Glenn Diesen: Germany’s developing economic crisis is a fascinating study in self harm
By sanctioning Russia, Germany has destroyed its business model. Now it faces an possible economic catastrophe
Germany just posted its first monthly trade deficit in three decades, and the head of the German Federation of Trade Unions has warned that key industries in the country may collapse permanently as a result of high energy prices and shortages. The golden era of the European Union’s economic locomotive has already come to an end.
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For three decades, the competitiveness of German industries was enhanced by the import of cheap Russian energy, while Europe’s largest country also became a key export market for German technologies and manufactured goods. Over the previous centuries, a key theme of European politics was that the productive power of Germany and the immense resources of Russia could create the main pillar of power on the European continent.
The relationship between Germany and Russia has subsequently always presented a dilemma: A partnership between the two giants would create a challenge to rival powers such as Britain and the US, while German-Russian conflicts have previously turned Central and Eastern Europe into what the British geographer James Fairgrieve referred to as the “crush zone.”
The current NATO-Russia proxy war in Ukraine demonstrates that this dilemma from the 19th and 20th centuries remains relevant. Although the 21st century presents a key difference in that the world is no longer Europe-centric.
Moscow’s objective for a Russian-German partnership was to construct an inclusive Greater Europe, although this initiative has now been replaced with a Russian-Chinese partnership to construct a Greater Eurasia. The export of Russian energy and other natural resources is being redirected to the East, while Russia increasingly imports vital technologies and industrial products from that source as well.
A case study of self-harm
The economic crisis in Germany is a fascinating case study of self-harm. After Moscow supported German reunification in the early 1990s, there was a lack of reciprocation as Bonn, then Berlin, abandoned the agreements with Moscow for a pan-European security architecture based on “sovereign equality” and “indivisible security.” Instead, Germany supported NATO expansionism to create a pan-European system, without the continent’s largest state.
As a result, the centuries-long historical rivalry for influence in Central and Eastern Europe was revived between Germany/NATO and Russia over where the new European dividing lines would be drawn. After Berlin supported the Orange Revolution in 2004 and the Kiev Maidan in 2014 to install pro-West/anti-Russian governments, Ukraine became a less reliable transit corridor for Russian energy. Yet, Germany undermined its own energy security by opposing several Russian initiatives to diversify transit routes. Berlin repeatedly threatened to cut reliance on Russian energy and thus incentivised Russia to search for export markets in the East.
The Minsk-2 agreement in February 2015 represented a compromise to resolve the conflict that followed the Western-backed coup in Ukraine the year before. Berlin negotiated the peace agreement, although it then played along with American efforts to sabotage or “renegotiate” the agreement for the next seven years. As NATO Secretary-General Jens Stoltenberg publicly admitted recently, the military bloc was using this time to prepare for conflict with Russia.
When Moscow responded by recognising the independence of Donbass and attacking Ukraine in February 2022, Germany cancelled the Nord Stream 2 pipeline, seized control of Gazprom’s subsidiaries on its territory, and announced sanctions on Russian energy. For years, there has been speculation that Russia would use the feared “energy weapon” by cutting energy supplies to Germany, although in the end there was no need to do so as Germany inflicted this economic pain on itself.