This piece at Axios by Rebecca Falconer puts a little meat on the bones of the claim that I have been making about Germany’s financing Russia’s war:
The European Union bought 71% of Russian fossil fuels via shipments and pipelines from Russia, the study found.
- Germany imported more than any other country, according to the report — spending an estimated 9.1 billion euros ($9.65 billion).
- Italy was the next biggest customer (6.9 billion euros), followed by China (6.7 billion euros), the Netherlands (5.6 billion euros), Turkey (4.1 billion euros) and France (3.8 billion euros).
The Germans, in particular, need to decide which is more important to them: ending global warming or ending the war in Ukraine.
I don’t see any way economic sanctions can be effective on Russia without being extended to its energy exports.
Ending European imports of Russian fuels means that the European economy goes into a deep depression until alternative supplies can be arranged. A year?
The sanctions hurt the EU very much worse than Russia. No one in Latin America, Africa, the MENA or Asia supports the sanctions other than our military allies, and not even all of them, Turkey for example. Turkey is boycotting the upcoming NATO war games.
Ominously, the Russia ruble is strengthening while the dollar and, especially the euro, are weakening.
Assuming this war does not go nuclear (the US’ choicE), the end of the American empire is at hnd.
Its easy to criticize the Germans — but I rather comment on what can be done at home.
All that gas isn’t all for German domestic consumption. Much of it powers German industry — in particular its exports to American and China. And Chinese imports from Germany often go into products that are exported to the US.
And considering the US has a $1.1 trillion trade deficit — that’s a lot of goods and the energy (a significant portion from Russia) that goes into making them.
And the solution is not reshoring all that industry; because that production still needs to be powered and the US doesn’t have that much excess capacity in share oil.
The solution is for Americans to cut their own consumption by $1.1 trillion dollars a year. Then the Germans / Chinese industry could back their own usage of Russian energy.
I’m waiting for the first US official to propose rationing US consumption…..
“Domestic consumption” doesn’t mean personal consumption. It includes business consumption. While I agree that the U. S. needs to reduce its oil consumption, at this point that won’t do much for our deficit and its impact on Russia’s oil exports would be mostly symbolic (assuming that there was follow-through on President Biden’s pledge to stop importing oil and gas from Russia).
Our energy imports are about 10% of our total imports and most of those are from Canada and Mexico. Our total oil consumption does not amount to $1.1 trillion/year. $1.1 trillion cut from total consumption would be a good trick. That’s about 5% of total GDP. That would be a major depression—worse than the “Great Recession” of 2008. If it were reduced proportionally 70% of that would be from personal consumption.
“The solution is for Americans to cut their own consumption by $1.1 trillion dollars a year.”
I didn’t know if this was tongue in cheek or not. We have a (round numbers) $20T economy. The last two “financial crises” of 2008/9 and 2020 measured roughly $.5T in GDP decline. These caused the massive QE programs the effects of which we are saddled today. We couldn’t stomach 2.5-3.0% declines in GDP then, and the associated consumer effects. Voluntarily reduce expenditures 5%? I don’t think so.
Although with this Administration:……..”I’m waiting for the first US official to propose rationing US consumption…” isn’t so far fetched.
Coming soon from the newly formed Ministry of Truth: “Less is more. Do your patriotic part.”
Bend the curve for just two weeks, you know………
Over the weekend it was reported that German dependence on Russian oil dropped from 35% last year to 12% now, and dependence on Russian gas from 55% to 35%. German has a plan to be free of Russian oil by the end of this year and now supports an oil embargo (which Hungary opposes), presumably because rationing can make-up the shortfall at this point. Germany expects to stop buying Russian gas in mid 2024.
An alternative approach to long-term decoupling is that this Russian oil expert claims that an immediate oil embargo for say thirty days would throttle Russian oil production and end the war. The technical side is that Russian oil distribution networks are Euro-centric, lacks pipelines to redirect to China, would be dependent on 30% of global stock of tankers working nonstop and reliant on non-Russian marine insurance and finance. Russia has little storage capacity, so oil wells would need to be closed and it has a large number of marginal oil wells that would be expensive to reopen. The game theory part is not as clear: announce the immediate or time-deferred embargo unless Russian armed forces return to their pre-2022 locations? Would Putin simply leave a neighboring control in control of NAZIs? Would he find a work-around? Escalate?
https://www.politico.com/news/magazine/2022/04/26/sanction-russian-oil-without-hurting-west-00027478
That’s a succinct statement of the point I’ve been trying to make. Conversely, the war is likely to continue until the Germans accomplish their “decoupling”, whether long or short term.
I dont think we can predict what Putin would do. If he believes his own BS about Nazis maybe he keeps fighting. If this is largely about economics and his winning the next election who knows what he does. Regardless, lets hope that Germany and the others go ahead and cut the dependence.
Steve
As a rough calculation based on the assumption that imported goods have a level of oil intensity that’s similar to oil intensity per GDP$.
The US has a GDP of $20 trillion. It consumed about 19 million barrels of oil / day in 2020.
The net trade deficit of $1.1 trillion would represent about 1 million barrels of oil / day. Russia exported about 4.5 million barrels of oil / day. So the trade deficit at a first approximation is 25% of total Russian exports if one accepts the idea Russian energy power European and Chinese industry that creates goods for export to the US.
That is not even accounting that American imports tend to be energy intensive but low margin goods like steel, rare earth metals, engine parts, etc.