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Germany takes control of Rosneft subsidiary

September 16, 2022

The government has placed the Russian oil giant's three refineries in Germany under trusteeship as it seeks to manage the impact of the energy crisis.

The PCK refinery in Schwedt
The PCK refinery in Schwedt is a key source of fuel for BerlinImage: Patrick Pleul/dpa-Zentralbild/picture alliance

The German government has taken the German subsidiary of Russian oil giant Rosneft under state control, putting it into the trusteeship of the Federal Network Agency regulator.

Rosneft Deutschland accounts for about 12% of Germany's oil processing capacity and is one of the largest oil processing companies in the country, the Economy Ministry said in a statement.

 It follows a similar move by Berlin with SEFE, formerly known as Gazprom Germania, which came under trusteeship after the Russian company Gazprom ditched it in April.

What has the government said?

In an official announcement of the move, Chancellor Olaf Scholz said it was important to do everything possible to ensure Germany's energy security.

He said the decision had not been easy but that it was unavoidable, as Russia was no longer a reliable energy supplier. It was "far-reaching energy policy decision to protect" the country, the chancellor added.

He said the step would secure the Schwedt refinery in the eastern state of Brandenburg, which supplies 90% of fuel to the German capital, Berlin. Since its construction some six decades ago, it has received all its crude from Russia via the Druzhba pipeline.

The refinery is one of three now to be taken under trusteeship, the others being the MiRo and Bayernoil refineries.

He also announced a "future package" for eastern German states worth €1 billion ($997.50 million) over several years following the move to trusteeship for Rosneft.

Schwedt itself would receive €825 million from the federal and state governments, according to Scholz. He said the funding would ensure that redundancies would be avoided at the plant, which employs some 1,200 people.

Economy Minister Robert Habeck was also upbeat about the decision.

"Today, we can say that the site has been secured, and Schwedt's future is in planning," he said.

Later on Friday, Scholz reacted to reports that Polish refiner PKN Orlen was interested in buying a controlling stake in the refinery in question. Warsaw said earlier this year that ending Russian ownership of the refinery was a condition for potentially supplying it with sea-borne oil via a terminal in Gdansk and via Polish pipelines to replace Russian crude.

"At the moment, we're doing a trusteeship," said Scholz, not selling the refinery.

Why has Germany made the move?

The German government cited the need to ensure continued operations at the three oil refineries amid Berlin's resolve to cease oil imports from Russia by the end of the year and European sanctions over Moscow's invasion of Ukraine.

"With the trusteeship, the threat to the security of energy supply is countered and an essential foundation stone is set for the preservation and future of the Schwedt site," the Economy Ministry said in a statement. It said suppliers, insurance companies, IT companies, banks and even customers were no longer willing to work with the company.

The trusteeship is to be accompanied by a "comprehensive package" that will ensure oil can be supplied to Schwedt via alternative routes, the ministry said.

Rosneft has previously stated that it was not intending to stop importing Russian oil even though an EU embargo is to come into force on January 1, 2023.

The trusteeship is initially due to last six months.

The Federal Network Agency, or Bundesnetzagentur, is the office responsible for regulating the electricity, gas, telecommunications, post and railway markets in Germany. Its main tasks are promoting competition in the sectors for which it is responsible and for guaranteeing fair and nondiscriminatory access to those networks.

What else has been said following the announcement?

A spokesperson for the Economy Ministry said on Friday at a regular news conference that it was not necessary to discuss the move with Russia.

However, taking over Schwedt does risk retaliatory measures from Moscow. So far, neither Rosneft Deutschland nor Rosneft have responded.

British oil giant Shell, which owns a 37.5% stake in Schwedt, said on Friday it was "unaffected" by Berlin's move to take control of the refinery. It has wanted to sell its stake for some time.

Reuters news agency has reported that Polish refiner PKN Orlen is interested in taking a controlling stake in the PCK Schwedt refinery. Warsaw said earlier this year that if Russian ownership of the refinery was ended, it would be potentially possible to supply it with sea-borne oil via a terminal in Gdansk and via a Polish pipeline.

Rosneft pledges to fight 'illegal' expropriation

Rosneft accused Berlin of undertaking the "forced expropriation" of its German subsidiaries.

It said that the seizure was "illegal" and it would take legal action to protect its assets.

"Rosneft sees this as a violation of all the fundamental principles of the market economy, the civilized foundations of a modern society built on the principle of the inviolability of private property," a company statement said, stressing that the firm had fulfilled its legal and contractual obligations.

Rosneft said that Berlin's decision meant that it was no longer possible to "guarantee the industrial and ecological safety of the plant."

tj,es/rt (dpa, Reuters, AFP)

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