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Businessinsider.co.za | How Germany — Europe’s Biggest Economy — Became so Dependent on Russian Natural Gas

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A protest against the Ukraine war in Cologne, Germany.

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Russia has been a reliable natural gas supplier to Germany for decades.Germany is facing pressure to cut Russian gas supplies off, and there are concerns the Kremlin could halt supplies.Russia accounted for 55% of Germany’s natural-gas imports in 2021 and 40% in the first quarter of 2022.For more stories visit www.BusinessInsider.co.za

Germany is facing mounting pressure to cut Russian natural gas from its economy, putting Berlin in a quandary as the move could devastate the economy.

Europe’s largest economy is heavily reliant on Russian gas: It accounted for 55% of Germany’s gas imports in 2021 and 40% of its gas imports in the first quarter of 2022, Reuters reported. 

Due to the war in Ukraine, German banks are already expecting the country’s GDP growth to slow to 2% in 2022 from 2.7% in 2021, said Deutsche Bank CEO Christian Sewing, who was speaking in his role as president of Germany’s BDB bank lobby, per Reuters.

“The situation would be even worse if imports or supplies of Russian oil and natural gas were to be halted,” Sewing said on Monday, according to the news outlet. “A significant recession in Germany would then be virtually unavoidable.”

But it’s hard for Germany to break the habit. Russia has been Germany’s natural-gas supplier for about 50 years — and it has always been reliable, even during the Cold War and throughout the collapse of the Soviet Union, Davide Oneglia, a senior economist at London-based consultancy TS Lombard, told Insider.

Germany imported Russian gas to promote dialogue, trade, and peace

Germany started its Russian gas policy during the Cold War in the 1960s with the so-called Pipeline politik policy that connected both sides with a gas pipeline. The move aimed to incentivise the Soviet Union to move toward dialogue and trade with the West instead of conflict, said Henning Gloystein, the director of energy, climate, and resources at Eurasia Group, a geopolitical consultancy.

After the fall of the Soviet Union in 1991, a unified Germany and the emerging European Union were keen to support Russia economically to stabilize the huge nuclear power, Gloystein told Insider.

“Again, the policy was to cooperate, and hope that trade and prosperity would lead to peaceful relations. Until recently, this policy worked well, though now of course this policy is in shambles,” he said.

Germany is now under pressure to ban Russian natural gas due to mounting reports of Russian atrocities in the Ukraine war. Last week, Russian President Vladimir Putin demanded payment in rubles and threatened to shut off Russian gas to Europe altogether.

“I think everybody was taken aback, because the whole energy transition plan from the various governments, from Germany has always been implicitly relying on Russian gas always flowing in the same quantity, at the same price,” Oneglia said. “Historically, they have never weaponised energy, or commodities.”

“This was a miscalculation,” he added.

What are Germany’s options if Russian natural gas is halted?

If the Russian natural-gas supply is halted, there are few options for Germany, which gets its natural gas via pipelines from Russia.

The country has been phasing out nuclear energy since Japan’s Fukushima nuclear disaster in March 2011. Germany’s last three nuclear plants are set to close by the end of 2022. On Wednesday, Chancellor Olaf Scholz rejected an appeal by lawmakers for the closures to be delayed, Bloomberg reported.

Alternatives such as liquefied natural gas (LNG) — the supercooled version of natural gas that can be transported on ships over long distances — are available. But Germany doesn’t have the infrastructure to deal with the fuel right now, said TS Lombard’s Oneglia.

LNG has to be converted back into gas at terminals before it’s transported via pipelines, but Germany doesn’t have any such terminals. In February, Chancellor Scholz announced Germany would be building two new terminals to reduce the country’s reliance on Russian gas — but they may take years to construct, according to Fieldfisher, a Berlin-based law firm.

And even if Germany could immediately buy LNG off the global markets, it would be expensive. Even before the Ukraine war, LNG prices were increasing rapidly due to a resurgence in demand as the pandemic ebbed — spot prices were 435% higher on-year in 2021 in Asia, the key market for the fuel, according to a report from consulting firm McKinsey.

LNG contracts are also typically long-term contracts spanning decades, so major suppliers like Qatar and Australia would already have committed much of their future supplies to the traditional markets like Japan, South Korea, and China.

Germany’s dependency on energy imports from Russia grew in the last 20 years

Economy minister Robert Habeck said on February 24 that Germany would be creating a strategic reserve of coal for energy security, Spiegel news outlet reported. The country had earlier planned to phase out the high-carbon fossil fuel by 2030, so stocking up on it would be “one step or two steps back” for Germany’s transition to a future powered by clean energy sources, said Oneglia. 

“We have maneuvered ourselves into an ever-greater dependency on fossil energy imports from Russia in the last 20 years,” Habeck said, per Associated Press. “That is not a good state of affairs.”

Germany will wean itself off Russian gas by 2024, Habeck said in a March 25 press release.

Last week, Germany activated an emergency plan to deal with disruptions to its natural-gas supply after Putin’s threat to cut off energy supply if payment isn’t made in ruobles.

Germany is now in the “early warning phase” of its energy emergency plan, with Berlin calling for all energy consumers — both industry and households — to save energy and reduce consumption. If the situation worsens, the country might ration gas in the last of the three-stage plan, with industry first in line for power cuts, as outlined by Germany’s economy ministry. The move could devastate the economy and lead to job losses.

