Some in this thread have asked how Germany could be so foolish to tie its economic destiny to such a problematic country as Russia.
The answer seems to be "one step at a time." And Germany is not unique.
Take the United States, for example, and its near total dependency on Chinese manufacturing for, well, just about everything. The US offshored manufacturing capacity hand-over-fist. In exchange the US got cheap goods (and low inflation), and continued supremacy of the dollar in world trade and as a reserve asset.
Both of those benefits are looking shakier by the week. Inflation is ripping higher, and the sanctions on Russia have prompted what some observers are calling Bretton Woods III, or a brand new economic order that minimizes the position of the US dollar.
But the worst part of all is the enormous leverage China has over the US. The US can protest human rights violations or even an attack on Taiwan, but any serious action taken against China will visit upon the US the same fate as Germany now faces. The brave threats can not be made good on because of an economic hole dug over the course of a generation or two.
The irony is that if you wind the clock back 25 years or so, this situation is the same in direction (although possibly not in magnitude) as policy makers wanted. Free trade was supposed to make conflicts more difficult because of mutual dependency. And it has worked. Just look at the disconnect between the saber-rattling German/US rhetoric and the tepid German/US actions.
It can be really tempting to look at this as bad for the US, but this is really just catastrophic for Russia. Decades of investment blown up, with one of the only real non-kinetic weapons that they have.
As Chancellor, he began the phaseout of nuclear energy and approved the Nord Stream gas pipeline directly from Russia to Germany.
Today he's:
1. The Chairman of Nord Stream, the company that owns the pipeline
2. The Chairman of Rosneft, the third largest company in Russia
3. A member of the board of directors of Gazprom, the largest company in Russia
You figure it out.
The bottom line is that European integration is a natural phenomenon. It is natural to have strong economic ties within one's neighborhood. You don't need a decades long conspiracy to explain basic economic advantage.
However, European/Eurasian integration is an existential problem for the one superpower that isn't part of Eurasia. Therefore we get a lot of chaos, misinformation, and artificial divisions.
They should also definitely remember what they did to cause this.
But this is not at all bad for the US, it’s great! Russia is isolated and weakened and the EU is strangulated by yet another wave of refugees and weakened economically, becoming even more dependent on the US for security.
So we are dependent on Russia for Energy, on China for Manufacturing and industrial demand of our most important industrial sectors and are protected by the US from a National Security point of view.
The army is a national laughing stock, the car industry is begging to be disrupted, and chinese equipment and machinery companies have completed their IP theft programs and are now almost at par from an innovation level.
All while international media hailed Merkel and her useful idiots for their international leadership.
Imo only the US, China and partially Russia (and maybe India) can be really autarchic, all of these countries that span almost an entire continent (or a big part of it).
Not sure if there's a solution to all of this, from Europe's point of view. Ideally by this point we should have had a genuine political and societal union (I'm from Romania myself, another EU member), but that has failed, it is failing (of course that the powers that be refuse to acknowledge that). Without that genuine political and societal union one cannot have an autarchic Europe.
Edit: Likewise, watching Germany dismantle its nuclear infrastructure over the last several decades for… what reason exactly? Replacing a clean, cheap, on-demand energy source for dependence on foreign energy imports? Even if you think global trade is panacea, why throw out working critical infrastructure and replace it with something beyond control?
Gas has been a popular choice, because it is a lot cleaner than coal / light oil / wood from a local pollution perspective. It burns cleanly, so switching to gas heating significantly reduces pollution in cities.
Nuclear energy is NOT clean, because it has the huge unsolved problem of what to do with the radioactive waste. Nobody wants radioactive waste anywhere near them, and there just isn't any place where you can put radioactive waste where it will be safe for a few hundred years.
But the biggest reason for our fear of nuclear energy is Chernobyl. It's been 37 years, and Chernobyl is still a danger.
The answer seems to be "one step at a time." And Germany is not unique.
