Germany could be crucial to ending crisis

Angela Merkel, a champion of closer ties between Ukraine and the European Union, has shown a willingness to take a hard line with Vladimir Putin.
Thomas Pete/Reuters/File
Angela Merkel, a champion of closer ties between Ukraine and the European Union, has shown a willingness to take a hard line with Vladimir Putin.

NEW YORK — In the face of the diplomatic maneuvering over how to confront a bellicose Russia in Ukraine, one country appears to hold the key to any long-lasting entente: Germany, Europe’s economic powerhouse and one of Russia’s primary trading partners.

Whether it is importing fuel from Gazprom or selling Mercedes-Benz to billionaire oligarchs, trade with Russia has played an important role in Germany’s emergence as an economic superpower over the past decade. Germany is now heavily reliant on Russia for its energy needs, importing more natural gas from Russia than any other country in Europe.

But Germany’s enhanced status on the world stage — combined with the end of the commodity boom and the onset of economic stagnation in Russia — has also shifted the balance of power. Some analysts argue that it is Russia that has the most to lose if economic sanctions are ever imposed.


This dynamic could offer insight into the role that the German chancellor, Angela Merkel, will play in any negotiations with the Russian president, Vladimir Putin.

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German diplomats have tacked away from a plan, pushed by the United States, to impose sweeping sanctions and remove Russia from the Group of Eight developed economic nations. Instead, Merkel has called for a more diplomatic solution, preferring more limited actions like many of her European counterparts.

But Merkel, a champion of closer ties between Ukraine and the European Union, has also shown a willingness to take a hard line with Putin. In recent months, Merkel has been particularly forceful on human rights issues. She played a crucial part in the release of the jailed oil executive, Mikhail Khodorkovsky.

“The German attitude toward Russia has changed in a very substantial way,” said Anders Aslund, an economics expert on Russia, Ukraine, and Europe at the Peterson Institute in Washington. “The tables have been turned.”

Ten years ago, Aslund points out, it was Russia that was in ascendance, as high energy prices, robust economic growth, and political stability made the country a darling for foreign investors. By comparison, the German economy was seen as dull and less than competitive.


Now, Germany has a current-account surplus that amounts to 6 percent of gross domestic product — an important indicator of economic strength and competitiveness. And Russia is being lumped together with other struggling emerging countries and has witnessed a fast erosion of its once sizable surplus.

There are two sides to Germany’s economic relationship with Russia: a reduced reliance on the country as an export market, countered by energy imports that remain strong.

While companies like Mercedes and Volkswagen are significant exporters to Russia, overall it ranks 11th, behind Poland, as a market for German goods. In fact, many of Germany’s top exporters have for years been focusing on China and other more dynamic markets in Asia. Jörg Howe, a spokesman for Daimler AG, the parent company of Mercedes, said that at the moment the company did not expect the crisis to affect sales of its cars. He described Russia as an important market, though not on the same scale as China, Germany, or the United States.

Aslund noted that Russia paid little for invading Georgia in 2008. Georgia’s prime minister met with US officials last week in Washington, and Kerry on Monday pledged a fresh $2.8 million to Moldova to help that nation’s economic prospects. All told, Kerry said the United States has provided close to $1.5 billion in economic assistance to help Moldova, which, like Georgia, is a former Soviet republic that has rejected Russia in recent years in favor of Western inclusion.