Is green transition boon or bane for German fertilizer?

The jury is out on the dilemma known as Green Transition, whose German title “Energiewende” meaning-energy turnaround- is still the subject of intense debate in the geoeconomics circle. As a policy measure it is intended to do good. But things are getting awry.

Brief explanation of Energiewende is not out of place. The core idea is based on shifting from fossil fuel (nuclear power also included) to green energy or renewable energy system. The goals are as follows:

1. Net Zero Emission by year2045

2. Electricity consumption from green/renewable source be at-least 80% by 2030

3. Coal as energy source be phased out by 2038

Facts & analysis

All these loftier goals are good for only obtaining electricity for both domestic consumption along with lighting and powering factory infra-structure. When it comes to the question of producing fertilizer, it is not a boon but a bane.

For example, production of nitrogen fertilizer relies heavily on the Haber-Bosch process, where large amount of natural gas is required as feedstock and energy source. Hence, the dependence on natural gas, for instance, cannot be over simplified. At present, only 75% of the required fertilizer for German farming is provided via domestic industrial giants. Chief amongst these are:

1. K+S Aktiengesellschaft: Being Germany’s largest producer of ammonia and urea-based nitrogen fertilizers located in Kassel, it is considered as global hegemon in potash, magnesium, and sulphur products

2. SKW Stickstoffwerke Piesteritz GmbH: Being the largest producer of ammonia and urea-based nitrogen fertilizers in Germany located in Wittenberg. It has a separate arm for producing de-fossilized "green" fertilizers

3. Compo Expert GmbH: Located in Münster, this international company specializes in high-quality specialty fertilizers and bio-stimulants for horticulture, turf covering and other agriculture.

All three above and many others who are engaged in domestic fertilizer production realize that the future for fossil-fuel based fertilizer within Germany is bleak, due mainly to Energiewende policy mandated by the Federal Government agencies tasked to bring out the “Green Transition” quickly.

Threats perceived

Heavy penalties would be imposed by these Federal agencies on the recalcitrant factories who fail to transition to using renewable energy source as well as green ammonia made on the basis of green hydrogen, which is produced with electrolysis using renewable electricity. In any case, generating  renewable electricity is more expensive in Germany.

Options available

There are only two options available for the affected factories. Either liquidate the company or relocate elsewhere in Europe, say Spain.

Geoeconomics Risk

1. Right now sourcing fossil fuel and natural gas is wrought with high geoeconomics risk. Closure of Hormuz Strait and blocking of Red Sea Navigation adds more cost in terms of transport and marine insurance not to forget about the high prices quoted for the fuel itself

2. Existing supply chain issues involving imports of fertilizers such as potash, phosphate, and sulphur from Mid-East would be further exacerbated when German fertilizer firms relocate their production facilities elsewhere in Europe.

Strategy Advice

The Federal Government must re-examine the structure and deadlines regarding Energiewende goals while the companies in fertilizer industry have to shelve their plans for energy transmission and relocate outside of Germany.

Navigating strategy amid geoeconomics recommend both governments and fertilizer companies to re-assess Energiewende ASAP. 

 

Cheers!

 

Muthu Ashraff

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser

 

 

 

Germany, confusion confounded in Red Sea blockade

Recent statement by German Chancellor, Friedrich Merz that Houthi military advances in Yemen and attack on energy plants in Saudi Arabia have worsened energy crisis is true; but calling for international community to size up with Houthis is only inciting more chaos. In sum, it is confusion confounded.

Let me take you in a quick journey therough how the crisis unfolded and the German stake, where German action has failed so far and what remedial measures she must advocate now.

The Crisis

Saudi Arabia-Houthi conflict started in 1934 leading to victory for the Saudis resulting in the loss of Asir, Jizan, and Najran belonging to Yemen. Since then there has been enmity brewing between the two parties. What Yemen doing is to recover the lost areas and to assert control over Red Sea which was in Yemen’s’ backyard. In a recent blitzkrieg, Yemenis are seen advancing in their goal of uniting their country which the international community including Germany must support!

German stake in Mid-East imports

German imports of crude oil from Mid-East hovers around 6% of the total. Germany is sourcing crude from Norway at 16.6%, USA 16.4% Libya13.8%. Kazakhstan supply which was around 13% earlier has wound down as Russia ordered suspension over pumping Kazakh oil via Druzhba pipeline. This is offset by Libyan supply that can be upped to 18% quickly to ease any shortage.

Hormuz blockade has affects much more than what Bab al Mandeb blockade does. Houthis are now controlling strategic positions around Bab al-Mandab. More than that, their attacking energy facilities in Saudi Arabia exasperated the situation. Naturally, the resultant worsening of the situation in the energy market has spill over effects on Germany as well.

