It’s the economy, stupid: German employers and unions unite to oppose EU Russian gas boycott

When it comes to the economy no amount of moralising will stop the flow of oil

Remember the phrase, “It’s the economy, stupid?” It was coined by James Carville, strategist of US President Bill Clinton’s successful 1992 campaign against George H W Bush.

The quip was meant to bring voters back to the fact that the campaign was being held in the middle of a recession, which the Clinton team used successfully to unseat Bush. Today the employers and unions united to call out a possible EU ban on Russian gas and oil, saying it would grind industry to a halt.

However, for a Ukrianeian perspective they see the EU feeding the Russian war and that war is costing lives.

Ukraine’s leaders say revenues from Russia’s energy exports are financing Moscow’s destructive war on Ukraine and must be ended. That won’t be easy to do. The EU’s 27 nations get around 40% of their natural gas from Russia and around 25% of their oil.

However, Bosses and unions in Germany have joined forces to oppose a possible EU ban on Russian gas, saying it would grind industry to a halt.

Many figures in Germany are calling for an EU-wide ban on Russian gas imports, following the country’s invasion of Ukraine in February.

But German employers and trade unions announced Monday they oppose such a move, saying it would lead to job losses and factory shutdowns in the EU’s largest economy.

“A rapid gas embargo would lead to loss of production, shutdowns, a further de-industrialisation and the long-term loss of work positions in Germany,” said Rainer Dulger, chairman of the BDA employer’s group, and Reiner Hoffmann, chairman of the DGB trade union confederation, in a joint statement Monday.

They added that, while EU sanctions are needed to put pressure on Russia, they must minimise the impact on those who impose them.

“In the current discussion, we don’t see that,” they said.

EU ministers are currently debating a potential embargo of Russian oil, as Ukraine’s leaders say revenues from energy sales are funding Russia’s war effort in Ukraine.

This follows an EU decision in April to ban Russian coal imports.

Germany – alongside Italy, Hungary and Austria – is very dependent on Russian energy and has been one of the most reticent EU member states to sanction gas and oil imports from the country.

As a major manufacturing hub, it has so far resisted calls for an immediate shut-off and said it plans to instead phase out Russian oil by the end of the year and most Russian gas imports by mid-2024.

Chancellor Olaf Scholz has warned a sudden cut-off of Russian gas would plunge “all of Europe into a recession.”

Analysts say an EU boycott of Russian energy would lead to higher energy prices, hurting consumers who are already facing a record EU inflation of 7.5%.

However, Germany’s economy minister Robert Habeck says the country has already slashed its dependence on Russian energy since the invasion of Ukraine.

Russian oil imports have come down from 35% to 25%, and gas imports from 55% to 40%, he said.

Despite widespread economic sanctions against Russian banks and individuals, the EU continues to send around $850 million per day to Russia for oil and gas, even as EU governments condemn the war in Ukraine.

Russian President Vladimir Putin warned European countries that switching away from Russian oil imports would be “very painful.” 

“Attempts by Western countries to squeeze out Russian suppliers, to replace our energy resources with alternative supplies will inevitably affect the entire global economy,” Putin said, according to Russian state media Tass.

“The consequences of such a step can be very painful — and first of all for the initiators of such a policy,” he said. 

“There is simply no reasonable replacement for Europe now. Yes, it is possible, but now it is missing. Everyone understands this, there are simply no free volumes on the market now, and supplies from other countries, primarily the United States , which can be sent to Europe, will cost consumers many times more expensive, will affect the standard of living of people and the competitiveness of the European economy,” Putin said.

Nevertheless, he added, European countries are constantly talking about abandoning Russian oil and gas, which further destabilizes the market and inflates prices themselves, primarily for their own citizens.” Attempts by Western countries to squeeze out Russian suppliers, to replace our energy resources with alternative supplies will inevitably affect the entire global economy”. 

National interest top EU cooperation

Meanwhile, Germany’s ruling Social Democrats are facing fresh pressure over their links to Moscow after accusations that a regional leader worked with Kremlin-backed energy giant Gazprom to undermine U.S. sanctions and spread Russian propaganda.

The allegations center on Manuela Schwesig, a senior member of Chancellor Olaf Scholz’s SPD party and the premiere of the northeastern state of Mecklenburg-Vorpommern. The state was the end point of the Russia-to-Germany gas pipeline Nord Stream 2, long championed by Berlin but cancelled before it came into service as Russia prepared to invade Ukraine.

The political heat on Schwesig has been growing since documents obtained by Welt newspaper showed her government cooperated closely with the company Nord Stream 2 AG, a subsidiary of Gazprom, as it tried to complete the project in the face of American sanctions. The documents showed that a foundation backed by the company and the regional government, supposedly meant to champion environmental causes, was a vehicle to circumvent the U.S. measures.

The policy of banking on cheap gas from Russia was also promoted by longtime conservative Chancellor Angela Merkel. Nord Stream 2 got the green light in 2015 from a “grand coalition” government composed of her Christian Democrats (CDU) and the SPD.

But the policy has been strongly associated with the SPD — not least because former SPD Chancellor Gerhard Schröder became a leading lobbyist for Russian energy companies and took senior positions in their ranks, including as chairman of the shareholders’ committee of Nord Stream 2. The Ukrainian government has also singled out German President Frank-Walter Steinmeier, an SPD stalwart and former foreign minister, for criticism over his role in pushing close energy ties with Moscow.

The EU’s 27 nations get around 40% of their natural gas from Russia and around 25% of their oil.

This may well be the existential crisis that brings in a new age of Green energy or just a crisis that sees millions go ‘cold and hungry’ a fuel crisis that will hit the working class from all directions.