IN GERMANY, THE ERA THAT DIDN´T TURN / GEOPOLITICAL FUTURES

In Germany, the Era That Didn’t Turn

Russia’s decline and America’s assurances weaken the rationale for rearmament.

By: Ryan Bridges

German Chancellor Olaf Scholz delivered his historic “Zeitenwende” – literally, “turn of an era” – speech three days after Russia invaded Ukraine. 

The world was at an inflection point, Scholz said, and Berlin had to adapt. 

Foremost, Germany needed a forceful but prudent answer to the Russian attack. 

Scrapping his coalition’s ban on the delivery of lethal weapons to conflict zones, Scholz announced the shipment of thousands of shoulder-fired anti-tank and anti-aircraft weapons to Ukraine – a very big deal among German officials, though less so among their allies. 

He also endorsed sanctions against Russia’s elites, and he reaffirmed his government’s commitment to the defense of its NATO allies. 

Scholz would flesh out his Ukraine policy later, but for now he had committed Germany to containing the war and exerting pressure to bring the Kremlin back to the negotiating table.

But what made Scholz’s Zeitenwende speech famous were two other commitments. 

First, the chancellor said Germany would “overcome” its dependence on Russian energy. 

Second, he promised to transform the Bundeswehr into a capable, modern fighting force by launching a 100 billion-euro ($106 billion) special fund for defense projects and investments. 

And “from now on, year after year,” Germany would spend more than 2 percent of its gross domestic product on defense, he said.

Germany has undergone a sea change when it comes to its energy security, though both it and Europe are still far from independent of Russia. 

But the stories – and the data – regarding defense modernization and rearmament are roughly the same as before. 

Clearly, there are some dependencies Germany is not ready to leave behind.

Energy Security

In the spring, German officials warned that the sudden loss of Russian gas supplies would trigger a recession on par with 2009, when the German economy shrank 5.7 percent. 

Yet the latest official estimates for 2023 assume little to no Russian gas and still project a fall in gross domestic product of half a percent or less.

How did this happen? 

First, Europe made refilling gas storage an emergency priority. 

At the time of writing, Germany’s gas storage is 88 percent full, 11 percentage points above the five-year average for this time of year. 

EU storage as a whole is more than a third higher than at this point last year. 

Second, demand destruction and conservation efforts contributed to a 20 percent drop in EU gas consumption from August to November relative to previous years. 

Germany cut its consumption by more than a quarter. 

This was just as Russia was escalating the gas war, stopping delivery in September through the Nord Stream 1 pipeline, which along with its sister project was sabotaged in October by unknown actors.

Finally, before Russia’s invasion of Ukraine, Germany had no capacity to import liquefied natural gas. 

After the invasion, Germany in just 10 months built the infrastructure to host its first floating LNG terminal. 

(This in a country that routinely uses fax machines and where a capital airport project missed its deadline by nine years.) 

Germany will launch two more floating LNG terminals soon, enabling it to replace about a third of the gas it imported from Russia last year – without needing to rely on its neighbors. 

More terminals will open around next winter for a total LNG import capacity of approximately 30 billion cubic meters, a little over half what Germany bought from Russia in 2021. 

It’s not exactly the picture of German efficiency – the LNG terminals are costing well over double the government’s estimate – but by German standards it was swiftly done, especially for a project of this magnitude.

And of course, there are Germany’s inherent advantages – its access to the North and Baltic seas and its centrality in Europe, and especially its strong finances, which enable it to compete with wealthy Asian buyers of LNG. 

This is why Germany was so reluctant to accept proposals for an EU price ceiling on natural gas imports. 

Germany, if not its energy-intensive industry, is better positioned than most of the region to weather high gas prices. 

It worries that an effective cap would undermine government efforts to reduce energy consumption while potentially diverting LNG shipments to non-European buyers and rattling markets. 

On Dec. 19, Berlin relented and supported a cap, but the myriad safeguards mean it is questionable whether it will ever be activated.

This is not to downplay the risks, the most immediate of which is that without adequate energy savings, Europe could suffer blackouts. 

Especially vulnerable are landlocked states in Central and Eastern Europe and anyone that can’t outbid the wealthier northwest for gas. 

Mild temperatures have helped reduce consumption, and in a best-case scenario German gas storage could enter April more than 70 percent full. 

By this time, Europe will have shifted from drawing down stockpiles to replenishing them. 

However, the consensus is that restocking will be extremely difficult for Europe next year, with Russian gas potentially unavailable and the anticipated return of Chinese demand following the end of its zero-COVID policy. 

The Paris-based International Energy Agency warned recently that the EU could fall 27 bcm short of meeting its estimated demand of 395 bcm next year.

If worse comes to worst, and if political cooperation in the EU breaks down and gas-sharing agreements fail, it’s safe to assume the bloc’s wealthiest member state would suffer a relatively smaller share of the pain. 

As with the economic response to COVID-19, the main challenge for the German government will probably be balancing its narrow national interests with its EU obligations.

