Germany rejects boycott of Russian oil and gas as it will leave millions without heat

Olaf Scholz's decision is a blow to US and British efforts to extend Ukraine war sanctions to Russia’s lucrative energy sector

By Justin Huggler
Berlin 7 March 2022

Germany has ruled out a boycott of Russian gas and oil as it would leave millions of homes across the country without heating.

The move is a blow to US and British efforts to press for sanctions to be extended to Russia’s lucrative oil and gas exports in response to the war in Ukraine.

Washington said at the weekend it was in “active discussions” with its European allies about imposing a boycott.

But Olaf Scholz, the German chancellor, issued a statement rejecting the idea on Monday.

“Europe deliberately exempted Russia energy exports from sanctions. There is currently no other way of securing Europe's supply of energy for heating, for mobility, for power supply and for industry,” he said.

“It is therefore of essential importance for services of general interest and the daily life of our citizens.”

Western sanctions have already dealt a serious blow to Russia’s economy, causing the rouble to fall by 30 per cent and cutting the Kremlin’s access to its foreign reserves.

But oil and gas exports, the mainstay of the Russian economy, are exempt from the sanctions.

They were worth a combined total of $235.5 billion (£179 billion) last year and experts fear they may be enough to pay for the Russian war effort.

The European Union is set to put forward its own proposals on Tuesday, after Ursula von der Leyen, the president of the European Commission, warned: “We have to get rid of the dependency on Russian gas, oil and coal.”

She is expected to call for member states to switch over to liquefied natural gas (LNG) from rival suppliers like the US and Qatar and alternative gas pipelines from Algeria and Nigeria.

But any EU move is likely to be limited by German reluctance. “The federal government has been working with its partners within the European Union and beyond for months to develop alternatives to Russian energy. But that doesn't happen overnight,” Mr Scholz said on Monday.

In the wake of the invasion the German chancellor surprised his allies and critics alike with his swift decision to scrap the Nord Stream 2 gas pipeline.

But it appears cutting off gas supplies to German homes with the country still in the grip of winter temperatures is a step too far for him.

The European Union currently relies on Russia for around 40 per cent of its gas, compared to less than 5 per cent in the UK.

Germany is even more exposed, relying on Russia for 55 per cent of its gas and 45 per cent of its oil and coal.

It is not the most vulnerable EU member state. Finland gets 94 per cent of its gas from Russia, Latvia 93 per cent, Estonia 79 per cent and Bulgaria 77 per cent.

Amid reluctance from its allies over Russian gas, US attention is shifting towards Russian oil, which is even more lucrative for the Kremlin.

Gas is worth $55bn (£42bn) in annual exports for Russia, but that pales beside oil, which accounts for $110bn (£84bn).

“We are now in very active discussions with our European partners about banning the import of Russian oil to our countries, Anthony Blinken, the US secretary of state, told American television at the weekend.

He stressed the importance of “maintaining a steady global supply of oil” amid fears a boycott could send prices soaring and impact the world economy.

The US is said to be pressuring Saudi Arabia to pump more to offset any drop in Russian exports.

Washington is also reportedly in talks over lofting some of its sanctions against Venezuelan oil to replace Russian supplies.