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Germany fears recession if heavy reliance on Russian gas is reduced too quickly

Germany is facing a moral and economic dilemma. How can it get rid of Russian gas without affecting its economy?

Russia currently supplies 40% of Germany’s gas, heating homes, and powering large industrial sectors.

However, every day that Russia’s fossil fuels are flowing from the east, the West sends enormous amounts of money the opposite way, financing the war in Ukraine.

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For oil and gas, Europe pays Russia approximately PS700m per daily.

Germany paid nearly PS7.5bn since the start of World War II.

While most people agree that Russia must stop using its oil and gas, there is not much consensus about how quickly. This could prevent a Europe-wide embargo.

This is largely because Germany doesn’t want to harm its economy.

Network supplies 60m homes in Germany

To find out more, we visited Mallnow compressor station at the border with Poland’s eastern side. Much of the gas that is leaking through its pipes originates from Russia. It powers businesses and heats homes.

Nicola Regensburger, a plant spokesperson, said that it was a crucial supply. She said that the plant is “particularly important for Europe” because it is part a network that supplies 60 million homes in Germany and also pushes gas through western Europe.

Image Thomas Dreusicke of India-Dreusicke Plastics says that production will cease if Russian energy is stopped

Thomas Dreusicke, a plastic mouldings factory in India-Dreusicke outside Berlin, told me that he is concerned about a sudden interruption to the supply. Vladimir Putin could turn off the gas in Russia, as he did elsewhere in Poland or Bulgaria. This would lead to rationing and possibly his company’s collapse.

He said, “We don’t have heat problems but we have problems if energy is interrupted.” “We are dead. “We don’t produce anymore.”

He said that he would be happy to pay more for energy, as long as it doesn’t happen.

He stated that “We were established in 1929… We have survived many crises and there will be life afterwards Putin, 100%.”

Image India-Dreusicke employees are worried about the cost of living

Recession fears if Russian dependence is too low

However, his employees weren’t so sure. Many said they did not want the war in Ukraine to end, but were afraid of what even a controlled decrease in cheap Russian gas might bring.

Silke Reichardt, Quality Manager, stated that the whole cost of living has risen. It’s very distressing that food prices are rising, rents are increasing, and all travel costs are rising.

This is what Germany’s government focuses on. Germany fears that Russia’s heavy dependence on Russian gas will lead to a recession. However, it has stated that it can get rid of Russian gas by 2024.

Jennifer Morgan, Germany’s climate change ambassador, agreed. She stated that Germany is working as hard as it can to eliminate fossil fuels. “We are seeing this in the phase-out of coal, and you can see that oil is moving ahead and that gas is moving as fast and as efficiently as possible.

“But (we are) doing that in a balance way… to ensure that Germany remains stable and balanced.”

Image The Mallnow compressor station forms part of a network that supplies 60m German homes

“We are now dependent”

Critics of the government claim that this entire situation could have been avoided. Astrid Hamker is president of the Christian Democratic Union’s economic council. She said that Germany was the only industrialized country that simultaneously phased out both nuclear and coal power.

“We have just reduced the energy supply too much, and now we are dependent.”

Continue reading:

What effect will Russia’s decision not to supply gas to Poland or Bulgaria have on Europe?

Russia is accused of trying to blackmail European countries by cutting off gas

Some are even warning that even though Europe might agree to a Russian gas embargo it may not work.

Professor Cleumens Fuest is the head of the IFO Institute for Economic Research. He stated: “We must remind ourselves that the Russian Central Bank still holds $300bn worth of foreign reserves. A lot of this in the form gold in the cellar. So, these can be spent. This means that a short-term impact on war is very unlikely.”

The world’s fourth-largest economy seems to have no other options. Germany continues to be in dilemma as the war in Ukraine continues.


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