Quite quick actually. The ex chancellor of germany [0] became Nord Streams' [1] Chairman of the Shareholders' Committee (since 2006)
[0] https://en.wikipedia.org/wiki/Gerhard_Schröder
[1] https://en.wikipedia.org/wiki/Nord_Stream
edit: correction and add link
It's completely brazen.
The commercial relationship between the USA and China is much different. First, it consists of thousands of businesses and millions of consumers: it's not so easy to stop the flow (you can ban some of it, but there are workarounds). For many of those goods, there will be substitutes. Finally, this wasn't something explicitly decided by the USA government.
The U.S. used Chinese factories because they were cheap. Emphasis on "were." Companies have been switching away from China en masse (to India, Vietnam, Thailand, etc.) for at least the past decade because China is no longer the cheap option. Frequently, including shipping costs (even before COVID) it was cheaper to just get stuff made in America if you could find a supplier. Hell, my last 3 years at a firm were devoted almost entirely to helping companies restructure their international operations out of China to cheaper countries.
The U.S. won't take serious action against China because China took Russia's place as the global counterweight to the U.S. But it has absolutely nothing to do with China's so-called economic leverage, because China doesn't have any over the U.S. anymore.
And perhaps most importantly defused the worker radicalism of the 60s/70s by literally moving the means of production out from under them.
Part of the reason inflation is ripping higher (and this was beginning to happen even pre-pandemic) was because the previous administration began tradewars which began to rip up global supply chains. Yes, the bulk of our inflation currently is due to the pandemic, but a good chunk of it was going to start happening anyway even if the pandemic never happened because we began to disrupt global wage arbitrage. Bringing jobs back to America was always going to lead to a period of inflation.
The prevailing political view, was that strong economic ties would make war and violent conflict between Germany and Russia impossible. This is basically what happened intentionally and successfully between Germany and France after World War II first with European Coal and Steel Community and later the European Union.
You know, if you go down that path it will never end. It's like the gold standard. It's going to fail every single time. Bretton Woods is doomed to fail. It was doomed to fail the day it was introduced.
Thankfully for some very key industries we still have onshore manufacturing and that is increasing in modern times.
Or were there other reasons for not diving into that technology with two feet in front, rather than try to sunset it?
If they had liquidated, those contracts would have been gone and the Gas dealers & utilities would have had to renegotiate new contracts with Gazprom Russia. This would have allowed them to require payments in Rubles instead of Euros.
> This would have allowed them to require payments in Rubles instead of Euros
"allowed" is a funny word - this situation is way past a point where cross-border contracts on either side hold any legal value. How are you going to hold anyone accountable for breach of contract?
Currently Russia has no right to sanction us, so anything they do is a further breach of ITO, which further deepens their case.
Diplomacy is important. The good guy has to respect the rules, or at least write them so we pretend that there are rules we adhere to.
This was a completely fraudulent construct. 100% of the voting rights were sold for the equivalent of 1 Euro to a single person with no serious business background (has dealt with cars and performed as a DJ). This is a company with billions of turnover. And 99.99999% of the ownership was bought back by the the company itself.
It also has contracts with Gazprom in Russia with guaranteed Prices and Deliveries.
Is anyone under an illusion that Gazprom in Russia will honor these contracts, now that their branch was seized? And if not, what methods are there to enforce these contracts?
The Russians seized the planes, which can fly but need spares and checks. The Germans seized the pipelines and the storage. Both have some utility in the interim, but both are ultimately useless.
In this case because both parties need it (for now) even through currently neither of them wants it. (Russia needs the money, Germany the Gas, if Russia could afford it they would already have cut of Gas to destabilize Germany. If Germany could afford it they would already have cut payments to force Russia to stop the war.)
Also I think some people misunderstand what sizing means in this context it doesn't mean "hey this is now ours" but is much more subtle and complex, and most important temporary by nature.
- NATO, apparently delusional
The idea people will “honor” contracts while you’re (illegally) seizing their property in effort to enact an economic siege of their nation is mental illness — either delusions or megalomania. That strategy doesn’t make sense.
