Sanctions in the Ukraine war: Germany can afford an energy embargo

The question of whether Europe should respond to Vladimir Putin's war with an embargo on Russian deliveries of gas, oil and coal is causing controversial debates, not least in Germany.

With reference to German dependencies, the federal government is proving to be a brakeman.

But tightening the sanctions regime would be in Europe's interests.

This tightening should include a rapid embargo on oil and coal.

Should an embargo on gas not be implemented, an import duty would allow Russian profits from the supplies to be skimmed off.

Sanctions need a clear goal: They are intended to weaken the Russian economy and thus make it more difficult to continue the war.

Do energy sanctions help to achieve this goal?

In Berlin, people like to say that Putin doesn't need any foreign currency for the war because he pays his soldiers in rubles.

That doesn't go far enough, because a lack of foreign exchange contributes to a slump in the Russian economy, it makes it more difficult for Putin to distribute economic benefits to his favorites, and they make it difficult to import electronics that are also used in weapon systems.

"An embargo on Russian oil and gas is much more expensive for Putin than for Europe," writes economist Hanno Lustig.

“Therefore this is a 'no-brainer' for European politicians whose horizons stretch beyond the coming months.

It will shorten today's conflict and discourage Putin from starting new ones.”

The federal government made its decision too early

The effectiveness of a sanctions regime depends on its communication.

In this respect, the federal government is acting more than unhappily.

By early committing to the allegedly dire economic and societal costs of energy sanctions, it was unnecessarily restricting itself.

In doing so, she created the impression among Western partners, such as in Moscow, that the Germans were insecure cantonists.

That helps Putin.

Now the federal government says that Germany will no longer need Russian gas from 2024.

"That's absolutely ridiculous," says economist Lukasz Rachel.

“We tell Putin he won't get any money in three years, which certainly makes him even more unpredictable and risk-taking in the short term.

Then we transfer him 700 million euros every day to finance his madness.” Ifo boss Clemens Fuest also shakes his head.

If you want to go completely without Russian gas, a stop now is desirable, but maybe not in 2024, when the war will hopefully be over.

The big question is: Can Germany economically afford an energy embargo?

Fortunately, the federal government has not succeeded in monopolizing public opinion with its pessimism;

in fact, she's on the defensive.

Important is the work of a group of economists who have simulated the consequences of an energy embargo and have come to the conclusion that there is a high probability that the German economy would be hit by a recession, but that serious upheavals are unlikely.

Germany's economy is suffering even without an embargo

The government will hardly want to make a decision that is important not only from an economic point of view solely on the basis of such studies and of course the results can be critically examined.

But the vehement rejection that work using modern technology is met with in parts of the traditional economist scene shows how far Germany has fallen behind international standards in this regard.

This dispute threatens to undermine the realization that doing nothing can be the wrong strategy, especially in uncertain times, and that the traditional German strategy towards Russia of “sticking your head in the sand” (Timothy Ash) will have a devastating effect in the long term.

Germany will suffer economically even without an embargo.

"However, in the medium term we will have to accept a loss of prosperity anyway if we want to establish ourselves independently of Russia," remarks Veronika Grimm.

However, this has not yet been understood everywhere.

In view of the terrible suffering that this war is causing not only in Mariupol, but also in view of the economic consequences of a long war for people in poorer countries who are dependent on food imports, it is high time that the German government changed its negative attitude towards a Energy embargo changes.