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Without Russian oil? Search for a solution for Schwedt
At PCK-Raffinerie GmbH, excess gas is burned in the crude oil processing plant. The refinery in Schwedt supplies large parts of eastern Germany. It is operated by the Russian state-owned company Rosneft. Photo: Patrick Pleul/dpa-Zentralbild/dpa
© dpa-infocom GmbH
For a long time, Germany resisted an EU oil embargo against Russia. Now the wind is turning in Brussels. But are the consequences manageable?
It’s going downhill fast. According to Economics Minister Robert Habeck, Germany’s dependence on Russian oil has fallen by two-thirds within a few weeks.
Now the Green politician also considers an oil embargo against Moscow to be feasible because of the attack on Ukraine. The European Union’s plans for this should soon become more concrete. But one big hurdle remains: the operation of the important refinery in Schwedt, which supplies large parts of eastern Germany. And the fear of another price shock for consumers and industry remains.
Will the EU decide on an oil embargo against Russia?
It looks very much like it. After the atrocities in Ukrainian places like Bucha, the pressure on critical member states has increased. According to information from the German Press Agency in Brussels, even the German government, which had been reluctant for a long time, is now supporting plans for an import ban on Russian oil. Hungary, Austria and Slovakia, which are themselves very dependent on Russian oil, as well as Spain, Italy and Greece, which fear a further increase in energy prices, were considered to be slowing things down.
When could the oil embargo come?
According to dpa information, the EU Commission, led by Ursula von der Leyen, wants to present the draft for a new package of sanctions against Russia as soon as possible. It is considered very likely that an oil embargo will be part of it. Possible transition periods are open. Since so many states still have concerns, the proposal could be to allow imports of Russian oil until autumn or even into winter. A conceivable alternative to the import ban is the EU’s upper price limit for oil from Russia in order to cap its income. According to estimates by the Bruegel think tank, Russian oil worth around 450 million euros was recently imported into the EU every day.
How dependent is Germany on Russian oil?
According to Habeck, around 35 percent of German oil consumption came from Russia in 2021. About a third of this came to West Germany by ship and two thirds via the Druschba pipeline to the refineries in Leuna in Saxony-Anhalt and in Schwedt in Brandenburg. The purchasers in the West were looking for new suppliers, says Habeck. The Leuna operator Totalenergies also wants to replace Russian oil by the end of the year – if necessary faster, as the minister explains in a video message: “So the problem is also solved.” This means that the share of Russian oil falls to twelve percent, exclusively for Schwedt. “The last third is the real problem,” says Habeck.
Why isn’t Schwedt looking for new suppliers?
The PCK refinery is operated by the Russian state-owned company Rosneft. “And of course they have no interest whatsoever in not refining Russian oil,” says Habeck. “If I call and say: ‘Hello, what do you actually want to do to become independent of Russian oil?’ They don’t even pick up the phone.” The federal government is therefore considering expropriation as a last resort. The basis should be an amendment to the Energy Security Act, which could be decided by mid-May.
How would Leuna and Schwedt then be supplied in the future?
“For the physical supply of crude oil in Schwedt, a pipeline can be activated that brings tanker oil via Rostock,” writes energy expert Steffen Bukold in a study for Greenpeace. “The capacity of the pipeline is sufficient for about 60 percent of the crude oil demand in Schwedt.” With an expansion, the capacity could increase to 90 percent, says Bukold. Mecklenburg-Western Pomerania’s Economics Minister Reinhard Meyer (SPD) actually sees opportunities to route more oil from Rostock to Schwedt. However, there are many detailed questions to be clarified.
Habeck says somewhat nebulously that there is “a critical limit that must not be undercut, because then the refinery can no longer be operated. That’s why it would be good if we created solidarity with Poland.” What is meant are additional deliveries from the port of Gdansk via the so-called Plock pipeline, as the economist Jens Südekum from the University of Düsseldorf says. This would also be a new reference route for Leuna. But one thing is clear for Südekum: “Replacement for Russian oil is only available at higher prices.”
Do consumers have to dig even deeper into their pockets?
Probably yes. According to Südekum, due to a lack of demand since the beginning of the war, Russian crude oil has been significantly cheaper than oil from other sources, which many now want. Since East Germany in particular has depended on Russian oil so far, large quantities have to be replaced there at higher prices. This is likely to affect consumers in the region. In Berlin, Brandenburg and Mecklenburg-Western Pomerania, nine out of ten cars are currently running on fuel from Schwedt. Leuna supplies around 1300 gas stations in Saxony-Anhalt, Saxony and Thuringia.
Two other cost factors threaten: The plants in Leuna and Schwedt may have to be readjusted if other types of oil are used instead of Siberian oil. And maybe refineries in the west have to contribute to the supply of east Germany, as Bukold writes in the Greenpeace study. That would mean transporting fuel or heating oil with trucks or trains – it would mean effort and costs.
Are jobs at risk?
In Schwedt in particular, there is great uncertainty. 1200 people are employed directly in the factory, as well as hundreds of employees at suppliers and service providers on the site. She too has more questions than answers at the moment, says Mayor Annekathrin Hoppe (independent). In a letter she warned Habeck to be careful. “We currently feel that the Federal Ministry of Economics is not taking us enough,” criticizes Hoppe.
In addition to the question of expropriation, a lot depends on whether enough oil would come from new sources to fill the refinery’s capacity. Südekum considers it conceivable that a difference will remain. There are similar concerns in Leuna. Christof Günther – Managing Director of Infraleuna, which operates the infrastructure in Leuna – said in March that a 100 percent replacement would not be possible. Suppliers could suffer. Around 100 companies with 12,000 employees work at the Leuna chemical site.
Can Germany cope with an oil embargo against Russia?
According to economists, an abrupt halt to oil imports could temporarily drastically increase prices on the world market and slow down the economy in Germany. Transitional periods would probably mitigate the effect of an embargo. Habeck puts it this way: “It would certainly lead to regional bottlenecks, it would certainly lead to higher prices, there might also be local disruptions. So you can’t say nobody notices. But it would no longer lead to a full catastrophe.”