Why Germany is tightening control over industry with Russian oil grab 

Why Germany is tightening control over industry with Russian oil grab 
Culture & Property rights

Germany seized the local unit of a Russian oil major Rosneft PJSC as it aims to take control of its energy sector and secure supplies while severing years of high dependence on Russia for fuel. 

The government, on Friday, declared it’s taking over Rosneft’s German unit, including its stakes in 3 oil refineries. This move will also affect holdings in Italy, France, and Austria.

Scholz’s administration announced the seizure after months of talks. And due to sanctions associated with the Ukrainian war, the German government is aiming to discontinue purchasing Russian crude by the end of 2022 while ensuring that Kremlin involvement in its strategic refineries won’t be a threat. 

Scholz disclosed at a press conference in Berlin, “This is a very important step for energy supply in Germany. We are making ourselves more independent from Russia, and also from decisions that are taken anywhere there.”

Germany has been largely affected by the economic battle with Russia due to its reliance on Russian oil and gas. Western Sanctions and Russia’s attempt to economically punish Europe for supporting Ukraine are a risk to Germany entering into recession.

The supply squeeze also affects the country’s energy sector, and the ongoing crisis dwarfs the government’s bailouts. 

As stated, this Rosneft unit swoop is an escalation of the economic battle with Russia as Germany unwinds years of tight collaboration. A major asset in the deal involves the Schwedt refinery close to the Polish border that supplies Germany with fuel. 

The facility has been getting its crude through the Russian Druzhba pipeline. It will be difficult to see how the facility will continue going fine provided that its plant remains in Russian hands. 

The move “counteracts the impending threat to the security of energy supply and lays an important foundation for the preservation and future of the Schwedt location,” said the German Economy Ministry.

Now, the refinery is preparing for possible retaliation from Russia. Retaliations like short-term limits in crudes supplied through the Cold War-era Druzhba link.  

Move to take over Uniper SE oil and others

On Thursday, Bloomberg reported that aside from Rosneft, Chancellor Olaf Scholz’s administration is in discussions to take over Uniper SE and 2 other main gas importers.

This comes as Germany works to achieve a memorable overhaul of its economy after 2 years of the pandemic. It wants to grab control over its industrial base to avoid blackouts and shortages this winter. 

Also, there’s a need for action since Uniper lost 100 million euros a day as it aims to replace Russian gas to continue deliveries to local manufacturers and utilities.

According to Verena Hubertz, a leading lawmaker for Scholz’s Social Democrats, “Over the next few months, we’ll have to continue to preserve critical infrastructure to achieve energy independence. Further measures will follow.”

Generally, it’s good to add that Germany can take over an energy company administration by giving an order via the German Energy Safety Act. This Rosneft trusteeship will run until March 15, 2023, however, it can be renewed. Rosneft can petition or challenge the order via the German courts.