Mariano Caucino

Germany and the Costs of War

Nineteen months after the start of the Ukrainian war, the conflict seems destined to show the interdependence between geopolitical factors and the economic future of every state.  A reality that does not escape even the most developed economies in the world.

Since February 2022, Europe has been affected by rising energy prices, disruptions in financial markets and a contraction in both Russia and Ukraine, two important destinations for European Union exports. It is at this level that Germany -the fourth largest global economy- probably became the most affected country since the conflict started.

Already in February, on the first anniversary of the war, a report from the German Institute for Economic Research (DIW) noted that the conflict and rising energy costs had caused a 2.5 percent drop in German GDP. While it warned that the country was facing a recession.

Meanwhile, according to a survey by the Deutschlandtrend Survey, published by DW in May, the war, inflation and a “fair distribution of financial burdens” were the biggest concerns of the German people. According to their measurements, support for NATO varied geographically, with 40 percent of East Germans believing that arms supplies to Ukraine had gone too far while 34 percent thought that sanctions against Russia had been excessively harsh, causing economic damage to Germany. But how could the most powerful country in Europe became so affected?

At the beginning of the conflict, Berlin tried to reconcile the requirements of its NATO membership with the interests derived from the Russian-German economic alliance. Therefore, in the initial stages of the war, the German chancellor attempted to delay the supply of combat tanks to Kyiv, highlighting the differences that the allies maintain over assistance to Volodymyr Zelensky´s government.

But Scholtz prudent attitude ultimately could not resist pressure from his allies regarding the need to send Leopard 2 tanks, considered highly effective for the counteroffensive against Russia. His tactics, however, did not cease to arouse criticism. Specially since Germany was observed as the most reticent NATO member when it comes to the unlimited supply that Kyiv seeks. To the point that the conflict presented an iron dilemma in this crucial historical stage that puts strategic Russian-German relations under tension.

As it is well known, since the 1970s, German governments -from Willie Brandt to Angela Merkel- have sought some formula of understanding with their giant neighbor. To the extreme that the Kremlin’s international behavior represented an enormous challenge to Germany, based on its dependence on Russian gas imports, a reality that did not escape other EU countries.

Until the war, Russia supplied forty percent of the EU gas spending and more than twenty-five percent of its oil imports. A distressing reality that accelerated a debate on its energy policy. To the point of calling into question Merkel´s historical legacy. The one that limited the use of nuclear energy as a consequence of domestic political needs.  With the consequences of deepening greater dependence on Russian gas. A reality that could be verified by the construction of the Nord Stream gas pipelines, perhaps the most concrete expression of Russian-German economic partnership.

But strictly speaking, that policy was none other than the continuity of that economic axis, which is based on geographical and complementary reasons and which is supported by the hard lessons of the past wars. But such policy is the one that has been put up for debate once again. As it has always aroused the concerns of the Atlantic powers.

It is in this historical framework, in the context of a growing interdependence between geopolitical factors, where reality appears deeply complicated even for the vigorous German economy.

Too big for Europe but too small for the World -as Henry Kissinger said- Germany could not escape the sign of times. Caught in a fight between larger powers. In a world marked by the decline in relations between the main actors of the system and which -taken to its most extreme conclusions- could converge in the formation of a kind of bipolar order between the US and China. In which Europe and Russia might have to accept the increase of their respective dependence on the Americans and the Chinese.

To the point where, apparently, an unavoidable context has been configured. The one that establishes that even the most powerful nation in Europe is suddenly unable to resist the trend of the time. In which Germany seems to have been punished as the most affected nation as a result of the Ukrainian war. Not being able, this time, to cling to the old Bismarck´s lesson that prescribed that the peace of Europe depended on never going to war with Russia.

Mariano A. Caucino is foreign policy analyst. He served as Argentine Ambassador to Costa Rica and to the State of Israel. Member of the InterAmerican Institute for Democracy.

About the Author
Mariano Caucino was Argentine ambassador to Israel (2018-2019) and to Costa Rica (2016-2017).