Cut to 2022 and Rosneft’s assets have been acquired by the German government. Sechin’s dream of downstream expansion into Europe’s biggest oil market is in ruins, a casualty of the escalating energy war between Russia and the West. On Friday, the German government said it was taking control of Rosneft’s stake in three German refineries — PCK in Schwedt, northeast of Berlin, MiRo in Karlsruhe and Bayernoil in the Bavarian city of Vohburg. Chancellor Olaf Solz said the decision was “inevitable”. “We have known for a long time that Russia is no longer a reliable energy provider,” he said. “That is why it is important that we do everything we can now to secure Germany’s energy supply.” “Ultimately, this is all about Germany rediscovering the need for energy security,” said Amrita Sen, an analyst at Energy Aspects. “Germany recognizes that its dependence on Russia has gone too far and now, with the embargo coming in, it has little choice.” Indeed, the trigger for the acquisition was the EU’s impending ban on Russian oil imports, which comes into force on January 1 and could put enormous pressure on Germany’s refining industry. Russia has already cut gas supplies to Germany, threatening a deep recession in the country this winter. Berlin has had some success finding alternatives to Russian crude, but the Schwedt plant has presented a problem: not only is it directly above a Russian pipeline, the 4,000-kilometer “Druzhba” or friendship line, but it’s also 54 percent owned by Rosneft, a company with little interest in refining non-Russian oil at the site. The government, which places Rosneft’s stake under the guardianship of the federal energy regulator, the Bundesnetzagentur, said Russian ownership of Schwedt and the other two refineries put their business at risk. “Key, critical service providers, such as suppliers, insurance companies, banks, IT companies, as well as customers, were no longer ready to cooperate with Rosneft,” the Economy Ministry said. All this is a far cry from Sechin’s press conference in 2017, which marked the opening of Rosneft Deutschland’s new office in Berlin. It was a time when German-Russian relations were in the balance and the Kremlin was still seen by many in Germany as a reliable partner. The optimists were personified by Michael Harms, head of the Ost-Ausschuss, the main lobby for German investors in Russia. Appearing alongside Sechin, one of President Vladimir Putin’s closest confidants, he said Rosneft’s new representative office in Berlin was “proof of Russia’s unwavering commitment to the European market”. German-Russian trade had, he added, “increased dramatically” in the first two months of 2017, and the expectation was that it would “grow by 10 percent this year, if not more.” Sechin repeated his assessment. The volume of trade between Russia and Germany had quadrupled between 2000 and 2013 to €56 billion, with German imports from Russia tripling to €27 billion and German exports to Russia sevenfold to €29 billion. “And it’s not just oil deliveries and oil refining, but also technological cooperation,” he said, referring to the massive market Russia had become for German manufacturers. However, the warm words exchanged between Sechin and Harms ran counter to the prevailing mood in many Western capitals. Russia had annexed Crimea just three years earlier, a violation of international law that plunged East-West relations to their lowest point since the Cold War. Europe and the US responded with sanctions, some of which targeted Rosneft. Instead of being hurt by the West’s punitive measures, the Russian-German energy partnership intensified. Russia has built a new pipeline under the Baltic Sea, Nord Stream 2, which would allow it to double the volume of natural gas exports to Europe, bypassing Ukraine. Germany backed the plan despite warnings from the US and its allies in eastern Europe that it would increase the continent’s dependence on Russia. The close energy relationship has its roots in a historic agreement between then-West Germany and the Soviet Union in 1970, under which the Germans paid for Soviet natural gas with steel pipe exports. The energy system that Germany has relied on for 40 years is virtually in ruins and they can no longer afford to leave these strategic assets in the hands of Russia. The agreement was supported by Ostpolitik, the policy of engagement with the Soviet bloc pursued by Chancellor Willy Brandt in the late 1960s and 1970s. But according to Thomas O’Donnell, a Germany-based energy analyst, it was also driven by a German desire for “strategic rebalancing – it was a way for Germany to free itself from its dependence on the US”. Many in the German establishment, he said, resented US dominance in energy matters and did not like “this idea of a world exchangeable oil market traded in dollars and protected by the US navy”. That resentment, he said, was one of the reasons Germany stayed out of the US war in Iraq in 2003. And that’s why it suited Germany to have direct access to Russian oil and gas. For decades the system worked well, with “long-term fixed assets like refineries and pipelines acting as cement for the relationship,” said Eurasia Group analyst Henning Gloystein. Russian hydrocarbons flowed into Europe regardless of Cold War tensions, and Germany was spared the cost of building expensive LNG terminals and other infrastructure to handle alternatives to Russian energy imports. “But when your biggest supplier goes hostile, things break bad and break fast,” Gloystein said. “The energy system that Germany has relied on for 40 years is virtually in ruins, and they can no longer afford to leave these strategic assets in the hands of Russia.”
