Nationalization Rosneft must secure fuel supply in East Germany

Russian oil company Rosneft no longer controls three major refineries in Germany. The German government decided Friday nationalization of Rosneft Deutschland GmbH and RN Refining & Marketing GmbH, in particular to secure the supply of fuels in East Germany.

The three refineries in which Rosneft had a controlling interest account for about 12 percent of the total capacity in Germany to make fuels such as petrol, diesel and kerosene from crude oil. This makes Rosneft one of the largest oil processors in Germany, according to the Ministry of Economic Affairs in a press release.

The most important part of the nationalization is the PCK oil refinery in East German Schwedt (1,200 employees). This is where 90 percent of the fuel for Berlin is produced, including kerosene for Berlin Brandenburg Airport.

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PCK currently runs on Russian crude oil. However, from 1 January, a boycott of Russian oil will be implemented throughout the European Union because of the war in Ukraine. In recent months, the German government has been busy looking for alternative sources of crude oil, via the German seaport of Rostock and via Polish ports. That search was complicated by the fact that Rosneft, the owner of which is a friend of Putin, controlled PCK with 54 percent of the shares. As a result, Poland refused to cooperate with alternative deliveries.

Since mid-May, Germany has had the legal opportunity to take control of companies if energy supplies are at risk. Until now, however, the government has been hesitant to nationalize Rosneft, fearing that Russia would stop supplying gas through Nord Stream 1 and immediately stop supplying oil. The Russians have already done that first; the second threat still hangs over the market.

In addition to the question of how the refinery in Schwedt now obtains sufficient crude oil, it is still unclear who will operate the refinery. According to sources from the Reuters news agency, a Polish competitor would be interested. Shell, which has 37.5 percent of the shares in PCK, said in a statement that it did not want to speculate on possible solutions to the operator problem. Shell put its share in the shop window last spring. A sale to then co-shareholder Rosneft was blocked by the German government.

Since the Russian invasion of Ukraine, Germany has been heavily covered with regard to its energy policy. Despite criticism from, among others, the United States, there was extensive reliance on supplies of gas and oil from Russia. This remained the case even after the annexation of Crimea (2014). Chancellor Olaf Scholz and his predecessor Merkel have long maintained that opening a second gas pipeline to Russia, Nord Stream 2, was a “private economic intention”.

Scholz said Friday afternoon in an explanation of the nationalization that it is important that “the government does everything it can to ensure Germany’s energy supply.” The German branch of the Russian gas company Gazprom was previously nationalized. “We have known for a long time that Russia is no longer a reliable supplier of energy.”