I’m personally sad to see how deluded US and EU leaders are.
The German state seized a local German branch of the Russian Gazprom company. In order to secure its energy supplies... which come from Russia.
Are they in essence capturing some reserves?
Edit: Source (paywalled, german) https://www.spiegel.de/wirtschaft/gazprom-germania-hat-berei...
No,
sized here means "put under control of a trustee until the situation is resolved" it doesn't mean "take over ownership".
The reason that happens is because the persons(s) currently in control of Gazprom Germania did try to use that control to act against German law in a way which threatens national security.
This is also more about Gas infrastructure then Gas as far as I can tell.
My guess is that some Russian oligarch tried to move ownership to one (or potentially many) chains of "dummy" companies which obfuscate the actual owner and go through many other non-Russian nationalities. This e.g. would make many legal actions against Gazprom Germania harder as the new (dumy) "owner(s)" would not be from Russia or any other sanctioned state.
what legal action? Gazprom is not under any sanctions…
https://www-sueddeutsche-de.translate.goog/wirtschaft/erdgas...
It's also worth pointing out that there's been some evidence suggesting that, in the weeks and months leading up to the Russian invasion of the Ukraine, the "fill level" of the Russian-owned storage infrastructure within Germany was decreased, which would both be a way for Russia to attempt to leverage gas delivery against sanctions (in other words, blackmail), as well as yet another strong indication that the invasion was a deliberate Russian aggression planned well in advance.
If you're interested in more and understand German, I'd recommend the most recent episode of Lage der Nation, which talks about this at much more length: https://lagedernation.org/podcast/ldn284-ukraine-krieg-6-woc...
Its a political push and pull about who defaults on the existing contracts on gas import, seeing as Russia wants to be payed in ruble now, while Germany would prefer the payments to be stuck on a EU bank account as a form of reparation payments to the Ukraine. To prevent this outcome, Russia in effect might be liquidating the Gazprom Germania. With Gazprom Germania being the ones doing the actual importing. Over the last weekend there was a change in ownership of the Gazprom Germania to new unknown owners. So they might be already bankrupt. To prevent this, Germany is now seizing control of Gazprom Germania and might be on the hook to prevent an insolvency to not default on the contracts with Russia.
In short, the German government fucked up majorly.
edit: Check "throwhow"s post in this thread for a longer summary
He told the world up until February 23rd that everybody was dumb to believe that Russia would invade. I would not believe anything Fefe says on his blog, ever. He dips into conspiracy theories time and time again and when he gets proven wrong he just says that it was meant to be "media competency training".
Is that illegal?
I wonder about rule of law. We talk about this as sacrosanct here in the "West".
It is funny that when push comes to shove (in my perception at least), we're quick to break the rules to get the outcome we want.
When say a 3rd world country does something like this in response to a "Western" multinational's actions (perhaps a controversial example would be Mossadegh nationalizing APOC), then the response we take it is pretty severe (often involving significant amounts of violence) and we portray ourselves as being "morally" rightous, often with the very same "rule of law" claim.
Just something I like to think about in this scenario. Not trying to push any agenda.
https://www.reuters.com/business/energy/germany-approves-law...
> In Germany, a third of gas storage belongs to Russia's Gazprom (GAZP.MM), whose facilities in Germany had lower levels of stored gas this winter than those operated by other companies.
In my opinion, Gazprom did so (last year) in order to strategically weaken Germany's position and strenghten Russia's position, by reducing the amount of gas that is stored in Germany.
If you really look for "sanctions" you'll see that there are some, but not really touching the energy sector since there is so far no viable alternative.
And other than losing money, what would be the consequences of Gazprom pulling out of Germany completely? I’m guessing that Russia just doesn’t have enough economic leverage to do so.
Russia decided to use the gas as a weapon and germany decided to use its financial structure (I.e. its ties to many other countries) as a weapon back. In the medium and long term I think Russia needs germany more than the other way around.
