Earlier this week, US President Joe Biden announced a ban on Russian oil imports, saying the move was “another blow to Putin’s war machine”. He added that the United States is moving forward with full awareness that “many of our European allies and partners may not be able to join us.”
Indeed, these allies and partners have become overly dependent on Russian oil and gas imports without realizing the danger. Germany has allowed itself to become highly dependent since 1998, importing about 55% of its gas and more than 40% of its oil from Russia.
Change through trade?
For decades, German energy lobbyists have argued that this dependence was both harmless and mutually beneficial, with Russia in dire need of cash and Germany desperate for oil and gas. Some even chanted the idea of change through trade, implying that trade with Russia would boost the country’s internal reforms.
During the presidency of Gerhard Schroeder and then Angela Merkel, many in Germany were drawn to this tempting idea. Even so-called experts, such as those affiliated with the government-friendly Oxford Institute for Energy Studies and the German Institute for International Affairs and Security Affairs.
Many other think tanks made the same mistake. A latent anti-Americanism, pervasive in Germany, has led many to reject warnings from American experts about this dependence on Russia. Indeed, many suspected that the United States was simply promoting its own energy exports and interests.
Concerns expressed by governments and independent experts in Eastern Europe were dismissed as Cold War thoughts. Now, however, these critics have been vindicated. Germany is in an energy dilemma and it is again up to the US to come to the rescue.
Oil exports fund Putin’s war
Revenue generated by oil and gas exports is what keeps Russian President Vladimir Putin’s war chest full of cash. They make up between 30% and 40% of Russia’s national budget. Last year, Russian state-owned companies earned about $ 180 billion (165 billion euros) by exporting oil. They make half a billion more every day, especially now that oil prices have skyrocketed. Russia’s central bank, meanwhile, said the country exported $ 62 billion worth of gas in 2021.
Russia’s war in Ukraine costs Putin about $ 1 billion every day. Sanctions, however, have frozen the central bank’s foreign exchange reserves. In addition, Russia has been cut off from new funds, now that government bonds have been downgraded to rubbish.
In Russian energy circles, there has always been the belief that oil exports bring in money and gas exports equate to power. If we really want to weaken Putin and his kleptocracy – and not just ordinary Russians – we must impose an oil embargo to restrict the flow of his income. Biden took the first step. The European Union must follow suit.
Gas boycott
From a technical point of view, it would be easy to implement such an embargo. Russia covers only 5% of world oil demand. As the market is fully globalized, oil tankers can deliver oil anywhere. While Russia could seek to sell its oil to China and India, it would have to accept a lower price. Many industrialized nations also have strategic oil reserves, some of which have already been exploited. This supply should be sufficient for several months. Also, other oil-exporting countries could be persuaded to increase their production.
The German National Academy of Sciences and many respected German researchers have said that the ban is possible if Germany temporarily changes the liquefied natural gas available on the world market.
Likewise, relying on more coal-fired energy could offset the fall in gas. And if the Germans lowered their gas heating systems by 2 degrees, we could already achieve a substantial reduction in gas consumption without freezing.
Oil and gas costs will rise in Western Europe. Low-income households will need financial support from the state, while companies will need to receive tax breaks.
European democracy is at stake
As the war in Ukraine escalates and Putin fails to win, he will resort to bombing more and more civilian neighborhoods, as Russia did in Grozny and Aleppo. The Russian oil and gas market makes us partly complicit in war crimes. Only by decisively putting an end to Russian imports can we bring down Putin and his brutal kleptocracy.
Liberal democracies are stronger than dictatorships. Democracy itself is at stake. That is why we have to make sacrifices.
Dr. Jörg Himmelreich is an Associate Professor at the ESCP Business School (ESCP) in Berlin. In 2007, he warned of Putin’s actions for the first time in the magazine International Politics of the German Council on Foreign Relations.
This piece was originally published in German
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