_ Yuri Kofner, Economist, MIWI Institute. First published in the “Freilich” journal. Munich – Graz, September 30, 2023.
“The single greatest American fear […] is the amalgamation of the European peninsula’s technology with Russia’s natural resources. That would create a power that could challenge American primacy.”
_ George Friedman, Stratfor. Washington D.C., 2014.[1]
In a recent commercial, U.S. neocons openly celebrate the war in Ukraine as a lucrative proxy war.[2] The fact is: Besides the two direct warring parties, Germany bears the greatest damage from this conflict, while the U.S. is the biggest war profiteer. It is thus in Germany’s national nterest to improve relations with Russia again.
At nearly 85 billion euros, European humanitarian, financial and military aid to Ukraine is 15 billion euros (21 percent) higher than that of the United States, according to a regularly updated report by the Kiel Institute for the World Economy.[3]
Germany is the country paying the most for and because of the war, with nearly 70 billion euros. Bilateral aid amounts to 20.9 billion euros, of which 17.1 billion (four-fifths!) are arms deliveries. Another 35.1 billion euros are hidden in German guarantees for EU aid to Ukraine. And social benefits for the more than 1.1 million Ukrainian refugees who have come to Germany since the start of the war have cost the German taxpayer another 13.1 billion euros.
Paymaster for the war
While Germany sends its remaining weapons systems to Ukraine, it buys new ones from the U.S. arms industry: between 2021 and 2022, the latter almost doubled its exports to Germany, according to SIPRI.[4] A lucrative business model.
The traffic light government is spending taxpayers’ money on the war in Ukraine, while its own population is lacking at every turn. On the scale: 70 billion euros is as much as federal spending on research and education, health, family, the economy and housing combined. Or to put it another way: with 70 billion euros, the state could pay all kindergarten contributions for ten years, pay the co-payment for all those in need of care for five years, or pay three years’ salaries for half a million border police officers.
A shot in the own knee
In addition to direct payments for maintaining the war in Ukraine and providing for Ukrainian refugees, the German economy bears the highest costs from its participation in Western sanctions and the energy embargo against Russia. Even before the outbreak of the hot war in Ukraine, Western sanctions have cost German companies 5.4 billion euros (0.16 percent of GDP) annually since 2014, according to a study by the Ifo Institute.[5] The U.S. Treasury’s extraterritorial sanctions have hurt European companies in particular: 83 percent of penalties have been imposed on them over the past decade; only three percent on American companies.[6]
Since February 2022, Brussels and Washington have significantly tightened their multilateral sanctions regime, with Germany suffering most from the export bans and energy embargo. Mainly due to the EU export ban on dual-use technologies, German goods exports to Russia fell by twelve billion euros (45 percent) in 2022 compared with 2021, and services exports by 30 percent, Bundesbank data show.[7]
Negative effects due to energy embargo
Ten times more drastic were the negative effects of the energy embargo. In spring 2022, the EU imposed a ban on Russian coal and oil.[8] In response to European sanctions, especially those against financial transactions, Russia had to reduce its gas supplies via the Yamal and Nord Stream 1 pipelines in the summer.
In September 2022, the U.S. allegedly committed an attack on Germany’s strategic infrastructure by blowing up the Nord Stream 1 and 2 subsea strings. This accusation is supported by statements of U.S. President Joe Biden,[9] investigative journalist Seymour Hersh,[10] former CIA analyst Raymond McGovern,[11] former Polish Defense and Foreign Minister Radosław Tomasz,[12] and many other credible sources. The worst part is that the traffic light government has not lifted a finger to solve this terrorist attack for over a year.
