Russian War Pushes Germany To Broaden Its Energy Security Definition

Emily Pickrell, UH Energy Scholar

Russian’s invasion of Ukraine has given Germany a painful lesson that energy security is about much more than economics.

For years, Germany has looked at its natural gas purchases on through an economic lens.

Reframing it came within hours of boots on Ukrainian soil: On Feb. 27, German Chancellor Olaf Scholz announced Germany’s plans to treat energy as a national security matter and wean itself off Russian natural gas.

The European Commission has now developed a matching steel spine. On March 8, it announced plans to reduce imports from Russia, eyeing complete independence by 2030.

Yet the dismantling phase may initially be more difficult for Germany, because the political risks associated with energy have played second fiddle to environmental and economic considerations.

From an environmental perspective, many of Germany’s decisions appear justifiable.

It has worked hard to veer away from both the coal and the nuclear power that were once a key part of its energy strategy. Coal power accounts for about a quarter of German’s power generation, but it has committed to completely phase it out by 2038 as part of its efforts to reduce its impact on climate change.

Germany’s vocal anti-nuclear movement have also successfully pressured leadership into phasing out nuclear power, spurred on by Japan’s 2009 Fukushima accident.

Germany has largely been able to compensate for this fuel reduction with its growing renewable assets. At the same time, it continued its use of natural gas usage without leaning on it solely as a way to replace coal and nuclear – it is now at 26% of total energy usage, up from 23% in 2009.

Yet Germany itself produces little gas, which is where its vulnerabilities begin. In 2020, Germany produced 201 billion cubic feet of its own natural gas (that is, enough to cover about 20 days of domestic demand) but these fields are nearing depletion. Domestic natural gas production has been falling since 2004 and will likely cease altogether in the course of the 2020s. It also has strict regulations that discourage the development of hydraulic fracturing.

At the same time, Germany currently consumes about 9 Bcf/d at natural gas, about 8 Bcf/d of which comes from imports. About half comes from Russia, while the other half comes from Norway, the Netherlands and the United Kingdom.

In recent years, however, natural gas production has been declining in both the Netherlands and the United Kingdom.

These factors – less nuclear, less coal, lower production and declining Western European natural gas imports – is what has given Russian gas the market it has in Germany.

While many are now pointing the finger at former German leadership for getting it hooked on Russian gas, the country’s reliance on Russian gas has long historical roots, tracing back to a 1958 trade agreement. In the 1970s, as the relationship between West Germany and the Soviet Union improved, so too did the gas flow, as the countries essentially traded steel pipes for gas, expanding out their connecting pipeline.

The gas trade has been relatively unhampered by politics: immediately before the fall of the Berlin Wall, West Germany was already buying about a third of its gas from the Soviet Union.

What is true is that the road to greater reliance on Russian imports was essentially guaranteed by the construction of the Nord Stream pipeline in 2011. This pipeline, which runs under the Baltic Sea, gave Germany the option to mainline Russian gas. It brought in 5.3 Bcf/d in 2021, meeting a luxurious 50% of German demand.

The original Nord Stream was a deal enthusiastically backed by former German Chancellor Gerard Schroeder, who then became essentially an employee of Putin weeks after leaving office, as the chairman of Nord Stream. His successor, Angela Merkel, was never enamored of Putin but was pragmatic when it came to the question of gas. Her vision of German security was economic, and she assumed the economic benefits for both sides would also promote political security, even after the Russian invasion of Georgia and the Crimea in Ukraine.

Fast forward to 2022, and Germany is now faced with making dramatic reductions, quickly.

And even though winter is for the most part over, making this much-needed political security adjustment will have more serious economic ramifications for the country.

Maintaining an adequate supply of natural gas in Germany last year was tough, with a global tightening of the natural gas market and the resulting spiraling prices. Supporters of the recently completed Nord Stream 2 – which follows the same path as the original Nord Stream – had hoped it would help.

No more. In March 2022 the project was definitely cancelled, after months of foot-dragging, as Russia began rattling its sabers.

And while energy security typically means having back-up plans, because this last year has been so dysfunctional for European gas, German inventory levels at the end of January 2022 were at their second-lowest point since 2011, dipping as low as 35%.

When Russian militarization talk began last fall, Europe initially tried to address its overall shortfall by ramping up LNG imports. In last month, more than two-dozen LNG tankers have been rerouted from the U.S. to Europe, lured by high gas prices in the EU.

This means that for Germany, the gas must be first brought in by LNG from elsewhere and then moved from the import facility to the consuming markets. The good news is that Germany has pipeline connections with Norway, the Netherlands, Britain and Denmark. The bad news is that many of these routes are full.

Germany can get LNG indirectly via terminals in Belgium, France and the Netherlands, but those reportedly also have been running near capacity.

Completely breaking free of Russian gas by next winter will be really challenging, according to Bruegel.org, an energy modelling group. Even if LNG imports were maintained at record levels, and Europe’s existing regasification terminals were run at technical maximum capacity, it would still require a reduction of about 10 to 15% of current demand to fully wean Europe off of Russian gas imports. For Germany, these numbers might be higher – a report by EconTribute estimates that a 30% reduction would be required. The resulting hit to the German economy could result in a 3% GDP decline.

Part of the problem is that is easy to think of meeting energy as strictly an economic challenge, until it isn’t.

For example, in thinking about the possibility of LNG terminals, it had only factored in the financial implications. Until a war was in its backyard, they were not considered economic, in the face of all that cheap Russian gas.

Germany’s eastern neighbor, Poland, looked at it differently, giving a higher priority to the need for energy diversification and the freedom it can provide. It started LNG terminal construction years ago, and announced plans for a second LNG terminal in 2019.

Germany is now back to assessing energy both in terms of the need to protect the climate as well as its own back. Following Russia’s invasion, Schotz announced that Germany has revived its own plans to build two LNG terminals in northern Germany. It will help in the longer term as a back-up, even though these terminals will not be operational before 2025.

They will be built on the back of a more secure Germany, and hopefully, a still-standing Ukraine.

Emily Pickrell is a veteran energy reporter, with more than 12 years of experience covering everything from oil fields to industrial water policy to the latest on Mexican climate change laws. Emily has reported on energy issues from around the U.S., Mexico and the United Kingdom. Prior to journalism, Emily worked as a policy analyst for the U.S. Government Accountability Office and as an auditor for the international aid organization, CARE.

UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.