Germany moved to regain control of its energy security on Friday in the face of Russia’s threat to cut off supplies and the EU’s plan to ban Russian crude oil: it seized Russian oil giant Rosneft’s operations in Germany, risking retaliation from the Kremlin.
The move was “inevitable… yes [make] we are more independent than Russia,” announced German Chancellor Olaf Scholz. “We have known for a long time that Russia is no longer a reliable supplier of energy. This is a wide-ranging energy policy decision to… preserve Germany’s energy supply… [and] to protect our country,” Scholz said.
“Defending our country”
Just last month, Germany amended an energy law that would allow the government to take temporary control of companies that have “critical infrastructure” for Germany’s energy supply. As a last resort, Germany could expropriate such companies, according to the revised law.
The government has now placed two Rosneft subsidiaries under the guardianship of the German energy regulator, meaning that three critical refineries are now controlled by Germany. These refineries process 90 million barrels of crude oil per year. PCK, a refinery in northeastern Germany, supplies 90% of the fuel to the capital Berlin, according to Reuters. Rosneft was one of the country’s largest oil refiners, accounting for roughly 12% of Germany’s capacity.
However, the takeover is temporary and lasts until next March. It also retains Rosneft as a major shareholder.
It is not the first time Germany has taken such drastic measures. In April, the government also placed a subsidiary of Gazprom – another Russian state-owned energy giant – under the guardianship of the energy regulator. The company’s assets include Germany’s largest gas storage facility, according to an FT report.
Chancellor Scholz said Germany did not take these decisions lightly. The companies’ operations were at risk because “key critical service providers . . . [like] suppliers, insurance companies, banks, IT companies, but also customers, were no longer ready to work with Rosneft – neither with refineries in which Rosneft is a shareholder, nor with its Russian subsidiaries,” the German economy ministry said.
For months, Russia has held Europe hostage by cutting off — and threatening to cut off — natural gas supplies to the continent. Russia, before its February invasion of Ukraine, was the largest supplier of oil and natural gas to the EU.
G7 countries last week agreed to cap Russian oil prices in a bid to stem the flow of petrodollars to the Kremlin. In response, Russian President Vladimir Putin said that Russia would simply deprive EU countries of their energy, claiming that countries that import Russian fossil fuels “are not in a position to dictate their will. Let them come to their senses”.
Threats from Russia, combined with the EU’s wholesale embargo on Russian crude next January, have left Europe scrambling to stockpile, fearing a winter energy crisis.
Yet Germany still faces serious challenges in replacing Russian crude oil with other sources. The nation is in advanced discussions with Poland to buy oil from the Eastern European nation, which will flow through the Polish port of Gdansk, to the now German-controlled PCK. Yet Poland has refused to supply its oil if Rosneft still holds a majority stake in the refinery.
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