“Boomerang Effect” Hits Europe: “Militarization” of Russian Energy Pushes Germany into Recession

Precipitation of German GDP red numbers It seems increasingly irreversible. Russia’s high energy dependence condemns EU countries to a productive emergency with uncertain outcomes and, over time, a dark residue and devastating prospect. In fact, the official discourse of Brussels already speaks of a arming Energy by the Kremlin. The term was coined months ago to describe Western economic sanctions against Moscow for its invasion of Ukraine, aimed at isolating the country’s financial capacity and bankrupting its debt service, its companies and its business operations. Without, of course, the early success that those responsible for the foreign policy and economic diplomacy of the US and its European allies predicted after it entered the fray.

The community club’s complaint against Moscow began airing over the technical delay of Nord Stream 2 and the subsequent delay in resuming gas flows from Siberia, but worsened less than a week after the resumption due to new revelations. Delay of replacement of second pipeline turbine and new maintenance works by Gazprom. It’s what Mario Draghi, who recently retired as Italy’s top president, described as a “repeated lie” that Moscow “always offers” to justify “gas and oil cuts” and is driving the euro’s big three partners “down the drain”. which threatens a recessionary period” in Germany, France and Italy.

Gazprom appears to be carrying out an ultimatum launched a few weeks ago by the Russian oil company Lukoil, in which several of its executives are in favor of a 30% reduction in sales quotas for community partners, with the sole aim of triggering a second price cycle that is infecting the domestic market. Therefore, the criticism of the European chancelleries in Brussels and Moscow already speaks of the militarization of energy, the next step after its use as a tool of foreign action.

This rush to Europe’s Russian energy hibernation is, paradoxically, through a tool sponsored by Draghi himself, who was his colleague at the Federal Reserve last decade and now Treasury Secretary Janet Yellen: the dollarization of Russian payment transfers. in order to hedge their finances.

But in addition, Gazprom’s strategic maneuver indicates that powerful state-owned energy firms have joined Vladimir Putin’s doctrine. As always after the collapse of the former USSR. Berlin responded eloquently, “There are no technical reasons” justifying the gas company’s decision to paralyze Nord Stream 1.

Despite the fact that German Chancellor Olaf Scholz ordered the closure of version 2.0 of the pipeline at the start of the armed conflict in Ukraine, he set Germany’s official goal of 100% achievement. energy mix on renewable sources in 2035 and lead the Union’s measures to reduce Russia’s energy dependence.

Europe gets 40% of Russian gas and a third of its oil, and consumption from Germany exceeds these EU averages. It follows that Berlin continues to cut gas consumption by 15% amid a one-way collapse in flows from Moscow, which countries like Spain have resisted and achieved smaller cuts; Specifically, 7%.

Since then, attempts by the largest economies to ensure that the energy embargo does not damage their production systems have been futile. In the eastern capitals of the union, Putin’s idea of ​​paying for gas and crude oil from Europe in rubles was the beginning of the militarization of his energy and the strengthening of his foreign reserves. Russia’s ostracism has a very high price. Javier Blas, energy columnist Bloomberg and co-author The world is for sale Along with Jack Farchi, he estimates the bill at $200,000 million and “probably more,” the cost of saving Europeans from the worst winter due to domestic energy disruptions and undersupply.

The heating tariff in Germany, where annual electricity contracts recently exceeded €350 per MWh, could set a historic record after a 750% increase between 2010 – when the average bill was €41 per MWh – and 2020.

In a climate in which gas prices continue to rise in 2023, GDP projections are on a free-fall and point to the fall and winter months as the most favorable for falling into recession. Uniper, the biggest importer of Russian gas in the German market, has requested an emergency bailout of about 10,000 million euros from CEO Scholz after admitting it was close to stopping payments.

“The crucial issue for Europe is radical and permanent energy savings,” explained Kadri Simson, head of the European Commission branch last week, because “the impact on GDP. [de los cortes de suministro rusos] It will be significantly lower if we start saving and don’t wait for Moscow to force us to do it in the future.” The Estonian commissioner, not by chance, expressed “market disruptions” and the urgent need to “rationalize the distribution of gas quantities” in Europe. Two notes of German origin, as Gazprom proposes to cut Nord Stream 1 by 20% with its new “technical shutdown”, which makes it difficult for the union partners – more than others, but Germany first – to certify gas supplies. 80% of its capacity, the level at which winter could be overcome with minimal guarantees.

This rarefied atmosphere intensified the signs of contraction in Germany from an investment, economic-financial and, of course, geopolitical perspective. To the point that the International Monetary Fund recently singled out the country for the lowest growth among the G-7 countries, there is no prospect of a revival until 2023. The main reason for the multilateral organization is energy, the hunger of which accelerates the inflationary process. spiraling, impairing households’ purchasing and spending capacity and delaying business and industrial investment projects to address security measures that ensure gas and electricity supplies.

The IMF is not the only institution that seeks to predict red numbers in Germany. In the private sector, Credit Suisse and Deutsche Bank point to a recessionary path now and into next spring. Its training services insist that the first seismic movements are recorded in the month of July Profit Alerts In industrial corporations such as BASF or Thyssenkrupp AG, sales in multinational companies are declining. Electronic commerce Such as Zalando and new shipments without the supply of chips and electronic components that never reached the trade flows of 2019.

“One of Germany’s amazing decades has just ended,” says Andreas Schuerle of Decabank, before predicting a “tech recession in the winter.” In his view, and without precedent, “the European locomotive is the essential core of the present problem,” for in no other member of the Union is the supply cut so distinctly coincident as to hurt federal production, the shortage of workers to an alarming degree. Experienced and such extreme dependence on Russian gas.

Calculations by Bloomberg experts range from approx red numbers 0.5% and minimum advance, one tenth, from April to June. While employers such as the German Chamber of Commerce and Industry confirm that one in six industrial firms have completely or partially suspended their operations due to power outages, and that this proportion doubles among energy-intensive companies.

“German economic expectations are deteriorating rapidly,” warns Veronika Roharova of Credit Suisse International, for whom “activity indicators have entered the collapse zone and suggest the economy is already in contraction.” “After avoiding a recession after red numbers at the end of 2021 due to the Omicron option, the German economy stumbled and entered recession in July,” notes Paul Smith, economist at S&P Global.

Source: El Diario





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