As a result, Germany was forced to switch from relatively cheap Russian pipeline gas (averaging 12 to 21 euros per MWh in the 2010s) to much more expensive American liquefied gas, the price of which averaged 140 euros per MWh in Europe between February and December 2022.[13] Even before the war, LPG was about 50 percent more expensive than natural gas, according to OMV. [14]
Actual target not achieved so far
IW Cologne puts Germany’s welfare loss from the energy crisis at around 65 billion euros in 2022,[15] while DIHK estimates the combined cost of export bans and higher energy costs at around 91.4 billion euros per year.[16] This corresponds to an impoverishment of around 1,500 to 2,200 euros per household per year. The U.S. has made a killing off the suffering of German consumers and producers. Between 2021 and 2022, U.S. LNG exports to Germany increased 17-fold (!). Across Europe, U.S. liquefied natural gas exporters were able to earn an additional 23.6 billion euros.[17]
While the sanctions and energy embargo have significantly harmed the Germans and benefited the U.S. economy, they have not yet achieved their purported goal of stopping the Russian war effort. In fact, the opposite is likely to be true. According to the Russian Ministry of Finance, government revenues from the oil and gas sector increased by 29 billion euros in 2022 compared to 2021, or by more than a quarter.[18]
In 2023, the Russian and U.S. economies will grow by two percent, while Germany’s GDP will shrink by 0.5 percent.[19] This is another sign of how the transatlantic sanctions regime leaves the Russians cold, hurts the Germans, and benefits the Americans, recalling Lord Hastings Ismay’s famous quote about NATO’s role: “Keeping the Russians out, the Americans in, and the Germans down.”[20]
No future AfD voters
In addition to German citizens, ethnic Germans from the post-Soviet region in particular are suffering from Berlin’s current stance. Not only is the German government acting contrary to international understanding by reducing the issuance of Schengen visas from Russia to Germany by over 37 percent in 2022 compared to 2021[21] and even confiscating the private cars of harmless Russian tourists.[22]
Since the spring of 2022, the traffic lights have also been doing their utmost to prevent thousands of so-called Russian Germans, i.e. ethnic German repatriates, from returning to Germany. According to the BVA, the corresponding applications in the first half of 2023 have almost halved compared to the first half of 2021, and approvals have fallen by almost 42 percent.[23]
Almost four-fifths of these ethnic German immigrants have a university or technical college degree, and 92 percent have “good” to “very good” German language skills.[24] They are Germans who want to live, work and pay taxes in Germany, but are turned away by the SPD Ministry of the Interior – despite the much-lamented shortage of skilled workers.
Against the backdrop of illegal mass immigration and left-wing racism hysteria, the paragraph pretext used to reject these ethnic German immigrants is particularly perfidious: allegedly, they cannot sufficiently prove their “belonging to the German nationality” (!). The real reason for the rejections, however, is much more Machiavellian: the politicians of the traffic light parties have realized that the predominantly conservative Russian-Germans, if they receive the German passport, will probably not vote for them but for the AfD, unlike the soon to be naturalized Arabs and Africans.
A dream that can only be whispered
Fact is: Apart from the warring parties directly involved, the Germans are paying the most for and through the war in Ukraine: with debts, foreign remittances, inflation, deindustrialization and denied visas. While the USA profits.
But things could have turned out quite differently. Otto von Bismarck’s vision of a strategic alliance between Germany and Russia turned into the dream of a “common economic space from Lisbon to Vladivostok”. Model calculations by the ifo Institute show that realizing this dream would have increased real income in Germany by 0.3 percent (11.6 billion euros). The automotive and construction sectors in particular would benefit from such a continental free trade zone.[25] In the long run, the combination of German technology and capital with Russian resources, space and labour could have opened up enormous prospects for prosperity, conservative values and geopolitical independence.
This is an unpopular view at present, but we must return to this dream. The first steps must be support for peace negotiations, a halt to German arms deliveries to Ukraine, the lifting of all sanctions against Russia, the resumption of cheap Russian gas supplies, reciprocal visa facilitation, and the unimpeded entry of all German ethnic German immigrants.