Although Germany’s predicament comes on the back of a confluence of events ranging from the war in Ukraine to a surge in global energy demand, TS Lombard’s Oneglia said he has to wonder if the industrial giant could have been better prepared for its energy security needs.

“In the end, there was no plan B,” he said.

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News24.com | Thousands Protest in Madrid Against NATO Summit

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A crowd demonstrates against NATO.

Photo by Oscar Gonzalez/NurPhoto

Carrying the hammer and sickle flags of the former Soviet Union, thousands protested in Madrid on Sunday against a NATO summit which will take place in the Spanish capital next week.

Amid tight security, leaders of the member countries will meet in Madrid between 29-30 June as the organisation faces the unprecedented challenge of the Russian invasion of Ukraine.

NATO is expected to consider the bid, opposed by alliance-member Turkey, for Finland and Sweden to join.

The Nordic nations applied in the wake of the Russian assault on Ukraine. Russian President Vladimir Putin calls the war a special military operation he says in part responds to the accession to NATO of other countries near post-Soviet Russia’s borders since the 1990s.

READ | Biden said Putin’s goal of weakening NATO by invading Ukraine backfired spectacularly

“Tanks yes, but of beer with tapas,” sang demonstrators, who claimed an increase in defence spending in Europe urged by NATO was a threat to peace.

“I am fed up (with) this business of arms and killing people. The solution they propose is more arms and wars and we always pay for it. So, no NATO, no (army) bases, let the Americans go and leave us alone without wars and weapons,” said Concha Hoyos, a retired Madrid resident, told Reuters.

Another protester, Jaled, 29, said NATO was not the solution to the war in Ukraine.

Organisers claimed 5,000 people joined the march, but authorities in Madrid put the number at 2 200.

READ | Pandor says Finland’s bid to join NATO indicates a decline in international security

Spain’s Foreign Minister Jose Manuel Albares said in a newspaper interview published on Sunday that the summit would also focus on the threat from Europe’s southern flank in Africa, in which he said Russia posed a threat to Europe.

“The foreign ministers’ dinner on the 29th will be centred on the southern flank,” he told El Pais newspaper.

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News24.com | Turkey Police Break up Istanbul Pride March, Detain Dozens: AFP

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Turkish police on Sunday forcibly intervened in a Pride march in Istanbul, detaining dozens of demonstrators and an AFP photographer, AFP journalists on the ground said.

The governor’s office had banned the march around Taksim square in the heart of Istanbul but protesters gathered nearby under heavy police presence earlier than scheduled.

Police detained protesters, loading them into buses. AFP journalists saw two buses of people who had been held, including AFP’s chief photographer Bulent Kilic, who had been handcuffed from the back.

Kilic, who was also detained last year during the Pride march, is currently in police custody.

Hundreds of protesters carrying rainbow flags pressed ahead with the rally in defiance of police.

Although homosexuality has been legal throughout the period of the modern Turkish republic, LGBTQ individuals point to regular harassment and abuse.

Istanbul Pride has taken place every year since 2003.

The last march which took place without a ban – in 2014 – drew tens of thousands of participants in one of the biggest LGBTQ events in the majority Muslim region.

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News24.com | NASA Blasts Off From Australian Outback in ‘historic’ Launch

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NASA’s first-ever launch from a commercial site outside of the United States blasted off from Australia’s Outback late Sunday, in a “historic” moment for the country’s space industry.

In the first of three planned launches from the Arnhem Space Centre, the rocket, carrying technology likened to a “mini Hubble” telescope, lifted off — blasted about 350 kilometres (218 miles) into the night sky.

“It is a momentous occasion for us as a company in particular, but it’s historic for Australia,” Equatorial Launch Australia CEO Michael Jones told AFP ahead of the lift-off.

Jones, whose company owns and operates the launch site in the far north of Australia, described it as a “coming out” party for the country’s space industry and said the chance to work with NASA was a milestone for commercial space firms in the country.

After a series of rain and wind delays, the suborbital sounding rocket soared into the sky to study x-rays emanating from the Alpha Centauri A and B systems.

After reaching its apogee, the rocket’s payload was to capture data on the star systems before parachuting back to earth.

READ | NASA is slowly powering down the Voyager probes. Here are 18 photos from its 45-year mission.

According to NASA, the launch offers a unique glimpse of the distant systems and unlocked fresh possibilities for scientists.

“We’re excited to be able to launch important science missions from the Southern Hemisphere and see targets that we can’t from the United States,” Nicky Fox, NASA’s Heliophysics Division director in Washington, said on announcing the mission.

Jones said the unique location had made preparations hard, with years of work to get regulatory approval and the need to haul rockets on barges to the launch site – about 28 hours drive from Darwin in northern Australia.

“I think for the team, it’s gonna be, you know, a huge relief that it’s done,” he said.

READ | ‘Giant leap forward’ – South Korea space rocket launch puts satellites in orbit

But with the next launch already looming on July 4, the break would be short-lived.

“We need to, you know, dust ourselves off, take a day off and then get back into it in readiness for the next launch because it’s just as important.”

It is the first NASA rocket to launch from Australia since 1995, and the project was hailed as the start of a “new era” for the country’s space industry by Prime Minister Anthony Albanese.

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