How important is the raw materials business for Russian President Vladimir Putin? The dimension of the daily transfers makes this clear. EU countries are currently paying around 400 million dollars (370 million euros) to Russia for gas supplies alone. The Kremlin’s reliance on it shows that gas continues to flow even through the pipelines in hard-fought Ukraine. In Germany, however, there is an increasingly fierce debate as to whether the warmongers from Moscow should really continue to receive such income unchecked.
A new study fuels these discussions even further. According to calculations by the environmental organization Greenpeace, Germany will probably have to transfer record sums to Russia for oil and gas this year. According to the study, Germany’s spending on Russian oil threatens to increase from 11.4 billion euros in the previous year to 14.3 billion euros in 2022. The import bill for gas could even double, from 8.8 last year to 17.6 billion euros.
Germany would thus pay a total of almost 32 billion euros to Russia this year. That would correspond to 57 percent of the Russian military budget for 2020. Germany is the world’s largest customer for gas and number two for oil. For the authors of the study, one thing is clear: “The federal government’s talk about possible import bans without concrete action is highly counterproductive,” says Greenpeace economist Mauricio Vargas. “It’s driving up gas prices and flushing record proceeds into Putin’s war chest. This war financing must be put a stop to.”
With raw material prices rising, Russia is also benefiting from the uncertainties that the country has created with its own attack on Ukraine. The fear of delivery failures and supply gaps is great and is causing turmoil on the commodity markets worldwide. At the very beginning of the Ukraine war, panic prevailed on the world market. The gas price on the spot market has meanwhile risen to more than 300 euros per megawatt hour (MWh) and was thus more than ten times as high as a year ago. At around 100 euros per megawatt hour, gas is still around four times as expensive as it was a year ago.
Greenpeace used existing figures for the study and calculated the further course of prices using indices. The environmental organization comes to a clear conclusion: “From a peace policy perspective, an immediate ban on imports of Russian coal, oil and gas would definitely be necessary,” the paper says. However, the NGO is not clearly in favor of this. Because the economic effects of an import stop, especially of gas, are unclear due to Germany’s high level of dependence. In the case of gas, it is only possible to a limited extent to switch to other providers.
The energy business finances about a third of Russia’s state budget
However, the Greenpeace experts are calling for alternative measures in the event of an embargo waiver. “If the federal government shies away from a gas embargo, it must immediately impose alternative sanctions, such as a peace levy, that curb the flow of money to Russia.” Greenpeace recommends siphoning off and retaining parts of Russia’s export earnings. The income could alleviate the consequences of the war, for example as a reconstruction fund for Ukraine, or be used to expand renewable energies. “As energy money for citizens, the income could cushion the high costs of energy,” the paper continues.
The entire Russian economy is heavily dependent on raw material revenues. About a third of the Russian state budget is financed by income from the energy business. More than two thirds of imports are financed by the export of fossil fuels.
Leading economic researchers have also recently spoken out in favor of taking a tougher stance on Russia and its energy and raw materials sector. It is important to stop the immense payments to Russia, recently demanded the economist Veronika Grimm. Finally, revenues from the raw materials business dampened the impact of the sanctions. Other leading economists, on the other hand, clearly warn of an embargo. Michael Hüther, director of the employer-oriented Institute of German Economics (IW), fears that the number of unemployed will increase by a million if gas supplies from Russia end.