More broadly: your business is in trouble if it only has a small number of customers or suppliers. That diversity provides resilience. In geopolitical terms, it’s it’s fine to have only overseas suppliers (and even good from a comparative advantage perspective) as long as they aren’t correlated. Germany’s bet (wrong) was that making an oversized commitment on Russia would provide a welcome guarantee to reduce the chance of isolationism, That didn’t work. But Russia made the opposite bet: that the commitment meant they had a stranglehold on Germany. But Germany is too rich and has too many friends for that to be any more than a transient threat.
I think we live in a dangerously intertwined world, and a bit of email redundancy in each country would be quite important.
The biggest problem will be the quality of supplies, as sanctions will damage the supply chain.
What quality? Even in Austria, at some really busy McD's I've been to like the train station or airport, their finished burgers looked nothing like the ones in the menu.
Often they had components like the cheese, lettuce and sauces missing and I got just a dry paddy between two barren pieces of bread as a burger lol. It was uneatable so I had to throw it away and buy a sandwich from the SPAR next door which has much better quality.
The McD's I've had in NY weren't much better either.
OTOH, McCafe's in Europe (the separate establishment, not to be confused with the coffee you can get from McD's) are amazing, coffee is always great, on par with even fancy hipster cafes and their pastry and cakes aren't bad either.
Like buns and meat and so could be sourced locally. But spice (mixtures) may have been imported and the mixture recipe is locally unknown.
Deglobalization means you can't travel to Russia ;)
(Not sure if Americans can visit the place. There are downsides to deglobalization too...)
In case it refers to McDonald's: They already did. https://www.mashed.com/202684/the-real-reason-mcdonalds-got-...
Nuclear canceled by the Green Party and pre-March went all in on Russian oil and gas.
Who has been in power for the last 20 years exactly that could have built renewable power instead of quadrupling down on Russian gas? It wasn't the Green party.
To some extent you can't even substitute with gas from other sources because of lack of (connections to) LNG terminals.
Top men:
.. after Fukushima. Trading one tail risk for another.
(Germany has oddly lagged in deploying renewables, though. Possibly due to lack of offshore sites, meaning that wind farms have to be deployed against the efforts of NIMBYs)
We use LPG gas (from a tank buried at the bottom of the garden) feeding a gas boiler to heat our house.
I'm all for energy independence, and would love to switch to a more environmentally-friendly energy source, but I'm deeply concerned about how much this will cost me, and even if I did have the money, based on reports in local media, getting a heating engineer in would take many months.
Half a continent wants to switch energy supply "now" and the world was already suffering a serious supply chain crisis. Changing quickly may simply not be possible, never mind affordable.
The energy sector get almost as much subsidies as the total funding of the Germany military, 1.5% vs 2% of BNP.
It would be interesting to know how much more tax money is needed for an independent and environmentally friendly energy grid if they just continue as they done in the past.
Plenty of LNG ships and suppliers. Cheap gas is not worth an immense cost of human life. I think this timetable could be moved forward far quicker.
That said, sometimes you do need to make tough geo-political decisions, where every option has a horrible cost. While the primary blame falls on the aggressor nation, it doesn't make those decisions easier.
this action doesn't make much sense then, does it?
The structure is rather complicated:
Afaik it works (or used to) this way:
There is Gaszprom (the Mother), Gazprom Export, Gazprom Germania and a bunch of distributors.
Gazprom sells to Gazprom Export which sells to Gazprom Germania which sells to its distributors.
This helps to evade taxes and allows for a bunch of nice management jobs to be distributed to German/Russian politicians.
The distributors pay the gas in Euro to Gazprom Germania which collects the money and sends it via Belgium to Gazprom Export.
With the Sanctions this would mean that that Gazprom Export could convert Euro to Rubles, so the Money in Belgium has been frozen.
To circumvent this Gazprom sold (or tried to) Gazprom Germania to some offshore entities out of the sanctions reach.
To hinder Gazprom to do this the German goverment tried to seize control but it might be already too late and they ended up with an empty shell.
