AEven with the West’s abandonment of an embargo against Moscow, the gas supply in Germany was no longer secure because of its unfortunate dependence on Russia. This could only be disputed by contemporaries who, after February 24, 2022, still believed that Russian supplies could always be counted on. But the world has changed: Russian gas is no longer a reliable and cheap commodity that consumers in both business and households are happy about. However, the gas only seemed cheap because, even after the Russian annexation of Crimea in 2014, politics and business simply continued to estimate the risk premium resulting from Germany’s dependence at zero – although Germany painfully paid the costs of half a century ago during the oil crisis had experienced dependencies in energy.

It is now becoming clear how exorbitantly high this risk premium can become as soon as the gentleman in the Kremlin wants it. For technical reasons, it may not be desirable for Russia to cut off gas exports to Europe for an extended period of time unless the raw material can be sent to other parts of the world via new pipelines. But to scare Germany in the long term, it is enough to reduce deliveries to such an extent that prices rise significantly and worries arise about how the country will get through the winter. The declaration of the alarm level in the gas emergency plan by the federal government is therefore correct. There is still enough gas. But that can change.

Too late for the coming winter

According to ordoliberal ideas, economic competitiveness is also determined by the political framework. Adam Smith, the progenitor of modern economics, has expressly emphasized the extent to which the economic success of a community depends on its external security. Security of supply forms a component of external security. Therefore, the politicians and business leaders who have orchestrated Germany’s dependence on Russian gas over the past 15 years cannot appeal to their predecessors. When the Federal Republic of Germany, under Chancellors Brandt and Schmidt, gained access to eastern natural gas via the so-called pipe deals, great care was taken not to become dependent on Moscow.

Now there would be no point in wanting to judge the past alone. The retrospect should serve to help find ways for a prosperous future in a rather difficult situation. Since the spring, the Scholz government has been trying with some success to provide an alternative supply of natural gas, at least in the medium term, albeit accompanied by occasional criticism of the new suppliers, the costs compared to the formerly supposedly cheap Russian gas and ecological aspects.

For the coming winter, however, many of these deliveries are likely to come too late anyway. This diversification is nevertheless correct, because it eliminates the incalculable risk premium that comes from being dependent on one supplier.

However, the government’s much more hesitant approach to gas demand is taking its revenge. Based on the thesis that gas in the energy supply could be substituted faster and more extensively in the short term than in many industrial uses, it would have been necessary to remove gas from energy production as quickly as possible. Since renewable energies cannot make a significant contribution to this in the short term, attention is necessarily directed to the coal and nuclear power plants that still exist. While the government has moved on coal, it is reluctant to approach the nuclear issue. Putin should ensure that this refusal will not last.

Two other important tasks remain to be accomplished. It is necessary to create incentives for the largest possible savings. In addition, private-sector mechanisms such as auctions should play a role in the allocation of scarce gas to companies. For months, economists have been making important proposals for both tasks, which should not be rejected on their own, because some economists had advocated the embargo in the spring, which was fiercely opposed by business and rejected by politicians. Especially in difficult times there can be no shortage of good ideas.

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