Putin has put Berlin in a tight spot

As Western governments seek to reverse Russia's intervention in Crimea, all eyes are on Germany to take the lead. As the most powerful voice in the European Union and one of Russia's top trading partners, Berlin has more at stake — and therefore, supposedly, more leverage over Moscow — than the United States. At least that was the premise of Berlin's long-term policy of engagement with President Vladimir Putin. The crisis in Ukraine, therefore, represents the toughest test yet for the policies of Chancellor Angela Merkel and her predecessors.

Merkel has certainly been more vocally critical than her predecessor, Gerhard Schröder, had been in responding to Putin's domestic policies towards minorities, political opposition and civil society groups. But she maintained the fundamentals of Germany's policy of engagement with Moscow rooted in the tradition of the New Ostpolitik, or new eastern policy, of the 1970s and '80s. The key project of the past decade has been a partnership for modernization with Russia, developed by Foreign Minister Frank-Walter Steinmeier when he served in the same position in the 2005-2009 grand coalition government. The premise of that policy is that increasing cooperation and the integration of Russia's economy with Europe would promote change and a more open political system in Moscow. That view is based on Berlin's interpretation of how the Cold War ended: While for Washington the fall of the Soviet Union was mainly the result of the West's economic success and the inability the USSR to keep pace, for the German political elite it was the direct result of the policy of détente that reduced geopolitical antagonisms.

Thus the mantra of the post-Cold War German policy towards Russia: "Peace and stability in Europe is only possible with but not against Russia." What the engagement policy failed to reckon with, however, is that while Russia seeks the transfer of know-how and technology to stabilize its rent-seeking economy, political change is not in the interest of the current Russian regime. Moscow wanted trade without change. Still, the German economy has benefited a lot from this policy, becoming Russia's third-most important trading partner and developing a successful energy business with Russian companies. Today, Germany imports 39 percent of its gas and 36 percent of its oil from Russia.

Doing business with post-Soviet Russia, however, often meant accepting Russian rules and the political system in Moscow. The growing economic interdependence may have cultivated in the German political elite a belief that they could influence Russian behavior, but thus far the Ukraine crisis is proving that belief to be an illusion. Putin's defiance of calls to reverse his intervention in Crimea has challenged Germany to find a meaningful response. Still, Merkel is the most powerful leader of Europe, and power is a currency Putin understands.

Germany's initial involvement in the Ukraine events was in line with its expressed policy of taking a greater leadership role in global conflict management. Foreign minister Steinmeier took the lead in bringing his colleagues from Warsaw and Paris to Kiev to stop a bloody conflict between former president Victor Yanukovich and the Maidan movement in mid-February. But the breakdown of the compromise agreement they brokered precipitated the Russian intervention in Crimea, posing a new challenge.

German and European stakes in the conflict are different from those of Washington, which has limited geopolitical interests in Ukraine. And it's much cheaper for the Obama Administration to impose tough sanctions on Russia than it is for Germany to so. While in 2013 the U.S.-trade balance with Russia was of about $38 billion, for Germany it was more than twice that amount. Energy dependency and economic ties reinforce Berlin's resistance to U.S. efforts to impose tough sanctions, but German policy makers also believe that more isolation and less communication will actually harden Putin's position.

Instead, Germany seeks to maintain channels of communication, and to internationalize the conflict by bringing observers from the Organization for Security and Co‑operation in Europe (OSCE) into the region and founding an international contact group. Berlin has even stopped the discussion of expelling Russia from the G8 for a moment (it now comes up again). Thus far, however, neither Merkel's phone calls with Putin nor the diplomatic efforts of Steinmeier have slowed Russia's moves to effect the secession of Crimea. Engaging Putin without effect while blocking tougher sanctions leaves Berlin more vulnerable to charges of appeasement. Putin, if anything, seems to be willing to respond in a tit-for-tat fashion to the limited sanctions adopted thus far, apparently believing that Brussels and Berlin won't impose sanctions that would really hurt Russia's economy because of the damage such measures would inflict on their own economies.

Still, Putin's effort to separate Crimea from the rest of Ukraine has forced Berlin to escalate its response. Merkel's tone has hardened, telling a session of her Christian-Democrat faction in the Bundestag on Tuesday that "what Russia is doing in Crimea is an annexation, which we cannot accept." If the referendum on Crimean secession goes ahead on Sunday, Germany will feel compelled to support tougher sanctions on Moscow even if Berlin believes that is not the right strategy.

If Germany fails to persuade Putin to change course in the confrontation over Crimea, the Russia policy Berlin has adopted over the past decade will have revealed its limits — the leadership in Moscow is clearly not an agent for democracy and rule of law in the region.

Germany now faces the challenge of leading the EU in developing an effective response to a Russian annexation of Crimea that Merkel herself has deemed unacceptable. But it also faces the longer-term challenge of moving beyond a Russia policy based on hoping that Putin can be coaxed into opening up his political system. Instead, Berlin will be under pressure to build bridges with more reliable Russian partners for change — for a new and serious Ostpolitikthat focuses on developing alternatives to the Putin system. Time may be working against Putin and his old solutions, but his intervention in Ukraine has created a policy crisis for Germany and Europe that will force them to take more responsibility than they have done until now.

Stefan Meister is a Senior Policy Fellow at the European Council on Foreign Relations