> Germany's economy minister announced the seizure in a statement on Monday. The move came after the ministry of economic affairs learned that Gazprom Germania had been acquired by JSC Palmary and Gazprom export business services LLC — but it wasn't clear who the owners behind the two companies were, per the statement.
> Germany's economy ministry justified the takeover by saying it had not granted permission for the Gazprom Germania acquisition. Permission is required, the ministry said, if the investors are not from the European Union and "critical infrastructure" is involved.
GAZPROM mother sells gas to the Russian GAZPROM EXPORT OOO (the Russian version of a GmbH) in Petersburg. This sells the gas to GAZPROM Germania in Berlin. This in turn sells the gas to a large number of smaller subsidiaries with their various customers. So far, this strong division has served to minimize risks and taxes.
Customers pay the gas to the subsidiaries of GAZPROM Germania in EUR/USD. These are the much-cited “supply contracts”. GAZPROM Germania aggregates these payments and transfers them via Luxembourg (GAZPROM Bank) to the Russian GAZPROM EXPORT.
Therefore, only GAZPROM Germania (for Germany) is affected by the conversion of payments to GAZPROM EXPORT from EUR/USD to rubles. After all, end consumers in Germany do not buy from GAZPROM AG in SPB or from GAZPROM EXPORT in SPB, but from the subsidiaries of GAZPROM Germania. The new legal situation in the RF will not change anything for these end users with their EUR/USD contracts.
Instead of transferring the EUR/USD to Luxembourg, where these funds can be "frozen" at any time, GAZPROM Germania is now transferring the aggregated payments from its subsidiaries to Moscow, where they are forcibly converted and effectively revalue the ruble. To a certain extent, these funds are thus withdrawn from the EU's options for sanctions. And Habeck and Co. can (almost) do nothing about it.
But the west doesn't want that. The idea of the western values is that GAZPROM Germania receives payments from the subsidiaries, but cannot pass these funds on. At the given moment GAZPROM Germania can then be confiscated as part of a further level of sanctions together with its considerable account balances. The RF would then have supplied gas without receiving any payment. The moral justification for such an expropriation would then be “reparations to Ukraine”. The USA in particular has experience in this. Private German companies were selectively expropriated after 1918 in order to "pay" for war damage by the German Reich.
What is the counter-strategy of the RF?
GAZPROM (mother) instructs GAZPROM EXPORT to liquidate GAZPROM Germania. This eliminates the commercially necessary intermediate step for gas trading, the trading chain is interrupted and the supply comes to a standstill. Not because someone turned off the tap, but because the importer is "bankrupt". However, since this would be a quasi-hostile act by the RF (specifically planned insolvency of a strategic utility company), they do it more skilfully: GAZPROM Germania is sold. To shady offshore companies whose owners nobody knows and whose cash flows are as yet unknown. And these offshore companies first withdraw the capital from Luxembourg, leaving behind a GAZPROM Germania as an empty shell, which is then sent into insolvency.
Habeck wants to forestall this scenario. The BMWi places GAZPROM Germania under receivership in order to prevent GAZPROM Germania's assets from flowing out to the new owners. And to prevent GAZPROM Germania from transferring the capital collected from the subsidiaries to Moscow for compulsory exchange.
Only GAZPROM EXPORT could now stop selling to GAZPROM Germania if GAZPROM Germany does not pay in rubles.
The only question now is how quick the "new owners" were over the weekend. Because GAZPROM Germania was supposedly sold on April 1, 2022. So now, four days later, it is unclear whether GAZPROM Germania is already insolvent. If so, then Habeck and Co. would have a problem. On the one hand, they would have to save the company with significant financial contributions, if necessary, and on the other hand, they would then have the buck in their hands. Because if you now instruct the management of GAZPROM Germania not to bill in RUB, as requested by GAZPROM EXPORT, then you are breaking the contracts, not RF. After all, GAZPROM Germania and GAZPROM EXPORT can specify any currency for internal settlement, and these are in rubles for GAZPROM EXPORT by law.
