DW: How Putin destroyed the Russian business model

Let’s start by looking back. The year is 2022 It started very promisingly for Russian state-owned companies Gazprom and Rosneft – Especially in Germany, their biggest European market. Both companies are the largest contributors to the Russian budget.

The new German government has announced the construction of several new gas-fired power plants to meet the country’s energy needs, following its decision to phase out nuclear power and, earlier, coal.

Gazprom So he faced a great opportunity Extension of supply to GermanyIt was already the largest market in the world and grew by a quarter (!) year-on-year. All Russian pipeline gas exports. Also, the construction of the gas pipeline has now been completed North Stream 2, While highly controversial in the EU, certification in Germany was still possible. New German chancellor Olaf Scholz called it a “private sector project”.

On the other hand Rose Napid It wants to increase its stake in the PCK refinery in Schwedt from 54 to almost 92 percent. This company has been exclusively processing for decades Russian oil provided By the friendly pipe. The refinery supplies petroleum products Berlin, much of East Germany, as well as the fast-growing new capital of BER. Rosneft was only waiting for final approval on the stake German government And don’t expect rejection.

At the end of 2022, the situation is very different: when Gazprom completely stops supplies to GermanyThe German government is taking control of its German subsidiary Gazprom Germania with large gas storage facilities. The Nord Stream 2 project is finally buried. Two German liquefied gas terminals are already in operation, and at least six are planned for next winter – all while Germany is no longer dependent on Russian pipelines. Principal Scholes continues to insist that Russia has been a reliable energy supplier.

Whereas Rose Napid The German government lost control of the refinery in Schwedt, which came under administration, and the authorities’ next step was to expropriate the Russian company. In addition, PCK wants to finish processing Russian oil under the EU embargo by the end of the year and rely on other suppliers in the future. Germany has high hopes for Kazakhstan in this regard.

So a year later Gazprom and Rosneft are in turmoil in Germany. More precisely: after ten months. This loss of the lucrative German market, experienced simultaneously by two major Russian companies, is quite illustrative. The greatest damage Vladimir Putin has done to the Russian economy With its attack on Ukraine on February 24, 2022. It’s not just about the failure of individual projects. This war destroyed the business model of today’s Russia.

There was an economic model The most important Russian exports are crude oil, petroleum products, natural gas, hard coal, metals – Mainly sold EuropeEspecially – to do European union. The foreign currency earned was used to purchase machinery and equipment to modernize the Russian economy and consumer goods for the Russian people.

Its focus as the EU’s largest export market and the most important supplier of high-quality imported goods resulted not only from geographical proximity. In addition to convenient logistics, they played a decisive role Historical and cultural relations: From at least the beginning of the 18th century, from the time of Tsar Peter I, Russia considered itself an integral part of Europe, and European countries – preferred trading partners.

In modern Russia, almost all gas pipelines, major oil pipelines, railways, highways, and a significant portion of air links to the West were directed to Europe. Trade with Europe was the main objective of modernizing oil, coal and container terminals in the Baltic Sea, Black Sea and Murmansk ports.

It was also an essential part of Russia’s business model European countries have become the largest foreign investors in the Russian economy. They have contributed to capital, technology and oil and gas industry, power generation, automotive manufacturing, food processing, retailing to name a few industries. Much of the investment also came from American companies, but America was not as important a market for Russia as Europe.

Everything is history now. With your war in the middle of Europe Putin abruptly ended the good workings of the model he helped create. Many European companies completely left Russia, others stopped their investments. Because of that they did EU and US sanctionsFor image reasons, business conditions in Russia have deteriorated significantly, or simply because of this War disgusts them.

But the biggest loss for the Russian economy is that it will lose the biggest market for its main export products in 2022. You have given her a severe blowThe European Union has imposed a ban on oil exports from Russia by sea. It has not yet had its full effect, as it only came into force on December 5, and European companies need time to switch to other suppliers and transport routes.

Ruble exchange rate However, it collapsed relatively quickly as fears of a sharp drop in foreign exchange earnings spread across Moscow. It will happen on February 5, 2023 An embargo on Russian oil products – No less severe blows. and from August 10 The European Union has cut off the Russian coal industry From its market, which recently bought half of Russia’s coal exports.

This is a huge loss in the European market alone Gazprom It has suffered before, not because of EU sanctions, but because of them The Kremlin’s decision. First, in the spring, he cut off gas supplies to those countries and companies that did not want to comply with Russia’s sudden demand to “pay in rubles.” Then, in the summer, he drastically reduced pipeline supplies Nord Stream 1 to Germany and neighboring countries, citing problems with Siemens turbines.

At the end of August Moscow has completely cut off gas to the EU. She did confidently Without enough energy and terrible prices threaten Germany and the EU with the fear of a cold winter That would force them to weaken support for Ukraine. The result? Two German companies are already planning to sue Gazprom for billions in damages for violating a large-scale gas contract. Until Russia pays them, it will be another obstacle – next to war – to the return of Russian pipeline gas to Germany.

Gazprom He cannot summon arcane damage North stream (And partly North stream 2) explosions occurred on September 26, nearly four weeks later supplies were completely cut off, and a few months later Russia arbitrarily cut supplies.

Lack of German and European sales market Accustomed to success, the Russian gas industry will plunge into deep crisis. Russia, admittedly, can to certain extents Redirect oil and coal exports to Asia, it would be very advantageous to continue sending oil tankers from Russian Baltic ports to Rotterdam, but not to distant India. But gas pipelines that have been exclusively laid west of Siberia for 50 years cannot be diverted to the east.

Although The Kremlin Announces new gas pipelines to be laid in East Russia It needs more of what it does not currently have and will no longer have enough: Time, money and skilled workers. Because The loss of the European sales market will now be more and more noticeable month by month. Russia would burn through its financial reserves for war and be cut off from international capital markets. And hundreds of thousands of healthy, professionally active people Russians Died at the front, maimed or fled abroad.

The Kremlin A half-well-functioning alternative to the European-oriented Russian business model cannot be created. In 2023, more and more Russians will realize this more and more.

Andriy Gurkov

Polish editorial office of Deutsche Welle