most recent total value for Germany as of April 2 at just under 26.5 percent.

In addition, more energy is extracted every day (529 gigawatt hours) than is newly stored (486 GWh), and this is far below the technically possible capacities.

What is striking here is that the levels reported for the plants previously owned by Gazprom are far lower than the national average.

According to the information, the largest German storage facility in Rehden, Lower Saxony, was almost empty at the weekend with only 0.5 percent utilization.

The memory in East Frisian Jemgum was 15.8 percent full.

Threatening energy embargo: government tries to procure gas

The federal government is now trying to free itself from dependency and to procure energy.

By order, the government has taken over the supervision of parts of the German gas supply previously managed by Russia.

Federal Economics Minister Robert Habeck temporarily appointed the Federal Network Agency as a trustee for the German subsidiary of the Russian state-owned company Gazprom.

Habeck justified this with unclear legal relationships and a violation of reporting regulations.

The aim is to ensure security of supply.

Gazprom is still Germany's largest gas supplier.

The economy minister had previously traveled to Norway and Qatar to explore contracts for supplemental or liquefied natural gas (LNG).

Talks are also to be held with Canada.

LNG is controversial in terms of climate policy because of the CO2 load caused by transport and combustion, but is considered an important alternative because of the time pressure when doing without Russian pipeline gas.

In Wilhelmshaven, Stade and Brunsbüttel, import terminals for the raw materials delivered by ship are to be built as quickly as possible - initially possibly as floating facilities before the complete terminals are completed.

From the point of view of Lower Saxony's Energy Minister Olaf Lies, if necessary, the work must start before the building permit - in the case of lighter tenders.

Wilhelmshaven wants to "implement a first import hub at the turn of the year if possible," he said.

“Here, as a state, we have to take risks if necessary.

The economic and social price that we pay if we do not become independent as soon as possible is much higher.”

Gas delivery stop "can only be carried out as a joint European effort"

But that is still far too little to replace Russian gas.

Germany will not be able to get out of its gas dependency on its own - at least not in the near future.

There is only a chance if all EU countries stick together and pool their capacities, for example by stopping exports of natural gas.

And even that, according to

information, would not be enough to completely replace Russian gas supplies by the end of the year.

Research Center Jülich therefore assumes that an import ban on Russian gas by the EU would be acceptable in an emergency.

However, Leander Kotzur, head of the "Integrated Models and Scenarios" department at the Institute for Energy and Climate Research, told the

: "An immediate stop to Russian natural gas deliveries would only be a joint European effort.

Significant cost-cutting measures in industry and households would be necessary immediately, and parts of industry would have to temporarily shut down operations next winter.”