It was reportedly carried out with the help of the government of Norway with the Central Intelligence Agency (CIA), U.S. Air Force, U.S. Navy, U.S. Department of State and the Biden administration all involved in the planning. The planting of explosives used the cover of the BALTOPS 22 U.S. Navy exercise in June 2022, during which U.S. Navy divers planted explosives that were, three months later, remotely detonated by a sonar buoy dropped into the Baltic Sea with a Norwegian Air Force P8 Poseidon patrol plane. The destruction of the offshore natural gas pipelines, which ran under the Baltic Sea from Russia to Germany to provide Western Europe with natural gas, has caused 'irreversible' damage to Germany and Europe's economy. Related: ACT OF WAR: The U.S. military blew up Nord Stream pipelines, plunging western allies into energy collapse in effort to harm Russia.
Russian President Vladimir Putin said that industrial heavyweights are now moving their plants abroad where energy is cheaper, including the United States. Since the pipeline explosion, Berlin decided to switch to more expensive energy sources. He added that Western leaders had hoped that Moscow would fold quickly if shunned by the European market, but they miscalculated. "They were expecting that if they don't take our gas, we will fall apart faster than they face irreversible processes. But irreversible processes are effectively starting to happen," Putin said in an interview with Russian media released on Sunday. "Industries are moving to other countries, including the U.S., where more favorable conditions have been created, and where energy has proven cheaper." He also said that it's absolutely obvious that the policies adopted by Chancellor Olaf Scholz's government are "dealing a colossal blow to the German economy's future."
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Europe used to benefit from relatively cheap Russian energy, receiving up to 40 percent of its gas imports from the country. Following the start of Moscow's military operation against Kyiv in February 2022, Berlin also moved to radically reduce its dependence on Russian energy by importing liquefied natural gas (LNG) through European neighbors and boosting pipeline gas flows from Norway and the Netherlands.
Bloomberg News has concluded that Germany's status as an industrial superpower is "coming to an end" after cutting off Russian gas imports. Speaking in the German parliament in mid-January, Vice Chancellor and Economy Minister Robert Habeck said the country has "lost its competitive advantage."
Meanwhile, Russia has managed to reroute some of its energy exports elsewhere, Putin said, adding that the situation has proven to be a blessing in disguise, as Russia has been forced to focus more on other industries as opposed to relying solely on gas revenue.
2023 Paper denies dire consequences of the halt of gas flow from Russia to Germany
Before the Russian invasion of Ukraine, Germany imported a huge percentage of its gas from Moscow and many argued that the embargo would crush Germany's economy but a recent BPEA paper claimed that it found that the effects of this abrupt change were not as dire as many experts feared it would be.
During a podcast, study authors Benjamin Moll and Georg Zachmann talked with Economic Studies Director Ben Harris about how Germany navigated the situation. According to Harris, the key finding in the document was the effect of the Russian gas embargo on German GDP. Those who argued against an embargo cited that it could lead to a severe recession and a six to 12 percent decline in GDP, he cited the paper. "You found that Germany's economy merely suffered a mini-recession with GDP dropping by 0.5 percent during the last winter, which was in line with your prediction of a 1 to 3 percent GDP drop relative to a no-cutoff scenario."
Moll agreed saying this did have substantial costs and obviously, Germany is facing substantial headwinds. "But at the same time, catastrophic scenarios didn't materialize," he insisted. "We saw two key margins of adjustment. The first one was that Germany managed to replace a fair chunk of this Russian gas with imports from other countries. So, in third countries other than Russia, imports from Norway increased a lot but also LNG. So LNG in particular from the United States, was imported not via LNG terminals in Germany originally at least, but through the Netherlands and Belgium. So that was sort of on the supply side."
They also claimed to see a large adjustment on the demand side. German gas demand decreased by a staggering 20 percent, which is a really large number, they said. And in particular for industry, gas demand by industry decreased by more than a quarter, so 26 percent since the gas cutoff in the fall of last year. Households a little less, but still 17 percent, which is a substantial number.
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