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EXPLAINED: How the crisis in Ukraine could affect Germany

What is happening?

After days of mounting concern over an outbreak of war in Europe, the worst fears have materialized: Russia has declared war on Ukraine.

According to the latest reports, Russian troops and warplanes have penetrated the eastern borders of the country and are approaching the capital Kiev. Many believe the endgame is to oust Ukraine’s democratically elected government and, in line with Vladimir Putin’s revisionist worldview, try to re-draw Europe’s borders.

The move has prompted European countries to come together for crisis talks to decide on far-reaching sanctions against Russia and additional aid to Ukraine. Separated from Ukraine by just one nation – Poland – Germany is unlikely to remain unscathed by the crisis.

This is what we know so far.

How have German officials reacted?

After news of the attack broke overnight, the Brandenburg Gate was lit up in the colors of the Ukrainian flag as a gesture of solidarity as spontaneous protests erupted in support of the Ukrainian government.

In a brief but firm statement on Tuesday morning, Chancellor Olaf Scholz (SPD) described the news as a “terrible day” for Ukraine and a “dark day” for Europe.

“The Russian attack on Ukraine is a flagrant violation of international law. There is no justification for it. Germany strongly condemns this ruthless act by President Putin,” he said.

The chancellor will make an emergency declaration in the German parliament on Sunday and has warned of further sanctions.

Secretary of State Annalena Baerbock wrote on Twitter and also threatened “mass sanctions” for describing Russia’s actions as “unjustified”.

“Today we wake up in a different Europe, in another world,” she wrote. “With the military attack on Ukrainethe Russian government is violating the most fundamental rules of the international order, right in front of the world.

“Ukrainians have done nothing, nothing to justify this bloodshed. This war is meant to destroy one thing: the hopes of the people of Ukraine. President Putin, you will never be able to destroy their desire for democracy and peace.”

Baerbock said Germany would meet with leaders of NATO, the G7 and the EU to discuss a coordinated response.

Will the country send weapons to Ukraine?

While Germany has provided about $2 billion in financial aid to Ukraine over the past eight years, it has firmly refused to send weapons to the region — and this position doesn’t seem to be changing.

Since World War II, the country has generally followed a strict policy of restraint in military conflicts, with the notable recent exception of Afghanistan. However, the situation in Russia and Ukraine is particularly sensitive to Germany because of its Nazi history: millions of people in both Russia and Ukraine were murdered by the fascist regime.

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“Exporting arms to the bloodlands that Germany helped create, supplying some of the bloodlands with weapons … against the other part of the bloodlands … is an abomination in the German political debate,” Thomas Kleine-Brockhoff of Germany’s Marshall Fund told the BBC.

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Instead, Germany has sent 550 soldiers to bolster NATO forces in Lithuania and has pledged 350 additional troops in the region.

But there are also growing concerns about the country’s limited military resources, which will make it difficult to continue supporting NATO.

Alfons Mais, the chief of the German Land Army, wrote in a post on the social network LinkedIn that “the options we can offer politicians to support (NATO) are extremely limited.” The Bundeswehr (army) is “more or less bare,” he wrote.

Annegret Kramp-Karrenbauer, defense minister in Angela Merkel’s cabinet, said Germany had forgotten the lessons of the past that “negotiation always comes first, but we must be militarily strong enough not to make non-negotiation an option for the other party” .

“I am so mad at ourselves for our historic failure. After Georgia, Crimea and Donbas, we have not prepared anything that would have really deterred Putin,” Kramp-Karrenbauer tweeted, referring to incursions Russia carried out while Merkel was in power.

What about sanctions?

In some ways, Germany has already announced its most rock-solid move: the indefinite postponement of approval for the €10 billion Nord Steam 2 pipeline, which would have provided Russia with a significant portion of the country’s natural gas supply.

However, when Chancellor Scholz announced the move on Tuesday afternoon, he promised more would follow if Putin allowed the situation to escalate further. This could include targeting wealthy individuals who support Putin’s regime, further sanctions against Russian banks and a ban on trading with certain Russian companies.