Defense U-Turn

As for Scholz’s defense spending commitments, there is no suspense. 

Germany will not spend 2 percent of GDP on defense in 2023, and based on current plans, after hitting the mark in 2024-25, it will fall back below it in 2026. 

Scholz’s term ends in 2025, so he will be able to campaign on (temporarily) meeting the target. 

Winning elections is, ultimately, what the 2 percent target is for. 

The real measure of whether a NATO member is meeting its minimum obligations is not so easily quantifiable, but no one disputes that Germany is falling short. 

Early returns on the Zeitenwende are hardly better.

In a recent exercise, all 18 new Puma infantry fighting vehicles failed. 

Before that, amid unsourced reports that the Bundeswehr had ammunition for only a couple of days of war, the co-leader of Scholz’s Social Democrats traded blame with defense industry officials for the shortage. 

The government says industry is failing to invest; industry says it does not trust the government to make investing worthwhile. 

Meanwhile, Defense Minister Christine Lambrecht, also of Scholz’s party, asked the finance minister to urgently provide funds to buy ammunition. 

The finance minister said Lambrecht had never mentioned this supposed emergency before and pointedly suggested she get her own house in order. 

The Finance Ministry also denied the request, which drew less attention, and said bureaucratic hurdles were to blame.

But the real culprit is Germany’s own interests and strategy, which, evidently, has not changed as much as Scholz’s Zeitenwende speech indicated. 

The reason is that the catalyst for the change – the looming threat of a Russian attack on a German ally – is no longer credible. 

In the last days of February, officials in Ukraine and the West were anticipating Kyiv’s encirclement. 

No one knew if the Ukrainian state would survive. 

No one knew how dependable the U.S. response would be, nor even whether EU or trans-Atlantic unity would hold if the Kremlin took any number of plausible actions, such as cutting off Europe’s gas supplies.

Ukrainian strength and American support have greatly exceeded expectations in Berlin as well as in Moscow. 

By April, Russian forces had withdrawn from around Kyiv. 

Not long after, the grumbling started in Berlin about whether all the new defense spending was really necessary. 

The Greens argued that more of the new 100 billion-euro special military fund should go to non-military elements of security, such as cyber and infrastructure protection. 

The cost-conscious Free Democrats felt emboldened to make the process as painful as possible to prevent its being repeated. 

And Scholz’s own Social Democrats returned to navel gazing. 

Over the summer, a senior Social Democratic lawmaker and chair of the Bundestag’s Foreign Affairs Committee wrote an essay outlining “a new Ostpolitik for the Zeitenwende.” 

This new Ostpolitik, or eastern policy, would be everything to everyone: “realistic and value-based, underpinned by military resilience and willingness to engage in dialogue.” 

And he said it should be coordinated with some three dozen German allies, with the close involvement of civil societies – which is good for diplomatic relations and democracy but a recipe for inaction.

The More Things Change …

The loss of Russian piped gas is a seismic event for Europe. 

Gazprom’s pipelines to Germany under the Baltic Sea are dead and buried, and the Yamal pipeline through Belarus and Poland isn’t operating. 

Shipments are occurring only via Turkey and Ukraine, both in small quantities. 

As a result, European gas prices are four to five times the norm.

But over time, the expansion of European LNG import capacity will help globalize the LNG market, with prices on the American, Asian and European markets converging. 

Persistently high prices will also transform the European industrial landscape, bankrupting weaker firms and driving some energy-intensive manufacturing out, but also creating the painful conditions that tend to drive innovation. 

(Some manufacturers have already defied expectations and found novel ways to boost their energy efficiency.) 

The crisis has renewed interest in the deepening of European energy cooperation, and it could accelerate the discovery and development of breakthroughs in green technology. 

It could also provoke social unrest and civil strife. 

Or the war could end suddenly, and Russia could begin restoring gas supplies. 

Only time will tell.

But when it comes to security policy, Germany is not convinced that it needs to do much more. 

If the Putin regime survives its misadventures in Ukraine, it will still be years before it can threaten any defensive coalition Poland, Finland and Sweden – let alone NATO – could put together. 

Poland especially has been bolstered by the war in Ukraine, and Warsaw is determined to build Europe’s strongest army. 

Whether it succeeds or not, Polish power is rising relative to Russia, providing Germany a stronger layer of protection. 

Most important, the Biden administration is determined to provide stability, eager to show partners and rivals in Asia that it is a reliable and valuable ally.

This does not mean nothing has changed in Germany. 

The urgency to break the country’s reliance on Russian piped gas is real – in fact, energy experts warn that Germany is overbuilding LNG import capacity. 

Moreover, dreams of an entente with Russia have been shattered, and Germans are more conscious of the risks of dependence on authoritarian states. 

For example, 84 percent of Germans agree that it is important that the country reduce its economic reliance on China, though the government is divided on this. 

But for a while longer at least, the U.S. is willing to provide the relatively minor resources necessary to stonewall Russia, which is paying an exorbitant price in Ukraine. 

Until this changes, Germany is betting against the Zeitenwende.