Where Germany has failed

Friedrich Merz states that “The international community cannot allow the Houthis to take shipping in the Red Sea hostage.”  This is just a declaration of war. Already US tried it and failed miserably. If Iran can do this in Hormuz why Yemen should be reprimanded. Ironically, Germany is also in cahoots with Nordic countries harassing Russian oil tankers in the Baltic Sea.

Remedial measures Germany should advocate

1. Call for an international conference to discuss both blockades Hormuz and Red Sea because these are very much interconnected in terms of geoeconomics

2. The globe must accept Hormuz Strait belonging to Iran and Oman and suggest required modus operandi for Iran to manage the Strait with participation by Oman

3. Germany should parley with Saudi Arabia in reconciling with Yemen in solving their territorial issues

4. Freedom of Navigation as an international concept must be re-evaluated taking into consideration of the rights and privileges of littoral states so that they have a stake in geoeconomics power and related responsibility

5. The United Nations Convention on the Law of the Sea (UNCLOS) need to be amended suitably taking into account the rights and privileges of all sea-faring nations.

Strategy Advice

Germany must join hands with brother Aryan nation Iran, to set example of good governance that brines prosperity to all and promoting peace and harmony along with surge in geoeconomics well-being.

Navigating strategy amid geoeconomics hold Germany and its people responsible for solving both Hormuz and Red Sea crises!

 

Cheers!

 

Muthu Ashraff

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser

 

Konrad Adenauer, dyed in wool capitalist

Once as Lord Mayor of Cologne, Konrad Adenauer objected the flying of Nazi flag in his office. As the First Chancellor of the post war Germany he has in his element the same hard core capitalism that made German recovery possible but at the cost of alienating Russia and her allies. Read for more:

Born in the Nineteenth Century, 5/1/1876 precisely, Konrad had charisma to be the leader of CSU and won the first federal election convincingly to propagate his three dimensional political philosophy based on Christian social ethics, undiluted conservatism and liberal democratic capitalism. He hated experimenting with any other political system and often snarled at any deviation by sloganizing his famous mantra: “Keine Experimente” meaning no experiment.

Konrad’s Ideals

Three main ideals that drove him to fame are:

1. Germany must have political stability

2. Economic recovery and thereafter sustainable growth for a long time

3. Fully integrated with the West and avoid contact with the East championed by Stalin.

Pluses

During his 14 year chancellorship of 1949-1963 he demonstrated his trait as dyed in wool capitalist. Here are few of good things he did:

1. Joining NATO and allying with both USA and UK he unveiled the policy of “westcindung” (Binding to the West)

2 Signed up The Treaty of Paris (1951) that established the European Coal and Steel Community (ECSC) to pool the coal and steel industries of six Western European nations viz., France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg

3. Followed it with The Treaty of Rome (1957) that, established the European Economic Community, the precursor of the present European Union

4. Initialled Elysee Treaty in 1963 to bring about Franco-German reconciliation

5. Finally, Konrad was able to mesh conflicting ideals of free market capitalism with a social welfare.

Minuses

1. Konrad remained an unrepentant capitalist with his ant-communist stand by unveiling “Hallstein doctrine” that eschewed recognising East Germany even though it is populated by German brothers.

2. As a skilful manager of international relations he paid an official visit to Moscow and met up with Stalin in 1955. But he rejected Stalin’s notion that Germany must be a neutral country like Switzerland. However, Konrad succeeded in freeing remaining German war prisoners held by Moscow

3. Covertly at the beginning and overtly later on, he worked against his own finance minister Ludwig Erhard and in fact walked an extra mile in preventing Ludwig contesting German Chancellorship. This was his great undoing. The CDU rebelled and he was unceremoniously asked to leave chancellorship. By the way, Ludwig Erhard is the founder and promoter of “Wirtschaftswunder” (Economic miracle) based on the idea of social market economy, which is credited as the main pushing force that made rapid economic recovery possible in Germany.

Lessons Learned

Konrad Adenauer is indeed a dyed in wool capitalist. He brought about German resurgence in geopolitics and geoeconomics. But he failed to understand that there is other side of the coin in terms communism that later gave way to socialism. Today, the trend is to go away from unmitigated capitalism towards inclusive socialism as Putin in Russia and XI Jinping in China have proven.

My Advice

Navigating strategy amid geoeconomics makes Konrad Adenauer an object lesson to be studied by present and future leaders of Germany.

 

Cheers!

 

Muthu Ashraff

Strategy Adviser

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Strategy Adviser