Bi-Weekly Geopolitical Report – The New German Problem (January 23, 2023)

Thomas Wash | PDF

When times are tough, you discover who your real friends are, just ask the European Union. From 1860 to 1945, Germany struggled to keep the peace with its neighbors. Commodity-deprived and lacking natural barriers, Germany has sought to impose its will throughout Europe to protect itself from being invaded or cut off from mineral resources. The European Union (EU) and the Northern Atlantic Treaty Organization (NATO) were eventually set up to mitigate this problem, but Germany’s unusual size and export needs created other issues.

Germany’s integration into the EU was designed to ensure that German interests were aligned with the West. However, things didn’t necessarily turn out that way. A decade ago, during the European debt crisis, the Germans lambasted southern European countries for being unable to repay the money they had loaned them. Germany built the Gazprom 2 pipeline with Russia against the wishes of the U.S., and its decision to sell a major port to China has drawn the ire of France. In short, Germany never truly committed itself to the European project.

The war in Ukraine has made Germany’s ambivalence unpalatable to its Western allies as the group gears up to take on a rising China and an aggressive Russia. Although it appears that Germany is attempting to maintain its neutrality, it isn’t clear whether this is possible, given the country’s size and influence. This report begins with a discussion on Germany’s conflicting loyalties, reviewing the country’s attempts to manage its relationships with its Western allies as well as China and Russia. Next, we consider how Germany has adapted to the changing geopolitical landscape, and we conclude with market ramifications.

Read the full report

The associated podcast episode for this report will be available later this week.