Every day the Germany pays to Russia three-digit amount of millions of euros for natural gas and other energy sources. The German Government claims that immediate imposition of an energy embargo would have serious consequences for the industrial production of the country. This assessment was repeated on Sunday, in a television interview, o Social Democrat Chancellor Olaf Solz, who spoke of a threatened “economic crisis”. But how likely is that? Opinions differ.
“A manageable energy embargo”
Already in early March a group of experts Leopoldina National Academy of Sciences had published studyaccording to which one energy embargo in Russia would be “Manageable” for the German economy. THE economist Riediger Bachmann from University of Notre Dame in the USA tried to calculate the financial losses of the embargo based on an econometric model for 40 countries and states in the newspaper Tagesspiegel that an energy embargo would be “feasible”. According to his valuation it would cause shrinkage of GDP up to 3%, while for example in 2020 the economic consequences of the pandemic had caused a decrease of 5%. “This is a significant percentage, but not something that can not be offset by targeted economic policy measures,” he said.
Fears for mass job loss express the chemical industry unions. At the same wavelength the branch steel industry “At the moment we have to stop production if Russian gas goes out,” he said. But employers in the metallurgy and electrical industries are also warning of the immediate consequences. As stated by head of the Gesamtmetall association, Oliver Chander“Could disrupt the production chain in many sectors”, mainly in the food industry, meat production and the chemical industry.
Fundamental risk to industrial production?
For his part economist Riediger Bachmann says the consequences for the chemical industry are manageable, as many of the products produced can be “substituted”. “This is a short-sighted calculation,” he said Michael Heather, President of the Institute of German Economics in Berlin, saying that “if we put a lock on the chemical industry for a year and a half, as would happen in the event of an embargo on natural gas, this would be the end for the production of raw materials in Germany.” In addition, Michael Heather rejects the comparison with the period of the pandemic, noting that “at that time the consequences concerned specific sectors of consumption, such as catering, hosting and organizing events, while this time we are talking about more sectors, the which are in fact much more interconnected, due to the way in which the production process is organized “.
The prediction that an embargo on Russian gas can be addressed is expressed by Moritz Schularik, Professor of Economics at the University of Bonn. As he explains in the newspaper Friday “Germany currently covers 50% of its gas needs from the Russian market through pipelines, which are not easily substituted, while 5% of this quantity is channeled to the chemical industry for the production of raw materials and is also not substituted.” On the other hand, Schularick points out, there are specific measures, such as home heating at slightly lower temperatures and improving the energy efficiency of buildings, which can contribute to further energy savings. According to the Energy Industry Providers Association (BDEW), private homes have a margin for energy savings of 15%, while in industry the margin is reduced to 8%.
The … complaints of economists to politicians
Speaking at the financial inspection Handelsblatt Schularik criticizes the reactions of some politicians. “For decades, economists have been advising politicians on the basis of facts, but they often make decisions based on their mood,” he said. On this issue, says the professor of Economics at the University of Bonn, politicians are asking the same people who for the past ten years have assured that “there is no question of energy dependence on Russia”, who now claim that “we can not end overnight Russian gas supplies “.
In any case, Germany adapts its long-term plan to the logic of independence from the Russian market. According to the Ministry of Economy until the summer oil imports from Russia will have been reduced by 50%, while imports of lignite will end at the beginning of autumn at the latest. Already today the share of Russian gas in total imports has fallen from 55% to 40%. By the end of 2024 the complete detoxificationprovided the further spread of renewable energy sources and the reduction of consumption.
DW / Insa Brende / Editor: Giannis Papadimitriou
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