German Economists Favor Tariffs Over Russia's Oil and Gas Embargo

07-06-2022

In a study conducted by ifo and the FAZ Economists Panel among economists in Germany, 70% of respondents believe that tariffs would be more effective in reducing payments to Putin's government while minimizing the impact on Europe.

Several German economists advocate imposing tariffs on Russia's energy products as an economic sanction on Moscow for the military invasion of Ukraine, rather than the option of a full gas and oil embargo. In a study conducted by ifo and the FAZ Economists Panel among economists in Germany, 70% of respondents believe tariffs would be more effective in reducing payments to Putin's government while minimizing the impact on Europe.

In the survey findings, economists believe that customs duties would force Russia to lower its export price and that higher prices in Europe would simultaneously lead to a redistribution of resources through market liberalization. "This could be an effective way to put pressure on Russia," stresses Lisandra Flach, director of the ifo Center for International Economics.

On the other hand, there is a 23% slice of respondents who are skeptical of this option, citing the risk of further raising already high energy commodity prices. For these economists, Russia has an advantage in the negotiations, especially on gas, meaning that tariffs would be mainly borne by the EU. They also argue that a reduction in payments is insufficient as a sanction, with a complete cut being preferable.

The same study also indicates that 57% of economists agree that Germany's international economic policy should limit trade relations with autocratic states, due to geopolitical risks and the responsibility to safeguard human rights. However, 38% advocate no limitations, believing that isolating these countries could make them more dangerous.

Despite Germany's heavy dependence on Russian energy products, Chancellor Olaf Scholz, believes that the country is increasingly prepared to end energy relations with Moscow. After looking for new international partners, Berlin also wants to strengthen the supply infrastructure and invest in renewable energies.