The truth is always the first victim in war, and Russia’s aggression against Ukraine once again proved this. However, war can reveal truths otherwise hidden and unspoken.
Martin Brudermuller revealed a hard truth about Germany’s economy in an interview with German newspaper Frankfurter Allgemeine Zeitung. German-based BASF, the head of the world’s largest chemical corporation, stated that Russian gas was the “fundament of German industry’s global competiveness.” When asked whether Germany was not fueling Putin’s war by importing energy from Russia, he replied that a ban on such imports would “destroy the well-being” of Germans.
What Brudermuller called “a mainstay for Germany’s economic strength” has been an integral part of Germany’s business model, and has helped secure its position as one of the most exporting countries in the world. German companies have built successful business models over the past two decades. Importing energy at lower prices and using it for development of competitive products was one of them.
China has been a significant contributor to the success story in recent years. This is because German corporate heads took advantage of the Chinese economic juggernaut earlier than any other competitors. They were able not only to capture large sections of China’s market, but also gained access to China’s rare earths, precious minerals, and other important resources. It is no surprise that Volkswagen (VW), the German auto giant, currently exports 40% of its annual production to China.
The global drive to make national economies more open to international competition has also been a boon for Germany.
The brutal war in Ukraine has made it seem like a straight path to success for German companies. Already the COVID-19 pandemic was a sign of what many consider “the end to globalization”.
In times of global pandemics, business leaders are starting to look at disengaging supply chains that have become too complicated. The absence of medical mask production in Germany opened eyes for politicians and the general public to the fact essential infrastructure was being outsourced all over the globe.
Although “Reshoring”, is expected to be the buzzword of the post-COVID era, most industrialized nations may find it difficult to bring production home.
The Ukraine war has given a new twist to the story of deglobalization in Germany. It has increased the national urgency for Germany to stop importing Russian energy to counter Putin’s aggression.
The question of how to deal China, which appears to be supporting the Kremlin, is also on the horizon. This is due to a smart awareness by the Chinese president of the fact that large amounts of Russian energy are now available for grabs. Their shared hatred of Western values like democracy, freedom speech and the rule of laws is what unites Putin and Xi.
Is the world heading for a split or, as Gabriel Felbermayr, a German economist, put it, “the end to 30 glorious years” of globalization? Is this the world we are heading for? A world where the United States and Europe will lead the West, but Russia, China and possibly India (which is still undecided) are joining forces in Far East.