German leaders are mulling over what to do with a crucial oil refinery in northeastern Germany, majority-owned by Russian oil company Rosneft, according to Politico.
The government is considering taking over the PCK refinery, located in the town of Schwedt, 120 kilometres from Berlin. This refinery alone meets half of East Germany’s fuel needs and provides 11 per cent of the country’s total supply. Given the importance of the refinery, its nationalisation would ensure the country’s long-term energy needs and avoid supply disruptions that could shock the country’s already faltering economy.
Berlin placed PCK under a temporary state “trusteeship,” but in this way the refinery would remain under Moscow’s control, making it virtually impossible for the Germans to secure oil supplies to the refinery in the future. Jacopo Maria Pepe, a senior analyst at the German Institute for International and Security Affairs, stated:
The problem is with this trusteeship. Rosneft is controlling this asset; if you extend it for another year, then… you might have a supply crunch.
However, experts warn that taking over the refinery would have its own huge disadvantages and could even lead to fuel shortages, which are most feared by the German authorities. Nationalisation could also leave Berlin with a billion-euro debt to Russia.
Berlin has already nationalised the former German subsidiary of Russian gas giant Gazprom, while Moscow has confiscated the assets of Western firms, including German oil and gas producer Wintershall.
Following the outbreak of war in Ukraine in February 2022, the EU imposed sanctions on Russian oil imports to the Union, with Berlin placing PCK in trusteeship along with two other refineries also majority-owned by Rosneft.
As the trusteeship, which Berlin has already extended twice, expires on 10 March, the German government must decide whether to take control of the PCK refinery on a more permanent basis. Rosneft owns a 54 per cent stake, which represents a significant part of the Russian company’s assets in Germany, valued at about $7 billion.
Viktor Katona, lead crude analyst at the Kpler market intelligence firm, warned that the Russians could “immediately cut any supply to Schwedt in the near future.”
“You would immediately get price spikes on fuel in the capital city. Fuel supplies might be jeopardised.”
German Economy Minister Robert Habeck claimed on Tuesday that he had received assurances from the Polish government that Warsaw would step in to help Berlin in the event of a sudden power cut. Katona added that Warsaw could help in an emergency by bringing oil to the refinery via pipeline from the Polish port city of Gdańsk. However, he also stressed that there was “no space” at the import terminal for deliveries to Germany on a long-term basis.
It’s like a game of musical chairs, and all the chairs are already taken.
Rosneft vowed to oppose any move to seize the refinery, with law firm Malmendier Legal, representing Rosneft, stating:
“Such an expropriation would represent a measure that would remain unprecedented in the history of the Federal Republic of Germany and would forever damage investment security. As a listed stock corporation, Rosneft will take all measures to protect the rights of its shareholders.”
Given the complexities and risks, Berlin’s best option may be to postpone the case and extend the trusteeship for the third time. Katona declared:
Every option that Germany has on the table right now is worse than the status quo.