Sources
[1] Friedman G. (2014). Borderlands. Stratfor. URL: https://worldview.stratfor.com/article/geopolitical-journey-part-2-borderlands
[2] Kisoudis D. (2023). Republicans for Ukraine Werbespot. URL: https://twitter.com/kisoudis/status/1706196755732156715
[3] IfW Kiel (2023). Ukraine Support Tracker. URL: https://www.ifw-kiel.de/topics/war-against-ukraine/ukraine-support-tracker/
[4] SIPRI (2023). Armstrade Data. URL: https://armstrade.sipri.org/armstrade/page/values.php
[5] Larch M., Yotov V. (2020). The Economic Costs of the Existing Sanctions in Relation to Russia. ifo Institute. URL: https://www.ifo.de/en/project/2020-08-14/economic-costs-existing-sanctions-relation-russia
[6] Timofeev I. et al. (2020). Sanctions Against Russia: A Look Into 2020. RIAC. URL: https://russiancouncil.ru/en/activity/policybriefs/sanctions-against-russia-a-look-into-2020/
[7] Deutsche Bundesbank (2023). Außenhandel und Dienstleistungen der Bundesrepublik Deutschland mit dem Ausland. URL: https://www.bundesbank.de/de/statistiken/aussenwirtschaft/zahlungsbilanz/aussenhandel-und-dienstleistungen-der-bundesrepublik-deutschland-mit-dem-ausland-615572
[8] European Council (2023). Timeline – EU restrictive measures against Russia over Ukraine. URL: https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-against-russia-over-ukraine/history-restrictive-measures-against-russia-over-ukraine/
[9] Welt 24 (2022): Scholz in den USA: Dieser Satz von US-Präsident Joe Biden erinnert stark an Donald Trump. URL: https://www.youtube.com/watch?v=g9V4HNGRMwc
[10] Hersh S. (2023). How America Took Out The Nord Stream Pipeline. URL: https://seymourhersh.substack.com/p/how-america-took-out-the-nord-stream
[11] CGTN (2023). Former CIA analyst supports Seymour Hersh’s story on Nord Stream explosions. URL: https://www.youtube.com/watch?v=Tz9RbdgyW0w
[12] Tunk C. (2022). Gaspipeline-Lecks: Polens Ex-Verteidigungsminister macht USA verantwortlich. Berliner Zeitung. URL: https://www.berliner-zeitung.de/news/gaspipeline-lecks-polens-ex-verteidigungsminister-macht-usa-verantwortlich-li.271382
[13] Estimates by the author based on: World Gas Intelligence, World Bank (2023). Russisches Erdgas monatlicher Preis. URL: https://www.indexmundi.com/de/rohstoffpreise/?ware=russisches-erdgas&monate=180&wahrung=eur
[14] TASS (2018). Russian gas is 50% cheaper for Europe than US LNG — OMV CEO. URL: https://tass.com/economy/1015850
[15] Koenen M., Obst T. (2023). Energiekrise führt zu spürbaren Wohlstandseinbußen in Deutschland. IW Köln. URL: https://www.iwkoeln.de/studien/thomas-obst-energiekrise-fuehrt-zu-spuerbaren-wohlstandseinbussen-in-deutschland.html
[16] Reuters (2023). Ukraine war expected to cost Germany 160 billion euros by year-end. URL: https://www.reuters.com/world/europe/ukraine-war-expected-cost-germany-160-bln-euros-by-year-end-2023-02-19/
[17] ITC (2023). Trade Map. URL: https://www.trademap.org/Country_SelProductCountry_TS.aspx?nvpm=1%7c842%7c%7c%7c%7c2711%7c%7c%7c4%7c1%7c1%7c2%7c2%7c1%7c2%7c1%7c1%7c1
[18] Ministry of Finance of the Russian Federation (2023). Brief annual information on federal budget execution. URL: https://minfin.gov.ru/en/document?id_4=119255-brief_annual_information_on_federal_budget_execution_bln._rub.
[19] IfW Kiel (2023). Konjunktur. URL: https://www.ifw-kiel.de/de/themendossiers/konjunktur/#m-tab-0-welt
[20] NATO (2023). NATO Leaders. Lord Ismay. URL: https://www.nato.int/cps/uk/natohq/declassified_137930.htm
[21] Auswärtiges Amt (2023). Statistik zu erteilten Visa. URL: https://www.auswaertiges-amt.de/de/service/visa-und-aufenthalt/-/2231558
[22] Hermann C. (2023). Zoll beschlagnahmt Autos russischer Urlauber. NTV. URL: https://www.n-tv.de/wirtschaft/Zoll-beschlagnahmt-Autos-russischer-Urlauber-article24253423.html
[23] BVA (2023). Aktuelle Monatsstatistik 2023. URL: https://www.bva.bund.de/DE/Services/Buerger/Migration-Integration/Spaetaussiedler/Statistik/Monatsstatistik/Startseite_Monat_text.html
[24] Friedrich N., Graf J. (2022). Integration gelungen? Lebenswelten und gesellschaftliche Teilhabe von
(Spät)Aussiedlerinnen und (Spät)Aussiedlern. SVR, BAMF. URL: https://www.bamf.de/SharedDocs/Anlagen/DE/Forschung/svr-studie-spaetaussiedler-innen.pdf?__blob=publicationFile&v=10
[25] Felbermayr G., Steininger M. (2016). Free Trade from Lisbon to Vladivostok. Bertelsmann Stiftung, ifo Institut. URL: https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/NW_Focus_Paper_EU_Eurasia.pdf