Germany has raised the stakes in its clash with Russia by seizing the German unit of Russian oil giant Rosneft. In the audacious move that might attract stringent action from Moscow, Berlin took over the assets of Rosneft, including its stake in three oil refineries.
The Germany government’s action is in the backdrop of the “impending threat to the security of energy supply and lays an important foundation for the preservation and future of the Schwedt location,” German economy ministry said.
Hardest Hit Country
Germany is the hardest hit country in Europe after Russia began squeezing the gas supplies to the region following the western sanctions against it over the Ukraine war.
Last week, Russian state-owned gas monopoly Gazprom completely stopped gas supplies to Europe through the Nord Stream 1 pipeline. With gas flow through the pipeline, which stretches 1,200km under the Baltic Sea, completely shut, the strain on Germany’s supplies increased ahead of the winter.
The Nord Stream 1 pipeline, which was opened in 2011, has been a lifeline for Europe. With winter months approaching, Europe is worried over the Russian move as greater supplies are required for heating homes.
Rising Gas Prices
Gas prices have spiked more than 400 percent in Europe after the supply crisis began in the wake of the Ukraine war. Further output stoppage will drive prices up again. The astronomical gas prices have strained the finances of oil behemoths across Europe, more so in Germany.
Germany’s biggest gas importer, Uniper, has sought more government aid as it faces an insurmountable cash crisis in the face of the Russian supply cut.
Uniper, whose losses have been climbing, has warned that it could run out of cash sooner than expected. Ever since Russia squeezed gas supplies through the Nord Stream 1 pipeline to Germany in the aftermath of the Ukraine war and the Western sanctions, Uniper has had to buy gas at higher rates to meet domestic demand.
Securing Refining Capacity
By nationalizing Rosneft’s oil facilities in Germany, the government of Olaf Scholz looks to supply and refining capacity. Chancellor Scholz and the economy minister Robert Habeck are expected to give more details of the nationalization plan soon, Bloomberg reported.
As per the report, German grid regulator BNetzA will take over RN Refining & Marketing GmbH and Rosneft Deutschland GmbH.
Shares of the major refineries, PCK Schwedt, MiRo in Karlsruhe and Bayernoil in Vohburg, have also been placed under the control of government agencies.
While RN Refining & Marketing GmbH and Rosneft Deutschland GmbH account for some 12 percent of Germany’s oil processing capacity, CK Schwedt refinery is a major source of fuel for Berlin. Rosneft Deutschland is also one of the biggest oil processing companies in the country.
“The decision is accompanied by a comprehensive package for the future, which will provide a transformational boost for the region and support the refinery to ensure the supply of oil via alternative supply routes,” the ministry said.
Rosnefft Profit Soars
Rising energy prices have resulted in windfall gains for the Russian energy giant. The first half 2022 profits of Rosneft Oil, Russia’s largest state-run oil company, had touched $7.2 billion, rising 13 percent.