Russian gas in Germany: A complicated 50-year relationship | Business | Economy and finance news from a German perspective | DW | 09.03.2022

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Russian gas in Germany: A complicated 50-year relationship

For 50 years, Russian gas has powered German homes and businesses. From the start, the trade link was controversial, but it established deep economic ties between the two countries.

Pipes for gas transport

German-made pipes formed the basis of many Russian pipelines

Germany's opposition to banning imports of Russian gas is a reflection of how deep and long-standing the country's dependence on the energy source is. Chancellor Olaf Scholz made clear Germany's position on Monday.

"Europe has deliberately exempted energy supplies from Russia from sanctions," he said in a statement. "At the moment, Europe's supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way."

For almost 50 years, the world's biggest natural gas exporter has been supplying Europe's biggest economy — heating homes, powering businesses, cooking food and lighting up streets.

Russia supplies gas to countries throughout the EU, and many in eastern Europe are even more dependent than Germany, which acquires roughly 50% of its gas from Russia.

But the German market has long been the jewel in the crown for the Russian gas industry. According to Russian customs data, Germany took just under 20% of all Russian gas exports in 2020, comfortably making it its biggest customer.

Pipes for gas

In 1955, West German Chancellor Konrad Adenauer visited Moscow to establish diplomatic relations between the new Federal Republic of Germany and the Soviet Union. A trade agreement followed in 1958 and by 1960, bilateral trade between the countries was booming.

In the 1960s, the astonishing wealth of Russian oil and gas resources was becoming apparent. Demand for German-made large diameter pipes soared as a mammoth energy business dawned for the Soviets.

Dirt road in the snow with a pipeline nearby

The vastness of Russia's energy reserves became apparent in the 1960s

West Germany had started providing pipes for the Druzhba pipeline ("Friendship Pipeline"), the world's longest oil pipeline linking Russia with much of eastern Europe, which eventually came into operation in 1964. However, the Kennedy administration in the US was spooked by the Soviet Union's growing energy sector and managed to push through, via NATO, an embargo on pipe exports from Germany to the Soviet Union.

However, by the end of the decade, West German Chancellor Willy Brandt's Ostpolitik policy was opening up the country's relationship with its eastern neighbors. That paved the way for a historic deal between West Germany and the Soviet Union in 1970, which saw West Germany agree to extend Transgas, an extension of the Soyuz gas pipeline, through what is now the Czech Republic into the southern German state of Bavaria.

In exchange for the gas, West Germany would supply pipes as part of a much wider arrangement known as "pipes for gas." Gas imports from the Soviet Union were paid with steel pipe exports in the other direction.

By 1973, Russian gas had begun to flow to West Germany, the same year as it began coming to East Germany, which was part of Europe's East bloc and a satellite state of the Soviet Union.

Several commentators, business leaders and academics have identified that 1970 deal as a significant fork in the road of the Cold War, as it established a mutual basis for economic cooperation between Russia and western Europe.

German imports of Soviet gas rose steadily throughout the 1970s, as various more deals were struck to increase supply. The oil crisis of the mid-1970s caused countries like Germany to further diversify towards natural gas as a source of energy, and the Soviet Union profited.

Routes of gas pipelines

US reservations over Russian reserves

Germany's relationship with Russian gas has been a perennial source of controversy in the US. Starting with the embargo on pipe exports in the early 1960s, several US presidents were concerned by Europe's growing dependency on the energy source. In the 1980s, President Ronald Reagan repeatedly tried to convince Germany and other European countries to reduce the amount of Russian gas they imported.

It was to little avail, however, as the business relationship was clearly seen as beneficial for both sides. By the time the Berlin Wall came down in 1989, the Soviet Union accounted for around one-third of all gas demand in West Germany. In terms of volume, Russian gas supplies to Germany had increased from 1.1 billion cubic meters in 1973 to 25.7 billion cubic meters in 1993.

Geopolitical tension

In the 1990s, Gazprom, the Russian state natural gas company, became increasingly interested in gas deliveries to Europe that bypassed Ukrainian territory, both because of Ukraine's poor gas infrastructure but also for geopolitical reasons. The Yamal pipeline, which hit full capacity in 2006, connects Siberian gas fields with Germany via Belarus and Poland.

Then came Nord Stream 1, a pipeline that would transport gas directly from Russian territory to German territory via the Baltic Sea, bypassing all countries in between. The agreement was signed in 2005 by then German Chancellor Gerhard Schröder and Russian President Vladimir Putin, and it opened in 2012.

Gerhard Schröder and Vladimir Putin stand side by side in front of a car

German Chancellor Gerhard Schröder became extremely close to Russian President Vladimir Putin, and ended up being nominated to the board of Gazprom

Poland and the Baltic States were strongly opposed, but the deal was seen by its supporters within Germany as a way of further cementing ties with Russia by means of a deeper, strategic partnership that ensured cooperation.

Moving towards the end?

Over the past decade, Germany has continued to import gas from Russia at historically high volumes. However, the trade relationship has come under increasing pressure, mostly due to geopolitical concerns expressed predominantly by the US about reliance on Russian gas at a time when the country has shown aggression to its neighbors, including Ukraine and Georgia.

Nord Stream 2, a planned second Baltic Sea pipeline that would have significantly increased the direct supply of gas from Russia to Germany, became a central focus of US concerns.

However, despite clear opposition from the US, the pipeline was completed and could have been eventually certified for gas delivery had it not been for the invasion of Ukraine. In the end, that invasion was what forced the German government to indefinitely postpone approval of the pipeline.

Its future now looks deeply uncertain, as does the entire relationship between EU countries like Germany and Russian gas imports. The war in Ukraine appears to have sounded the death knell.

Despite German opposition, the EU is pushing to drastically move away from Russian energy sources as soon as possible. On Tuesday, EU officials outlined a plan to end imports of Russian energy before 2030 and to reduce demand by as much as two-thirds in 2022 alone.

"We must become independent from Russian oil, coal and gas," European Commission President Ursula von der Leyen said in a statement. "We simply cannot rely on a supplier who explicitly threatens us."

Edited by: Hardy Graupner