As Allahpundit pointed out earlier, the Russian ruble has rebounded despite US and European sanctions. That rebound is probably only a short term fix but ultimately the state of the Russian economy will depend on its sales of oil and gas. The US and UK have stopped buying Russian oil but other countries, particularly Germany, are in a different position.
Today, German Chancellor Olaf Scholz and UK Prime Minister Boris Johnson held a joint press conference in London where they discussed Germany’s efforts to wean itself off of Russian energy. Scholz said he hoped to stop buying Russian oil by the end of the year but when it came to gas he was a bit vague.
[Scholz] said: “We are actively working to get independent from the import of oil and we think that we will be able to make it during this year. And we are actively working to get independent from the necessity of importing gas from Russia. This is, as you may imagine, not that easy, because it needs infrastructure to be built.”
Johnson voiced sympathy over the German predicament. “This is not easy for any of us and I applaud the seismic decisions taken by Olaf’s government to move Germany away from Russian hydrocarbons. We cannot transform our respective energy systems overnight, but we also know that Putin’s war will not end overnight”.
However, he then added: “I think by the middle of 2024, as I recall, Germany’s going to stop using Russian gas, which is quite extraordinary.”
Asked if he agreed with Johnson’s timetable, Scholz simply said: “We are optimistic that we will get rid of the need of importing gas from Russia very soon.”
It’s not clear what happened here. Maybe Scholz gave Johnson an optimistic estimate behind the scenes which Scholz wasn’t willing to commit to in public? Whatever the case, it sounds like two years from now is the very best case.
Over at the NY Times, Paul Krugman has a piece titled “How Germany Became Putin’s Enabler.” Krugman argues that there are estimates which suggest a much quicker reduction of the use of Russian gas is possible without doing drastic damage to Germany’s economy. (Yes, I’m quoting Krugman and not to mock him. I can’t believe it either.)
On the eve of the Ukraine war, 55 percent of German gas came from Russia.
There’s no question that quickly cutting off, or even greatly reducing, this gas flow would be painful. But multiple economic analyses — from the Brussels-based Bruegel Institute, the International Energy Agency and ECONtribute, a think tank sponsored by the Universities of Bonn and Cologne — have found that the effects of drastically reducing gas imports from Russia would be far from catastrophic to Germany.
As one member of the German Council of Economic Experts, which fills a role somewhat similar to that of the U.S. Council of Economic Advisers, put it, an embargo on Russian gas would be difficult but “feasible.”
The ECONtribute analysis offers a range of estimates, but their worst-case number is that an embargo on Russian gas would temporarily reduce Germany’s real G.D.P. by 2.1 percent.
Germany’s economy only grew by 2.7% last year so that kind of decline could be pretty significant for Germany and for Scholz. Is there really nothing more Germany can do? Well, they could reverse course on closing down those nuclear power plants they unwisely shuttered. But no, Scholz has ruled that out.
“We decided for reasons that I think are very good and right that we want to phase them out,” Scholz, who was finance minister and vice chancellor under Merkel, said Wednesday during government questions in the lower house of parliament in Berlin.
He dismissed a lawmaker’s appeal for the nuclear exit to be delayed as “not a good plan,” arguing that it would not reduce energy dependence on other countries as the fuel rods would also have to be procured from abroad.
Those reasons for phasing out the remaining plants may have made sense a year ago but the situation has changed. If the choice is between taking a significant but short term hit as a result of your own ill-considered energy policy or propping up a regime that has embraced the intentional murder of civilians including children…Shouldn’t Germany of all countries be pretty sensitive about this sort of thing?
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