Germany sticks with Putin for its oil and gas

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BERLIN — German Chancellor Olaf Scholz on Monday pushed back hard against calls from the U.S. and Ukraine for an EU ban on imports of Russian gas and oil as part of international sanctions on Moscow.

One of the darkest ironies of Russian President Vladimir Putin’s war in Ukraine is that Europe is helping fund the Kremlin’s war machine through energy payments. Despite repeated pledges to reduce dependence on Russia after the invasion of Crimea in 2014, the EU has failed to combat its hydrocarbon addiction. Dismissing fears that Putin was a serious threat, Germany was long the main proponent of the Nord Stream 2 pipeline pumping gas from Russian export monopoly Gazprom straight to Germany.

Although Berlin finally had to freeze the Nord Stream 2 project after the invasion of Ukraine, Scholz made clear that Europe’s biggest economy would not make any further energy sacrifices and would keep buying from Russia.

“Europe has deliberately exempted energy supplies from Russia from sanctions,” Scholz 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. It is therefore of essential importance for the provision of public services and the daily lives of our citizens,” he added.

The Ukrainian government, with the backing of a number of U.S. and European politicians, has argued that the West must take action and cut this core revenue stream for the Russian budget.

Glossing over Germany’s role in undermining EU diversification plans for years, Scholz said that his government and European partners have been “working hard for months” to develop alternatives to Russian energy supplies, but stressed that “this cannot be done overnight.”

“That is why it is a conscious decision on our part to continue the activities of business enterprises in the area of energy supply with Russia,” Scholz added.

The chancellor’s intervention followed comments by U.S. Secretary of State Antony Blinken, who said on Sunday that the United States and European Union are in “very active discussions” to ban imports of Russian oil. Japanese media reported that Tokyo has joined those discussions.

Ukrainian President Volodymyr Zelenskyy on Monday also called for “a boycott of Russian exports, in particular, the rejection of oil and oil products from Russia.”

“Someone would call it embargo, others can call it morality, when you reject giving money to a terrorist,” he added.

Addressing a potential ban on Russian energy, European Trade Commissioner Valdis Dombrovskis said: “Nothing should be off the table … We should do more, because this aggression unfortunately is not stopping so we should see a way — in a sense —to stop Putin’s ability to finance this war.” U.K. Prime Minister Boris Johnson has also said that an oil import ban should be “very much on the table.”

The problem is that it would be almost impossible for the EU to impose an import ban on Russian oil without support from Germany, the bloc’s kingpin.

Broad backing

Within Germany, support for Scholz seemed wide.

German Foreign Minister Annalena Baerbock, ironically from the Greens, is also in favor of keeping the hydrocarbons running.

“We are prepared, as I have repeatedly made clear, to pay a very very high economic price,” Baerbock told the “Anne Will” talkshow on Sunday. “But if tomorrow the lights go out in Germany, in Europe, that doesn’t mean that the tanks will stop. As I said, if that were the case, we would do that,” she said.

Michael Kellner, a parliamentary state secretary in the German economy ministry, argued on Monday that it is far easier for the U.S. to block oil imports than for Germany. He note Russian oil makes up 7 to 8 percent of U.S. imports, while about 30 percent of Germany’s imports come from Russia. This is a “very different starting position,” Kellner told public broadcaster ZDF.

Norbert Röttgen, a foreign policy-focused lawmaker from the center-right Christian Democratic Union (CDU) opposition, struck a rare note of dissent.

“Putin is trying to bring Ukraine to its knees by criminally bombing entire streets, residential areas and hospitals. We can not permit that to continue by financing his war through oil and gas. My appeal to the German government: Please stop our imports,” he said.

Germany’s reluctance to impose these sanctions now poses a big strategic problems for international attempts to tighten an economic noose around Putin. Even the fear of potential sanctions against Russia has placed an unexpectedly broad de facto embargo on Russia oil in past days. As of Friday, 70 percent of Russian oil is struggling to find buyers, according to JPMorgan.

This is a serious temporary headache for Putin. He can ultimately diversify to other markets such as China but will be liable to face heavy discounts on his crude in the meantime.

It remains to be seen whether the traders will cease their self-imposed embargo in the days ahead, reckoning that Germany will have seen off the immediate threat of a European crackdown against Russian crude.

Paola Tamma and America Hernandez contributed reporting