Status: 04/26/2022 08:07 a.m
By the end of the year, Germany should be able to do without Russian oil imports – that’s what the federal government has promised. In practice, this could be complicated – and expensive.
In Schwedt an der Oder in Brandenburg, right on the border with Poland, they listen carefully when big politicians say something about Russian oil imports. Since the federal government announced the goal of being able to completely do without Russian oil by the end of the year, the mood among politicians and business people here can only be described as extremely tense. The reason is just outside the city gates: the PCK refinery. Here Russian crude oil from the pipeline known as “Druzhba” (“Friendship”) is processed into gasoline, fuel oil, kerosene. Gas stations in Berlin, Brandenburg, Mecklenburg-West Pomerania are directly dependent on the plant.
The uncertainty comes from two sides: will Germany impose an oil embargo or will Russia turn off the tap? Both would have consequences that go far beyond Schwedt. The security of supply of parts of East Germany would be called into question. And in Schwedt, with around 33,000 inhabitants, the 1,200 direct jobs in the refinery would be at risk.
The refinery is the economic heart of the city, for Schwedt there is a lot at stake. This probably explains why both city politicians and the company itself have become very silent. At the moment there is no comment from the town hall on the subject, and the company, PCK Raffinerie GmbH, also does not want to give an interview.
Designed for Russian oil
But in the background, insiders report, scenarios are already being played out as to what would happen if no more Russian oil flowed out of the pipeline, which previously made up the lion’s share of the raw material in Schwedt.
The first challenge would be a technical one. Because the refinery is specially designed for the heavy Russian oil. Not only petrol is produced here, but also kerosene for Berlin-Brandenburg Airport and heavy oil for the power and heat supply of the city of Schwedt. The simulations for a replacement supply, for example with crude oil from the Middle East, are complicated, to put it mildly. Because oil from the Arab region has a different composition: it is lighter. The result: The refinery could no longer produce all products as usual – and accordingly generate less income.
Quantity is also an issue
In addition, there would probably be a quantity problem. The location is connected to another pipeline – from the Baltic Sea port of Rostock. But that could only deliver a little more than half the usual amount of crude oil. And only if it were filled with oil from tankers as continuously as possible. After all: “A supply is possible from a purely technical point of view,” writes the PCK refinery.
But before that, the oil would first have to arrive in Rostock. The tankers commonly used in world trade are too big, the oil would probably have to be pumped into smaller ships in Rotterdam. But is there enough freight capacity for this? “Good question,” replies an insider who knows the business games.
An alternative: supply via the port of Gdansk from Poland. Larger ships could dock here, and the oil would be pumped into the “Druschba” pipeline via detours, and from there it would be routed to Schwedt. Only one scenario so far. The problems here: Supply contracts to Gdansk would first have to be concluded and the Polish side would have to agree. Both scenarios, Rostock and Poland, would incur additional costs.
Russian majority owner
As a result, an alternative supply seems technically possible – with restrictions and cost increases. The other problem, however, is the ownership structure. The refinery is majority owned by Rosneft Deutschland GmbH, a subsidiary of the oil company Rosneft, which in turn is majority owned by the Russian state.
The British oil company Shell currently holds 37.5 percent of the shares. Shell actually wanted to sell everything to an Austrian company. But Rosneft had a right of first refusal and made use of it. The Federal Cartel Office had no objections; after the Ukraine war began, the Federal Ministry of Economics put the sale on hold. It is now being examined whether the purchase of shares by Rosneft could endanger public order and security in the Federal Republic.
In addition, from a legal point of view, the PCK refinery is a so-called “contract processor”. That means it doesn’t decide for itself whose oil is refined on whose behalf. That is up to the shareholders. It is completely unclear how Rosneft will behave in the event of a German embargo. Would the company accept the refinery being fed with other oil, or would it rather shut down the plant instead? Rosneft Germany does not reply to written questions.
Nationalization as a last resort
And so all sides don’t really want to let themselves be looked at at the moment. From the point of view of federal politics, the simplest thing would be a liberation as a last resort: the refinery could be nationalized or at least placed under federal supervision. The decision about which oil to process would then no longer be in the hands of Russia.
Experts do not consider this scenario unlikely. In principle, the ifo Institute found that doing without Russian oil is economically feasible: “In the case of oil, we assume that a drop in Russian supplies can be offset by other sources.” Janis Kluge, Russia expert at the German Science and Politics Foundation, has a similar view: “Abandoning Russian oil is feasible given sufficient preparation time.”
In contrast to gas, he sees Germany as having greater leverage over Russia when it comes to oil. The world market is big enough here to absorb the delivery failures. And the effect on the Russian side would be painful. Kluge says: “Oil is very important for the Russian budget, because it is taxed much more heavily in Russia than gas. From my point of view, an import ban on oil is advisable because it would increase the pressure on Russia.” In Schwedt they will listen carefully to such statements.