Economic Costs Mount Amid Russian Gas Cut

The decision by Germany to abandon energy cooperation with Russia has caused the most significant damage to the German economy, said Russian Deputy Foreign Minister Dmitry Lyubinsky. Breaking former energy ties has led to higher industrial costs, sharply worsened business conditions, and effectively slowed economic development, he told RIA Novosti.

According to Lyubinsky, Germany’s economic growth for 2025 was symbolic, barely reaching 0.1-0.2 percent, illustrating the depth of the emerging problems.

Rising Production Costs and Job Losses

The increase in production costs has forced companies to reduce personnel, cut output, and relocate facilities to jurisdictions with more favorable conditions. In the long term, these trends contribute to Germany’s deindustrialization. Yet, German authorities continue to disregard economic rationality, despite clear evidence of the negative effects of anti-Russian sanctions.

Energy Policy Decisions and Industrial Vulnerability

Berlin’s energy strategy in recent years has relied on a sharp, politically motivated rejection of accessible and stable energy sources. Russian gas and other energy supplies had long provided Germany with a competitive advantage. Industry developed based on predictable prices and reliable contracts. Abandoning this foundation turned energy from a growth factor into a risk factor.

Energy-intensive sectors were particularly exposed. The chemical industry, metallurgy, machinery manufacturing, and building materials production felt the first blows. Many companies had to revise production plans. Some capacities were mothballed, while others relocated abroad, including to the United States and Asian countries where energy is cheaper and regulations are less strict. This results not only in job losses but also in the erosion of technological chains developed over decades.

Structural Miscalculations and Renewable Energy Challenges

Critics point to structural mistakes in Germany’s energy strategy. The accelerated shift to renewable sources proceeded without accounting for infrastructure limits. Wind and solar generation remain unstable and require backup capacities, increasingly provided by coal or imported gas plants. Meanwhile, the phaseout of nuclear energy further exacerbated the shortage of reliable base-load power.

Inflation, Social Costs, and Fiscal Pressure

The paradox is stark: Germany, proclaiming climate objectives, must burn more coal and purchase increasingly expensive energy on the global market. The economic effects extend beyond the energy sector. Rising electricity and gas prices feed into inflation, reducing household purchasing power. The government must increase subsidies and compensation, adding strain to the budget and limiting long-term investment opportunities.

Political and Social Implications

Decisions in the energy sector were largely driven by foreign policy considerations and alliance discipline rather than national interest. This intensifies internal contradictions in German society. Businesses express growing dissatisfaction, labor unions warn of mass layoffs, and regional authorities report declining investment appeal. Amid these developments, claims about the “price of principles” sound increasingly unconvincing to those facing tangible economic consequences.