Fear of Russian retaliation
The federal government has concerns about Rosneft’s expropriation
February 22, 2024, 7:26 p.m
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Rosneft Germany is currently already controlled by the federal government. Expropriation is on the cards, but carries risks. On the one hand, it is about the security of supply for millions of households. On the other hand, the Chancellery apparently fears Russia’s reaction.
In addition to expropriating Rosneft Germany as the majority owner of the Brandenburg oil refinery PCK, the federal government is also exploring other solutions. According to a report in the “Handelsblatt”, there are concerns in the Federal Chancellery and the Federal Ministry of Finance about expropriation. The reason is concern about Russian retaliation through the expropriation of German companies in Russia and high compensation claims, as the newspaper reported, citing government circles.
This was confirmed to the German Press Agency by those close to the government, as was a meeting between representatives of the federal government and the Russian side. The “Handelsblatt” reported that there was a meeting with Rosneft boss Igor Sechin in Istanbul a few days ago. According to information from those close to the participants, it was discussed at the meeting not to pursue nationalization for the time being under certain conditions.
Instead, the Russian side should refrain from suing against a further extension of the existing trust administration. This would give the Russians time to find a buyer for Rosneft Germany, the newspaper said. A spokeswoman for the Federal Ministry of Economics did not want to comment. The hearing on a possible expropriation is currently underway, which will then be evaluated. Rosneft holds 54 percent of PCK in Schwedt, 24 percent of the Miro refinery in Karlsruhe and around 28.6 percent of Bayernoil, based in Neustadt an der Donau.
Escrow solution will expire soon
The Federal Ministry of Economics has been examining for several weeks whether Rosneft’s shares in the three refineries should be expropriated. The federal government placed the Rosneft subsidiaries under trust management in September 2022 and thus brought them under its control. The aim was to secure the supply of fuel despite not using Russian oil because of the war in Ukraine. After being extended several times, the trust solution expires on March 10th.
In the dispute over the Russian state-owned company Rosneft’s shares in German refineries, the Federal Ministry of Economics believes that the supply of millions of consumers in eastern and southern Germany is at stake. If the Brandenburg PCK refinery were to fail – where Rosneft is the majority owner – there would be a monthly shortage of 300,000 tonnes of diesel and heating oil in the greater Berlin and Brandenburg area, according to a report from the ministry to the Energy Committee in the Bundestag. A further 210,000 tonnes of diesel and heating oil per month would be missing if Rosneft Germany’s shares in the Miro and Bayernoil refineries were to fail.
“High risk of supply shortages”
“It would not be possible to procure and transport these shortages at short notice,” says the paper, which is dated Wednesday. “As a result, there would be a high risk of supply bottlenecks in the east and south of Germany.” Without government intervention, the operations of Rosneft Germany and its associated refineries Miro, Bayernoil and PCK would be expected to be impaired.
If PCK were controlled by Russia, suppliers, customers, service providers and banks would withdraw, which could lead to the cessation of operations, it is said. “As market forces cannot solve this problem, further government intervention is required.” A further temporary extension of the trust administration would be possible. But a long-term solution is necessary, explains the ministry. A hearing was therefore initiated. But that is not yet a decision for expropriation.
The deadline for the hearing expires on Friday. Brandenburg’s Economics Minister Jörg Steinbach had stated that he considered other solutions to be conceivable in addition to expropriation. It cannot be ruled out that Rosneft is interested in selling its shares.