On Thursday, Economy Secretary Robert Habeck indicated that a “strong sanctions package” would be forthcoming that “would cut off the Russian economy from industrial progress, attack and freeze assets and financial holding companies, and drastically limit access to European and American markets.” “. †

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How will this affect the German economy?

According to the German-Russian Chamber of Commerce (AHK), there are currently some 3,651 German companies active in Russia and are likely to be directly affected by the crisis. “So German companies are among the most active foreign investors in Russia,” a spokesman for the Association of German Chambers of Industry and Commerce (DIHK) told Tagesschau. “In addition to the great need for modernization and the good image of the ‘Made in Germany’ brand, it is mainly the relatively high profit margins that attract them.”

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An escalating conflict will hit these companies hard, impacting financial markets and the wider economy. When the German stock exchange (DAX) opened this morning, it had fallen five percent on news of the invasion.

According to DZ-Bank, Russia recently ranked 14th among the main destination countries for German exports, with 1.9 percent of German exports going to Russia. On the import side, it is the 12th most important trading partner, with 2.8 percent of all imports to Germany from Russia. According to the Federal Statistical Office, the main goods traded between Russia and Germany were raw materials, vehicles and machinery.

In 2021, German exports to Russia rose to €26.6 billion a year, so far-reaching sanctions are sure to put a dent in the treasury’s revenues.

What does it mean for the cost of living?

Experts generally agree that the war in Ukraine will exacerbate the rising cost of living. While the Nord Stream 2 announcement was highly symbolic, Germany had not yet received deliveries of natural gas through the pipeline, so it will not be affected by direct losses to its reserves.

However, fears that Russia will stifle gas supplies to Europe in retaliation for sanctions have already sent energy prices soaring to unprecedented heights. This is likely to have a direct impact on households, further driving up energy bills and raising the cost of living as businesses pass on their higher costs to consumers.

Ukraine protests at Brandenburg Gate

Protesters wrap themselves in the Ukrainian flag at the Brandenburg Gate in Berlin. Photo: photo alliance/dpa | Kay Nietfeld

Economy Minister Robert Habeck (Greens) announced the decision to put the controversial pipeline project on hold and warned that energy prices will undoubtedly rise in the near term, although he promised to take steps to reduce the impact on consumers.

There is also a consensus that current gas reserves would be enough to get Germany through the rest of the winter, even if supplies were to be halted completely. Now that the government has set its sights on renewable energy projects, it hopes it will soon be able to completely end its dependence on Russian gas, although in reality this will take several years.

Disruptions to wheat and maize shipments could also have a knock-on effect on food prices. According to BloombergUkraine is an agricultural power that is responsible for about 25 percent of the world’s wheat trade and about 20 percent of maize sales. Problems producing and delivering these shipments would send shockwaves through the global economy and hit German consumers hard.

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What about refugees?

Ukraine has about 44 million people, nearly three million of whom live in Kiev. As Russian troops approached, images were shared online of endless traffic jams as people tried to flee the capital to the west.

In a speech delivered this morning in response to the invasion, Berlin Mayor Franziska Giffey spoke of the impact the conflict would have on the capital and said Ukrainian refugees are likely to come to Berlin if the situation worsens.

However, according to a spokesman, the Federal Ministry of the Interior is “prepared for conceivable scenarios”, but does not believe that the chance of refugees coming to Germany can be seriously estimated at the moment.

Federal Interior Minister Nancy Faeser said she was in close contact with the Polish government and the EU commission regarding refugees fleeing to neighboring countries such as Poland. According to the ministry, the German government will “massively support” other EU countries, especially Poland, in case a huge influx of Ukrainian refugees arrives there.

It would mainly concern “humanitarian aid”.

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Meanwhile, the Association of Cities and Towns has called on state and federal governments to prepare for an influx of Ukrainian refugees.

“We expect close coordination between the federal government, the federal states and the municipalities in order to have sufficient time for extensive preparations,” Gerd Landsberg, general manager of the association, told Handelsblatt. It is about freeing up funds and preparing housing.

According to the Federal Bureau of Statisticsthere were approximately 145,515 Ukrainians living in Germany in 2020, with the number of Ukrainian immigrants rising sharply after the 2014 attacks in Russia.

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