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Europe is bankrolling Putin's war on Ukraine

March 12, 2022

The battle over Ukraine is about nothing less than Europe's freedom. For that, we should be willing to make sacrifices, says Jörg Himmelreich.

Workers at the construction site of a section of the Nord Stream 2 natural gas pipeline near Kingisepp, Leningrad
Halting gas imports from Russia would hit Putin harder than a ban on oil, says Jörg HimmelreichImage: Alexander Demianchuk/Tass/picture alliance

Earlier this week, US President Joe Biden announced an import ban on Russian oil, saying the move deals "another powerful blow to Putin's war machine." He added that the United States was moving ahead with the step fully aware that "many of our European allies and partners may not be in a position to join us."

Indeed, said allies and partners have developed an overreliance on Russian oil and gas imports without realizing the risk involved. Germany has allowed itself to become particularly dependent since 1998, importing some 55% of its gas and over 40% of its oil from Russia.

Change through trade?

For decades, German energy lobbyists claimed this dependence was both harmless and mutually beneficial, with Russia in dire need of cash and Germany desperate for oil and gas. Some even touted the idea of change through trade, implying that business with Russia would strengthen domestic reforms in the country.

Jörg Himmelreich
Jörg Himmelreich is a renowned Russia expert

During the chancellorships of Gerhard Schröder and then Angela Merkel, many in Germany were attracted by this alluring idea. Even so-called experts, like those with the business-friendly Oxford Institute for Energy Studies and the government-affiliated German Institute for International and Security Affairs fell for it.

Many other think tanks made the same mistake. A latent anti-Americanism, pervasive in Germany, lead many to dismiss warnings by US experts over this dependence on Russia. Indeed, many suspected the US was simply promoting its own energy exports and interests.

Concerns expressed by governments and independent experts in Eastern Europe were dismissed as Cold War thinking. Now, however, those critics have been vindicated. Germany finds itself in an energy dilemma, and it is once again up to the US to come to the rescue.

Oil exports bankroll Putin's war

The revenue generated from oil and gas exports is what keeps Russian President Vladimir Putin's war chest brimming with cash. They make up between 30% to 40% of Russia's national budget. Last year, Russian state-run companies earned some $180 billion (€165 billion) exporting oil. Each day, they make half a billion more, especially now that oil prices have spiked. The Russian central bank, meanwhile, reported that the country exported $62 billion worth of gas in 2021.

Russia's war on Ukraine is costing Putin roughly $1 billion every single day. Sanctions, however, have frozen the central bank's foreign reserves. Moreover, Russia has been cut off from fresh capital, now that government bonds have been downgraded to junk status.

In Russian energy circles, there has always been the conviction that oil exports bring in money, and gas exports equate power. If we really want to weaken Putin and his kleptocracy — rather than just ordinary Russians — we will have to impose an oil embargo to cut his income stream. Biden has taken the first step. The European Union should follow suit.

Boycott gas

Technically speaking, it would be easy to implement such an embargo. Russia meets a mere 5% of global oil demand. As the market is fully globalized, oil tankers can deliver oil around the word. While Russia could seek to sell its oil to China and India instead, it would have to accept a lower price. Many industrialized nations also possess strategic oil reserves, some of which have already been tapped. This supply should suffice for several months. Also, other oil exporting nations could be persuaded to ramp up production. 

Oil companies turn their backs on Putin

The German National Academy of Sciences and many well-respected German researchers have said a ban is feasible if Germany temporarily switches to liquefied natural gas available on the world market.

Similarly, relying on more coal-powered energy could make up for a drop in gas. And if Germans were to lower their gas-powered heating systems by a mere 2 degrees, we could already achieve a substantial reduction on gas consumption without freezing.

The cost of oil and gas will rise in Western Europe. Low-income households will need financial support from the state, while companies should receive tax breaks.

European democracy at stake

As the war on Ukraine drags on and Putin fails to achieve victory, he will resort to bombing ever more civilian neighborhoods, as Russia has done in Grozny and Aleppo. Buying Russian oil and gas makes us partially complicit in his war crimes. Only by putting a determined stop to Russian imports can we bring down Putin and his brutal kleptocracy.

Liberal democracies are stronger than autocracies. Democracy itself is at stake. For this, we must make sacrifices.

Dr. Jörg Himmelreich is an affiliate professor at the ESCP Business School (ESCP) in Berlin. Back in 2007, he warned against Putin's actions for the first time in the journal Internationale Politik of the German Council on Foreign Relations.

This piece was originally published in German

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