This is a question that people can write entire books on, but I’ll try to give an explanation.

The overly simple answer to this question is: because the allies agreed to allow Germany to stay independent. This was decided at the Yalta conference in 1945, where Roosevelt, Stalin, and Churchill agreed that after the war, Germany would remain its own country.

Now, for the more in depth answer: You have to start by looking at the aforementioned Yalta conference of 1945. The purpose of this conference was to determine what would be done with Germany after the war ended, which as it turned out, would be a few months later. Among the things agreed upon at the Yalta conference:

1. Purge Nazis from positions of power

2. Foster the growth of democracy

3. Remove the German military

4. The creation of four zones of occupation.

Now, points 2-4 are most relevant to your question. However, keep in mind, that though Stalin, FDR, and Churchill all agreed to foster democracy, they all had very different conceptions of what democracy is. And, just to clarify, by zones of occupation I do not mean splitting germany into four separated states, just that the allies share the duties of occupation. These duties, which are later more formally agreed upon at the Potsdam conference in July-August of 1945, include the “Four Ds:”

-Denazification

-Deindustrialization

-Demilitarization

-Democratization

Also important to note is that at the Potsdam agreement, the allies still believe in a unified Germany. East Germany as an independent state is not created until 1949.

Now, to address your first part of the question, as to why the Soviet Union didn’t expand its territory: well, to some extent, they did. If you look of a map of Germany before 1939, you’ll see that Germany has two prong like bits where Poland is now, along the Baltic Sea. That territory was historically Prussian and home to large numbers of ethnic Germans. After the war, the USSR takes control of Königsberg (now Kaliningrad), which you can now see on a map of Russia as that little disjointed bit on the Baltic Sea coast. In addition, much of eastern Germany’s territory is lopped off and given to the polish, while Poland loses some of its eastern territory as well and essentially shifts west on the map.

Also of note is that the borders of the soviet zone of occupation/East Germany were decided before the war ended as a compromise. Neither the soviets nor the Americans knew where exactly where they’d be at the end of the war, so they kind of had to hedge their bets geographically. In fact, the Americans were actually almost at Berlin when the war ended, but retreated west, back to the agreed upon demarcation line rather than set up their zone right where they were.

As for why East germany didn’t just get absorbed into the Soviet Union, there’s several aspects to consider.

Prior to 1949, Stalin does try to squeeze the allies. He blockades off West Berlin (which, as you may know, is also occupied four ways and happens to be squarely in he middle of the Soviet zone), hoping to get the allies to back down, but the Berlin airlift ruins his plans. Also, prior to 1949, Stalin does not have a nuclear weapon. This prevents him from trying to be more aggressive than and going back on his word from Yalta/Potsdam should he have wanted to do that.

Once east Germany does become a state, the simplest reason is just that there’s no need to absorb East Germany into the USSR. East Germany was a sofort satellite state and part of the Warsaw Pact, along with the other countries behind the iron curtain, so they were allied militarily. In addition, East Germany’s General Secretary would generally do whatever was asked of him by Moscow. By carefully planting loyal communist officials in the East German government, the Soviet Union retained a large degree of control over east Germany while retaining the appearance of respecting sovereignty and democracy (which, as the uprisings in Hungary in 1956 and Czechoslovakia in 1968 show us is largely baloney). Another factor is strategic: in the event of nuclear war and/or a land war with NATO, East Germany, along with the rest of the Warsaw Pact countries, provided a buffer zone for the Soviet Union.

As for the other part of your question, “how was germany even able to remain a country?” Well, the answer is that many people thought that Germany should NOT have become a country again. This was most famously advocated for by Henry Morgenthau, who was FDRs secretary of the treasury. Morgenthau argued that Germany should be split into three zones, stripped of its military and heavy industry, and only be allowed to have the industrial capacity it had had in 1933. Of the three zones, the western zone, which is also where most of Germany’s industry is, would be an “international zone” governed by the UN.

That plan was never formally adopted. Partially because the new Germanies wouldn’t be able to sustain themselves, but also because there was a fear that if the allies got too punitive, they would destroy the ability of Germany to recover and thereby encourage exactly what had happened after the treaty of Versailles. The western allies felt that economically integrating Germany into Europe would be the best way to ensure peace and stability in the future. In addition, with the start of the Cold War, the allies were deathly afraid of communism taking hold in Germany, and therefor pumped tons of money into Germany via the Marshall Plan, under the assumption that a prospering, economically sound Germany would be less susceptible to communism.