How Vladimir Putin’s Ukraine stunt stuns Germany and disrupts its economic dreams

Germany is stunned by Russia’s invasion of Ukraine. Russian operations seek to prevent Ukraine from aligning with NATO. This disrupts several current hypotheses, among which is Germany’s Russia policy. The German desire to have strategic autonomy from the US on European affairs is restricted. This is likely to singe their China policy as well.

In the Baerbock-Blinken meeting and the Scholz-Biden summit, Germany maintained that Nord Stream 2 (NS2) was a geo-economic connectivity asset for stabilising energy prices and supplies to Europe. They disagreed with the US view that NS2 was geopolitically hindering dealing with an assertive Russia.

The Europeans, chiefly the French and Germans, did their utmost to engage Russia diplomatically using the Normandy process, and the Minsk agreements. They attempted a Summit between the US and Russia too. Russia abided by the American prediction of invading Ukraine. Suddenly, the Americans seem more correct in assessing Russian behaviour. The Germans look as if they were chasing a chimera despite years of investment.

The Russian attack on Ukraine has major consequences within Germany's political framework. Chancellor Scholz, when he assumed office, looked at NS2 as an economic asset but now believed that state sovereignty was being disrespected, and borders were sought to be moved which was unacceptable. The Green Foreign Minister Baerbock was more emotive, indicating that Russian actions would not be forgotten. “Germany is stunned, but not helpless,” she said while sanctions were announced. Perhaps the most evocative response came from the former CDU Defence Minister Annegret Kramp-Karrenbauer who said Germany had had a historical failure. After Georgia, Crimea and Donbass it had not prepared itself for deterring Russia effectively.

The German political reaction to Russian action is like somebody has been tasered or teargassed. They seem underprepared despite the US repeatedly saying that an invasion was imminent.

There are three aspects on which Germany will need to reassess. The first is its economic partnership model with Russia and China. After the Cold War, Germany engaged Russia through a partnership of rapprochement. This was built upon Willy Brandt’s Ostpolitik. Brandt acted from a firm commitment to the Transatlantic Alliance and the rapprochement with Russia, after the Cold War, was more of a German effort to show strategic autonomy.

In Angela Merkel's time, this became a rapprochement through economic partnership. Over two decades, Germany received stable and cheap Russian gas through a series of pipelines, one of which runs through Ukraine and Poland. NS1 runs through the Baltic Sea. Between 40 per cent and 50 per cent of German gas comes from Russia. Compared to the European average, Germany is more dependent on Russian gas than most others.

Now that NS2 certification is suspended, interlocutors believe that Germany will not be able to bring it into operation if it wants to have a strategic partnership with the Western alliance. Even if NS2 does not come through, existing levels of gas will continue from Russia through the other pipelines. If Ukraine is neutralised, it will then be left to Germany to decide to pay almost $1 billion a year in transit fees, which is of great economic sustenance for Ukraine.

The NS 1 and 2 bypass Ukraine, which Russia was keen on. Gazprom invested 50 per cent into NS2. Following regime change in Ukraine, Russia, faced with a suspension of NS2, may not be keen to avoid Ukraine getting the benefit of transit fees. However, Germany will assess whether it can really afford to avoid Russian gas imports. It is a green economy and makes great efforts towards renewables. These are loud but slow efforts. Germany now needs to realise whether it could enmesh Russia into an economic partnership or was it ensnared by a Russian gas matrix?

Second, Germany and France are committed to European autonomy. Stung by the Trump administration they decided that a secure and stable Europe gave them the option of pursuing a European alternative, which need not depend on US aggressive action towards Russia and China. Baerbock and Scholz emphasised the Normandy process between France, Germany, Ukraine and Russia, which was a European initiative. This remained a nuanced difference between the US and Germany.

However, Russia was not persuaded that NATO was not a security threat to them even if Europe was not. Therefore, Russia's inclusion of Ukraine in its sphere of influence leaves Germany's Russian policy in tatters. Now Germany is behind the US to impose sanctions, which this time may not be so easy to resile from.

Gerard Schroeder, the former SPD Chancellor, under whom the NS was signed off on, later became chairman of the company with Russia. He has expressed astonishment at Russia's security action and believes it unjustified but yet he says that Germany should remain cautious in delinking itself socially, economically and politically from Russia.

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The German coalition compact said that they would work for a European foreign and security policy which meant that they would stand on their own feet. The rug has been pulled out from under those feet by Russia, which was a keystone of their stability and security consciousness.

The biggest gainer from the Russia-Ukraine crisis could actually be the US who would see European autonomy snipped and the Transatlantic Alliance coalesce again.

Germany is reluctant to increase its defence expenditure to 2 per cent of GDP to satisfy NATO. Now NATO troops are in several East European countries in the wake of the Ukrainian crisis and are unlikely to leave in a hurry. These EU members do not have the confidence that Europe can secure them from Russia so prefer the US approach. It is for Germany to decide whether raising its defence expenditure will help it raise its own stature. As Europe's largest economy with strong climate credentials does it become a power to reckon with? It is for Germany to realise that security and strategy in the world today are not coloured green.

The third aspect, which Germany will need to relook at is its China policy. On this too, it sought autonomy because of its economic interlocking. While there are no gas pipelines between China and Germany, there are freight trains which run all the way and a new train has even been introduced in 2022. China has unhesitatingly challenged German values. Merkel's last gasp effort to have a Comprehensive Agreement on Investment with China. is now held up by the European Parliament. In order to somewhat align with US attributes of China policy, and yet show autonomy, Germany enunciated Indo-Pacific guidelines, became vocal on the South China Sea, criticised Chinese actions against Uighurs and in Hong Kong. However, it has not diminished its economic engagement, despite strong US economic sanctions. against China. The CAI may not go through, but the extant economic engagement with China for Germany will continue. The Sino-Russian axis will call this out.

Germany should use its Indo-Pacific policy to find greater space as a middle power. Its European autonomy may be tattered, but it can build better relationships with other Quad partners like India, Japan and Australia, besides Korea and ASEAN. It needs to be more open with them and offer the kind of investment in China into this region, even if they don't want to call it a China plus one policy.

Engaging with middle powers, beyond Europe, growing their defence capabilities and committing themselves to protecting values and strategic objectives more robustly with partners since they can't do it alone. may help them in the near term.

The writer is a former Ambassador to Germany. Views expressed are personal.