Almost all of the debate surrounding Germany’s economic ties with Russia since the invasion of Ukraine has focused on gas and oil. For good reason: Germany buys more Russian oil and gas than any other European country, making energy Russia’s most lucrative import to Germany.
However, many German companies depend on a steady supply of other Russian exports, especially raw materials such as nickel, palladium, copper and chromium.
Nickel is used in the manufacture of stainless steel, but it is also an important component of lithium-ion batteries needed to power electric cars. Palladium is also vital for car manufacturers, as it is an essential component in the production of catalytic converters, which clean exhaust gases from gasoline and hybrid vehicles.
In 2020, Russia was Germany‘s largest supplier of raw nickel, accounting for 39% of the country’s supply according to MIT’s Observatory of Economic Complexity, a trade tracker.
It also supplied around 25% of Germany’s imports of palladium and between 15% and 20% of the heavy metals chromium and cadmium, which have a range of industrial uses. Russia also accounted for 11% of Germany’s refined copper imports in 2020, 10.9% of its platinum and 8.5% of its iron ore.
Nickel and Daimler
A recent study by the German Economic Institute (IW), a Cologne-based think tank, identified several raw materials imported from Russia that would be difficult for Germany to substitute. “New trade relations with other countries exporting these raw materials are essential,” the institute said in a statement.
Nickel is important for making lithium-ion batteries for electric cars
Nickel is particularly important to consider. Germany’s second largest import partner for unwrought nickel in 2020 was the Netherlands with 29%. But Russia is the market leader, supplying around 20% of the world’s purest form of the metal, known as Class 1 nickel.
High quality nickel has become increasingly rare in recent years. The boom in electric vehicle production around the world – which needs high-grade nickel for batteries – has led to an increase in demand.
Tesla CEO Elon Musk has frequently tweeted about the lack of nickel. “Nickel is the biggest challenge for high volume, long range batteries!” he wrote in July 2020. “Australia and Canada are doing pretty well. US nickel production is objectively very poor. Indonesia is awesome!”
Class 1 nickel prices had already doubled in the past two years, but Russia’s invasion of Ukraine raised concerns that Moscow could impose an export ban. A trading frenzy in early March saw prices hit record highs, with the London Metal Exchange even suspending trading for a time, the first time it has taken such a step in 37 years. Nickel prices have risen 400% in 2022 alone.
Volkswagen – which has effectively staked its future on rapidly becoming an electric powerhouse – recently announced that it has reached an agreement with Chinese companies Huayou Cobalt and Tsingshan Group for a joint venture to secure the supply of raw cobalt and nickel in Indonesia, one of the largest producers.
Export bans, import bans
However, uncertainty over Russian commodities will continue to weigh on the market. Some analysts have predicted that the nickel crisis alone will add at least $1,000 (€919) to the costs of a new electric car for consumers.
The VDA, the trade body for German automakers, says the war in Ukraine will cause further disruption to vehicle production in Germany. “Long term, the auto industry faces shortages and rising raw material prices,” he said in a statement.
Automakers aren’t the only ones affected. In 2018, German chemicals giant BASF teamed up with Russia’s Norilsk Nickel, the world’s largest producer of refined nickel, for a deal that would see the Russian company supply nickel and cobalt to the new materials production plant. for batteries from BASF in Finland. Such agreements are now under scrutiny.
Norilsk is one of the nickel mining centers of Russia
Although Moscow has not included materials such as nickel on the export ban list it published in March, there remains a chance that sanctions from Moscow or Brussels will end the flow of such materials. first to Europe.
On Friday, the EU announced import bans on several Russian products, including coal, caviar, wood, rubber, cement and vodka. However, nickel and other commodities exported in large volumes to countries like Germany were omitted from the list.
Small potatoes versus energy
Even though the sale of Russian nickel to Europe is not legally prohibited, the overwhelming pressure on German companies to cut trade ties with Russia continues to mount in virtually every sector.
Yet as myriad economic and trade ties between Germany and Russia are snuffing out and will continue to do so in the face of outrage over what is happening in Ukraine, nearly every scenario is overshadowed by the consequences. possibilities of an embargo on Russian oil and gas.
Many pundits and business leaders have argued that Germany’s economic prosperity over the past decades has been largely based on cheap Russian energy supplies.
Ultimately, other German-Russian economic ties are overshadowed by the energy issue
BASF director Martin Brudermüller told the Frankfurter Allgemeine Zeitung that a sudden ban on Russian oil or gas could lead to an economic crisis as severe as any in Germany since World War II, and that his company would have to stop production if the supply of natural gas fell to less than half of current use.
Some disagree with such strong assessments. A study by the German National Academy of Sciences, Leopoldina, said an immediate end to supply would be “manageable”.
The fact that something as strict as an outright ban on Russian energy is seriously debated shows one thing clearly for any German company with ties to Russia, whatever its nature. : nothing is forbidden, whatever its economic “criticality”. be.
Edited by: Hardy Graupner