Olaf Scholz at Davos: 2022 'challenged us as never before'

German Chancellor Olaf Scholz spoke gave a rare speech in English in Davos on Wednesday, saying that Russia's invasion of Ukraine in February of 2022 — soon after last year's World Economic Forum (WEF) — had thrown the world into turmoil. 

"What a difference a year makes. At the start of 2022, many people were expecting a boom or at least a substantial boost for our economies' transition towards climate neutrality. Then came February 24," Scholz said, referring to the date of the invasion. 

He said the war was having a devastating effect on Ukraine in particular, citing Wednesday's death of the interior minister in a helicopter crash and offering condolences. 

"But the war is having impacts on all of us," Scholz said. 

He went on to outline risks to the geopolitical order, challenges for various countries, not least Germany, to rapidly give up Russian fossil fuel exports, inflation and other issues. 

However, he tried to argue that opportunities to accelerate the green transition could prove a rare positive by-product of the turbulent year.

Scholz is the only G7 leader to address the WEF this year, as the relevance of a summit that's primarily a gathering of the world's super-rich is increasingly called into question. Although hosted in the Swiss Alps, the forum's founder is a German economist, Klaus Schwab, and Berlin's ties to the event have traditionally been strong.

'In order for this war to end, Russia must fail'

"The other part of the story is this," Scholz said. "Russia has already failed completely in reaching its imperialist goals. Ukraine is defending itself with impressive courage."

Scholz also said that "Russia must fail" in order for the conflict in eastern Europe to end. 

"That is why we are continuously providing weapons systems to Ukraine, along with our partners," Scholz said, listing several of the weapons systems Germany has sent to Ukraine so far, including the IRIS-T medium-range surface-to-air missiles, one of the most recent and advanced examples. 

He mentioned the existing armored vehicles like Marders (weasels in English, Germany names most of its military land vehicles after animals) Germany had dispatched. 

He did not touch on the Leopard 2 tanks which some NATO allies, most notably Poland but also the UK and Lithuania and others, have been encouraging Germany to approve for export to the front lines. Germany must approve the resale or donation of its military equipment to a third country.

A meeting of NATO defense ministers is scheduled at the US Ramstein Air Base in Germany on Friday where the topic is likely at the very least to be discussed behind closed doors. 

Scholz said Germany had also made "over €12 billion" (around $13 billion at today's exchange rate) available to Ukraine and would continue to support the country "as long as is necessary." He called for the private sector to play a "key role" in nascent plans for the so-called "Marshall Plan for Ukraine" jointly recommended by Scholz and European Commission President Ursula von der Leyen last October.

Germany now 'completely independent' of Russian fossil fuels

Scholz also focused on the rapid change to Germany's energy import habits in 2022 as European countries ramped up sanctions on Russia and as the Nord Stream gas pipelines were blown up.

"Within a few months, Germany made itself completely independent from Russian gas, Russian oil, and Russian coal," he said. 

He spoke of several new liquid natural gas (LNG) storage terminals, including one in Lubmin he had opened on Saturday, that were either operational or being planned. He called this good news "for our energy security, and that of our European neighbors who will be receiving gas from these terminals."

"And so I can say that our energy supply for this winter is secure," Scholz said. 

This was reflected on global markets, he said, where energy prices had recently "seen a huge stop, and drop," after skyrocketing in the second half of 2022, in particular. 

He also sought to assure "our partners in Asia, Latin America, Africa and the Carribean," that "the fact that we purchase LNG on the world market should not lead to scarcity elsewhere," pledging to try to prevent this. "We are aware of our obligations," he said.

As a rule of thumb, less wealthy countries further from the war in Ukraine and outside NATO have taken a less hard line against Russia, and yet also face Western pressure to do more despite having less comparative purchasing power. 

Scholz also noted a gradual deceleration in still-high inflation levels — caused in no small part by energy price instability — praising "resolute moves" by central banks to slow it down.

On climate: 'Germany can be flexible ... and we can be fast'

But Scholz probably devoted the majority of his speech to climate change, the green energy and industrial transition, and Germany's goals to achieve net neutrality on CO2 emissions by 2045. 

He said that Russia's invasion, spiking energy prices and natural disasters around the world meant that: "It is now crystal clear to each and every one of us that the future belongs solely to renewables." 

He said Germany planned to "maintain a strong manufacturing sector" as it moves towards carbon neutrality, saying he hoped ingenuity and technical innovations could help facilitate this. He cited Germany being the place where the first effective COVID-19 test and vaccine were developed as an example of this resourcefulness.

He tried to argue that Germany was working to shed its reputation as an overly bureaucratic country where change can sometimes be hard won and slow to materialize, saying 2022 had shown "above all" that "Germany can be flexible ... and we can be fast."

"We will make available no less than 2% of our country for wind power with a minimum of red tape," Scholz said, in a bid to highlight one example. Although Germany was one of the first countries to invest heavily in renewable energies and remains among the world leaders in terms of its share of electricity gained from renewables, its progress on this issue has stagnated in recent years, partly amid political and public resistance to the construction of onshore wind turbines, often on aesthetic grounds.

He said the green transition should not be the "end of our industrial powerhouse, but a new start."

Warning against 'economic decoupling' and 'protectionism'

Scholz voiced a willingness for more global free trade deals and also said he welcomed the US' major investment designed in large part to combat climate change, known as the Inflation Reduction Act (IRA).  Overall, he said "I very much welcome this investment." 

However, he also gently chided the US over parts of the legislation — in line with similar concerns from the EU and other European countries — saying that "protectionism hinders cooperation ... and is detrimental to climate change mitigation." 

European countries have objected in particular to US provisions planning to offer large subsidies to green industries, but only if they are based in the US. Washington has indicated a willingness to discuss these concerns, without committing to alterations as yet.

Earlier in his address Scholz had warned of a more general "danger of a new fragmentation of the world and the dangers of economic decoupling," which he called a "Sword of Damocles" (a reference a story about an ever-present threat hanging over somebody's head). This phenomenon was most visible in the case of Russia but was not limited to it, he said. 

Scholz, a former finance minister known to take particular interest in economic affairs, also touted his coalition government's plans to streamline and reform its immigration laws in the coming years to attract more skilled workers amid record employment levels and low fertility rates in Germany. 

"Those who want to roll up our sleeves are welcome: that is our message," he said to prospective new arrivals. 

Finally, perhaps again betraying his political past looking after Germany's public coffers, Scholz concluded by asking the audience to imagine a future German chancellor addressing the Forum in 2045, presenting Germany as "one of the world's first carbon-neutral industrial nations."

He concluded with an overt call for people to buy in to his plan: "If you asked me today where you can invest in the future sustainably with a high return, my answer is: Don't look any further. Come to us in Germany and Europe." 

Edited by: Wesley Rahn

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