Russia Halts Oil Flows to Germany as Berlin Seizes Rosneft Assets

It is likely that a long-overdue decision has been made in the Kremlin to stop oil supplies to the refinery in Schwedt, which Germany seized from Rosneft.

Photo: commons.wikimedia.org by Thomas Wolf, www.foto-tw.de, https://creativecommons.org/licenses/by-sa/3.0/

Brandenburg Gate, Berlin

Russia Stops Pumping Kazakh Oil to Germany

The decision to nationalize the Russian stake (54%) in the refinery in Schwedt (Brandenburg) was made in the autumn of 2022, and the process has been completed. Germany was granted "indefinite trusteeship” not only over Rosneft's oil refining and petrochemical assets, but also over its wholesale oil and petroleum product trading structures, which, in terms of consequences and with the approval of EU regulators, is equivalent to expropriation. Berlin could have refrained from accelerating this decision, as the United States has consistently extended exemptions for Rosneft from sanctions.

Currently, the option of reselling Rosneft's nationalized stake to a new investor is being considered. Kazakhstan is mentioned among the potential buyers, as it supplies 20% of the oil to the Schwedt refinery via the Druzhba pipeline.

However, Kazakhstan's Energy Minister Yerlan Akkenzhenov, speaking on the sidelines of the "Regional Environmental Summit” in Astana, stated that in May the transit of oil to this refinery via the Druzhba pipeline may be halted. According to him, the Russian side cited a lack of technical capability to pump the oil. Akkenzhenov suggested that this could be related to recent strikes by Ukrainian forces on Russian infrastructure.

The minister emphasized that Kazakhstan has the ability to redirect these volumes to other export routes. Primarily, this concerns the Caspian Pipeline Consortium (CPC) through Novorossiysk and the Chinese direction.

A Response to Merz for Strategic Support of Ukraine

The Germans had hoped that oil supplies to the Schwedt refinery from Kazakhstan would continue, but Russia is closing this "lifeline.” This is a blow to the regional economy, as the refinery supplies fuel to 85% of vehicles and heating systems in Berlin and Brandenburg, while "seaborne” oil from Poland, which will have to replace the missing volumes, is significantly more expensive. The news comes amid a shortage of supply on the global market and conflicts in the Middle East, meaning that the entire German economy is also affected. Press Secretary Dmitry Peskov, when asked to clarify the situation, said that such matters should be addressed to the relevant Russian companies.

The Russian authorities have taken two notable steps. First, they did not concern themselves with Kazakhstan's reaction, and, as we can see, it has found alternative destinations for its flows. Second, they stopped taking Germany's economy into account. It is likely that there had been an intention to support the former East Germany, where opposition is strong in the form of the Alternative for Germany (AfD). However, after Chancellor Friedrich Merz opted to strengthen direct military support for Ukraine, reinforcing its capabilities with long-range drones, this concession effectively disappeared.

State elections in eastern Germany are scheduled for September. The leadership of AfD openly calls for the resumption of Russian energy imports. The party actively uses the issue of high fuel prices and the threat of closure of the Schwedt refinery as a key element of its election campaign. However, the regional government cannot unilaterally overturn Berlin's decisions. Nevertheless, if AfD enters the Brandenburg government (currently leading with approximately 34-35%), it will be able to exert political pressure on the federal authorities through the Bundesrat (the chamber representing the states), sabotage the sale of the refinery to a new investor, and demand the preservation of jobs.

Destabilization of Germany's domestic political situation will only continue to grow.