Podcast “Wirtschaft Welt & Weit”: Fratzscher sees Russia’s economy already in recession

Possible delivery-off before embargo
Is Putin now also turning off the oil tap?

By Andrea Sellmann and Mary Abdelaziz-Ditzow
09/22/2022, 11:55 am

Russian President Putin could stop oil supplies to Germany before the planned embargo, experts say. DIW President Marcel Fratzscher and Eastern Europe expert Stefan Meister discuss the future of German-Russian economic relations in the ntv podcast “Wirtschaft Welt & Weit”.

Druzhba is Russian and means something like friendship. The name of the Druzhba pipeline, which connects Russian oil fields in western Siberia with the refinery in Schwedt, Brandenburg, more than 5,000 kilometers away, seems to belong to another time. Since Putin’s war of aggression against Ukraine, friendly trade has come to an end. Instead, concerns are growing that Russian oil will stop flowing to Germany sooner than expected.

For Russia expert Stefan Meister, these fears are more than justified. One urgently needs to look for alternatives, he warns in the ntv podcast “Wirtschaft Welt & Weit”. Because it is quite possible that Russian President Vladimir Putin will turn off the oil tap in Germany after the gas tap. It is already clear that the EU’s oil embargo will take effect soon and that Germany will have to stop using Russian oil from January 1, 2023. But there are still more than three months until the deadline. Enough time for Putin to turn off the oil early and thus exacerbate the energy crisis.

“Russia’s economic model is dead”

Russia has long been one of the world’s largest energy exporters. While a lot of oil, gas and coal have flowed from there to Europe in recent years, millions of euros flow back to Russia every day. Germany built on its supposed friendship with Putin and now has to pay the price for this dependency. Not only with the Nord Stream 2 gas pipeline, which became a billion dollar grave, but also with oil. According to Meister, the massive price increases brought a lot of money into the Russian coffers during the transitional period.

In the new episode of the “Wirtschaft Welt & Weit” podcast, Meister discusses with economist Marcel Fratzscher whether Germany is indirectly co-financing the war of aggression against Ukraine through this expenditure. The President of the German Institute for Economic Research (DIW) points out that Germany is already reducing imports within this period. You also have to make sure that the sanctions can be enforced. All in all, Fratzscher sees the Russian economy already in recession.

As a commodity exporter, Russia is extremely dependent on imports. Machine and spare parts deliveries from Germany are now stopped due to sanctions and are increasingly weakening the Russian companies. For Fratzscher it is already clear: “Russia’s economic model is dead”. The country will experience a massive and long-lasting economic decline unless it changes course.