"Germany's economy minister announced the seizure in a statement on Monday. The move came after the ministry of economic affairs learned that Gazprom Germania had been acquired by JSC Palmary and Gazprom export business services LLC — but it wasn't clear who the owners behind the two companies were, per the statement."
I’m not sure what the levels are, seems like they’d be at a higher level since the flows could stop at literally any time since they refused Putin’s decree to pay in rubles.
I know it would be probably very hard for businesses dependent on LNG but we need to move from russian gas fast, not have 10 year plan that will take 30 in reality.
Every euro/USD paid will be mostly siphoned to re-building dictator's army. As much as they fucked up and still are fucking up now in Ukraine, next russian invasion may be much better executed. Let's not pay with our money for it, since his ultimate ambitions cover as much Europe as he will be allowed to grab and subjugate.
The Arab monarchies largely keep their messes in their own backyards. When there has been leakage, it has been limited. Russia rolling tanks into Europe is so harebrained it creates a new category of security risk we haven’t had close to home in a while: that of a madman.
At the same time, gas is a relatively enviromentally safe, when compared to others, and since the relations to Russia were mostly friendly, the slight problems in the regime were ignored.
Now germany is reliant on them, and that was a mistake they are realizing. But if germany stops accepting gas today, the germans will freeze in the winter when the gas runs out, so its a complicated situation.
The much larger problem is industrial manufacturing, in clusters like Ludwigshafen, where you have companies like BASF and Benckiser that rely on Russian gas for their refinery operations.
Fertilizers, chemicals, lubricants, etc.
You turn off Russian gas, you turn off the German industrial complex. Literally over night.
And that’s the reason why the German is so cagey about stopping the import of Russian gas. They can’t, because they don’t have an alternative.
And yet there are still people, in this very thread, that say that Merkel was always against German dependence on Russian gas but could not do anything about it. For 16 years!
>This awkward situation is all her doing, but still nobody will mention her name.
There is more "evidence" that Merkel is a long-term Russian intelligence asset, recruited from her youth in East Germany,[1] than that of Trump being the same. One guess on which claim is incessantly repeated by the bien-pensants of the chattering classes.
[1] Something else never talked about is how her parents moved from West to East Germany when she was a baby
1: https://verfassungsblog.de/illiberal-democracy-beyond-hungar...
It goes well beyond politics, as you can see.
I'm from as Eastern Europe as it gets (European side of Istanbul) and people seem to like me here. Why do you think that they dislike East Europeans?
I mean, Germans don't seem to like the current government of the country where I'm from, but for good reasons and I certainly share their dislike!
Whereas if we do not receive gas anymore, it would wreck our own economies, which would lead to massive unemployment, social unrest and maybe going to the political extremes in the long run.
It would basically be European suicide. We need to be strong to help Ukraine.
That being said, the day we can stop paying for Russian gas is the day we will truly be free. Germany's liberatarian finance minster called renewables "freedom energy" and that could not be truer IMO.
It's news to me that we strongly dislike Eastern Europeans?!
Some folks definitely do, especially in logistics or people who live close to the border, mostly due to economic frustration regarding lost jobs and some amount of crime coming from Eastern Europe but Germany as a whole doesn't dislike Eastern Europe...
Everything of value of this subsidiary has (pipelines, stored gas, etc), is physically in Germany and already subject to German law. The stored gas wasn’t going anywhere without the German regulator’s permission and the regulator can always force Gazprom Germania to sell German stored gas to Germans.
Nor does seizing this magically solve the problem of lack of gas. The Germans either abide by Russian rules for gas, or pipelines coming in from Russia remain empty.
This was a boneheaded move. The Russians can now seize a comparable German asset in Russia to recompense Gazprom; say a VW plant, a real asset that can continue to produce real things while the Germans are left with old laptops, empty pipes, a salt cavern and unheated offices in Berlin.
If they (the Russians) had tried to vent Germany’s gas reserves (which wont happen because the employees are German) to kneecap them (the Germans), then you would have seen the German regulator do something.
