Germany faces a new kind of cold war this winter

Published in Newsroom.co.nz (Wellington), 6 September 2022

I have a good relationship with my parents. However, when the subject of visiting them for Christmas came up, their answer was: “You’d better not come!”

In every respect, Germany is expecting a miserable winter. And that is why my parents meant well and advised me to take my family on holiday elsewhere. Never mind that it would have been nice to have a family Christmas again after the Covid years when travel was not possible.

The underlying reason for my parents’ advice has a name: Vladimir Putin.

Russia has been slowing down energy supplies to the West since they invaded Ukraine. Last week, it shut down Nord Stream 1 – the most important pipeline for Germany.

In Putin’s hands, gas is a psychological weapon. There has been a seemingly erratic reduction in the quantities Russia has supplied to Europe, ostensibly because of ‘technical difficulties’. Moscow sows maximum discord and anxiety this way.

There are many Germans who do not understand that it is Russia stopping the gas deliveries. Quite a few believe the West has switched off its own gas supply as part of its economic sanctions regime against Russia.

Last week, for example, Wolfgang Kubicki, a leading politician of the liberal FDP party, recommended connecting the new gas pipeline Nord Stream 2 if Nord Stream 1 remains unavailable because of alleged technical problems.

That is a marvellous idea, but it is completely unrealistic. Neither technical difficulties nor economic sanctions are to blame for the lack of gas from Russia. The real reason is that Putin is deliberately making gas scarce. It is part of his war against Europe. Rather than delivering gas to the West, he prefers to flare it at home – literally.

Gas shortages are leading to rising heating costs and electricity prices. Both are weakening the German economy and could lead to a severe recession in winter.

But Putin’s gas weapon is doing more damage than just the immediate economic pain. The political consequences are likely to be even more serious.

That brings me back to my parents. Their municipal utility in my hometown of Essen has just notified them of next year’s gas prices. They will increase by 127% as of October 1 – more than double.

A household with an average gas consumption of 20,000kWh will pay €3,360 ($5,480) a year instead of €1,570 ($2,560).

In an interview with a local newspaper, the utility’s boss said this was not the end of the line. As of October 1, a new gas storage levy will add to price increases. Its amount is not yet known but there is every possibility gas may soon be even more expensive.

But it is not just gas. Electricity prices in Germany are also rising rapidly.

Last year, an average household using 5,000kWh of electricity paid an average of €0.32 ($0.52) per kWh (including taxes and fees).

Those contracting with an energy supplier can now expect much higher prices – about €0.82 ($1.34) per kWh.

The additional burden from gas and electricity alone will therefore add another €350 ($570) a month to the energy costs of an average household.

This may be painful but manageable for people who earn a good income or have a solid pension. But prices like these will be out of reach for many Germans, right through the middle class, especially when rising interest rates and wider inflation have increased the cost of living across the board.

That is precisely Putin’s calculation. He is not only targeting macroeconomic damage with his gas weapon. No, he is specifically aiming to create social and political conflicts. When energy prices become astronomical, politics becomes more fractious and society more polarised. That is just what Putin wants.

This weekend, Prague offered a foretaste of the conflicts to come to Europe. A rally of 70,000 people took place on Wenceslas Square in the Czech Republic capital. The crowd was simultaneously protesting against inflation, Russian sanctions, and the last few Covid measures.

Germany may experience something similar in the coming months, perhaps on a larger scale.

A combination of severe economic hardship and social unrest because of high energy prices can have profound political and social implications. Blackouts would further aggravate the situation.

In contrast to previous crises, the current crisis affects many people, not just a few industries. The Government will have a hard time cushioning the crisis financially. The sums involved are too large.

On Sunday, the Federal Government announced another support package for households and industry to deal with the energy crisis. It is the third such scheme, and this one is worth €65b ($106b). No one, however, suspects it will stem the crisis.

The Ukraine war has triggered an almighty political, social and economic catastrophe for Germany. It is not on the scale of a hot war, but the maximum havoc an enemy could inflict without military force.

Still, Germany must blame itself for the trouble it is in. It made three strategic mistakes, which left it vulnerable.

First, it made itself dependent on Russian energy supplies in the naive belief they would never be used as a weapon. Never mind that Germany’s neighbours to the East – Poland, Ukraine and the Baltic States – had repeatedly warned the Germans of this possibility.

Second, Germany decommissioned its base-load generation capacity. The nuclear phase-out was rushed after the Fukushima disaster in 2011. Coal-fired power stations were mothballed as part of the initiatives to reduce carbon emissions.

Third, the Germans were slow to install any facilities that would have given them options in case of Russian supply reductions. Fracking remains banned, and terminals to import liquefied natural gas are only now being installed in the face of this crisis.

The result is the prospect of a winter that could be Germany’s winter of discontent.

No wonder my parents thought I should stay away from the German cold – both the physical and metaphorical cold.

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