Berlin on Friday announced the trusteeship of the German subsidiary of Russian giant Rosneft. Behind this decision is the fight for Germany’s energy self-sufficiency. The Schwedt refinery in the east of the country plays a central role in this conflict.
Germany is gradually dismantling the energy bridges to Russia. The government announced on Friday September 16 the trusteeship of Rosneft Germany, the German arm of the Russian oil giant. A decision that marks the takeover of one of the high points of Russian business presence in Germany.
With this measure, “the immediate threat to the security of energy supply is counteracted,” said Berlin. Rosneft’s German subsidiary manages three sites in Germany that account for 12% of the national oil refining capacity. These refineries, with locations in Schwedt between Berlin and the Polish border, in Karlsruhe in the southwest and in Vohburg in Bavaria, will be placed under “fiduciary administration” by the national energy network agency for at least six months.
The lights of Berlin
Berlin feared that Moscow would use oil as a weapon like gas. In early September, Gazprom decided to indefinitely shut down the Nord Stream 1 gas pipeline. Against the background of the Ukraine war and Western sanctions against Russia, “it was difficult to let a Russian company manage such important energy plants for Germany,” sums up Detlef Stolten, head of the research center for energy issues in Jülich, West Germany.
Rosneft Germany’s trusteeship is part of the race against time to find alternatives to Russian hydrocarbons. The government had already taken over the German Gazprom subsidiary in April 2022. In July, the authorities started a large-scale construction project for a port terminal for the import of liquefied natural gas (LNG) in Wilhelmshaven to partially compensate for the import ban on Russian gas. Finally, Chancellor Olaf Scholz used a state visit to Canada in August to sign hydrogen import contracts that will diversify the German energy mix.
Of particular importance, however, is the monitoring of Rosneft’s German activities. It was several months in the making and was at the top of the federal government’s list of priorities mainly because of one location: Schwedt.
This huge refinery in the state of Brandenburg provides light in Berlin and throughout the north-east of the country and provides energy for all of the industry in this part of the country.
“We’re moving Berlin and Brandenburg,” reads the advertising brochures from Rosneft Germany, “a bit pompous, but not entirely wrong,” regrets the Süddeutsche Zeitung.
Without oil from Schwedt, Berlin Airport could not continue to operate, there would be no petrol at the gas stations in the region and the entire construction industry in northern Germany – especially construction roads – would be almost at a standstill.
Who should replace Russian oil?
The Schwedter refinery is controlled by a Russian group and only receives Russian oil. More specifically, this location is one of the main destinations for the black gold flowing through the Druzhba Pipeline (Russian Friendship Pipeline), the longest oil pipeline in the world, running 4,000 km from southeastern Russia to northern Germany.
And Berlin doesn’t want to hear about Russian oil anymore… from January 1, 2023, according to a law passed last July. With this, the Schwedt refinery single-handedly crystallizes all economic, geopolitical and even technological problems in order to find alternatives to Russian hydrocarbons.
First of all, the Schwedt site was built for the “acceptance and processing of Russian oil, which has its own special features”, emphasizes Detlef Stolten. Impossible, for example, to switch to Norwegian oil overnight. “We will have to do development work that costs time and money,” admits the German expert.
Then Germany will have to find an alternative supplier for Russia. Berlin has been looking for the rare pearl since May. Rosneft has offered to bring oil from Kazakhstan, emphasizes the Mitteldeutsche Zeitung, a regional daily newspaper in the state of Saxony-Anhalt. But Berlin preferred to turn to countries less close to Moscow.
The German government knocked on Poland’s door this summer, asking Warsaw to send it oil imported from the port of Gdańsk. But the Polish government did not want to become a supplier to a site run by a Russian company. “It is clear that Germany is paying the price for leaving our energy supply to Russian companies,” admits Detlef Stolten.
According to calculations by the German Fuels and Energy union, “it will not be possible to completely replace the oil transported through the pipeline,” stresses the Süddeutsche Zeitung. It will be necessary not only to increase imports, but also to bring oil by rail and tanker from southern Germany, which has a surplus.
A major upheaval that will be expensive. “It would take about 6,000 tankers a day to replace the oil that is transported through the Druzhba pipeline every day. Even if Germany had the capacity to mobilize such a fleet, it would be too expensive to set it up,” states the Süddeutsche Zeitung.
The Ghost of the West German Opposition, East Germany
In any case, “the renunciation of the inexpensive Russian hydrocarbons will increase the bill for the state and the population,” admits Detlef Stolten. But in the east of the country, some voices believe that the costs of this transition have not been shared fairly. “The embargo on Russian oil was decided by West German politicians who didn’t consider that it’s the eastern regions, more dependent on Russian oil, that will bill for the price increase,” complained on Twitter Sören PellmannDeputy for the eastern federal states of the radical left-wing party Die Linke.
The state takeover of Rosneft Germany will also weigh on public finances. The government has not detailed the cost of this operation, but Gazprom Germania’s trusteeship should cost between $5 billion and $10 billion, and Berlin is also considering nationalizing Uniper, one of the largest gas operators in Germany, which is on the verge of bankruptcy because of the Russian gas embargo. An operation that should also cost tens of billions of euros.
“These are the costs of the trade conflict that Russia is waging against us,” says Detlef Stolten. The takeover of the Schwedt refinery by Berlin makes it clear to him that there has been a local military war since the beginning of the Russian invasion of Ukraine, but also – less visibly – an economic war. But if Germany does not pay the price for this independence, “the long-term costs will be much higher because Vladimir Putin can always question the security of energy supply”.