GERMANY AGAINST RUSSIAN OIL

BLOOMBERG - 16 MAY 2022 - Germany plans to stop importing Russian oil by the end of the year even if the European Union fails to agree on an EU-wide ban in its next set of sanctions, government officials said. 

Efforts to seal deals with alternative suppliers are progressing at the chancellery in Berlin and the government is confident it can solve remaining logistical problems within the next six to seven months, according to the officials, who spoke on condition of anonymity.

With European Union foreign ministers meeting in Brussels on Monday to discuss the next round of sanctions, EU diplomats have floated a delay in the phased-in oil ban after Hungary objected, saying the step would be too damaging to its economy.

German Chancellor Olaf Scholz’s government is determined to push ahead with its national plan as part of Europe’s penalties on Russia for its invasion of Ukraine, the officials said. The government hasn’t said which countries would make up the shortfall.

Russia’s share of German crude consumption has already declined to 12% from about 35% before the war in Ukraine, according to the Economy Ministry in Berlin.

Remaining challenges include getting enough alternative oil to a key eastern German refinery that relies heavily on Russian crude through the so-called Druzhba pipeline and is operated by Kremlin-backed producer Rosneft PJSC.

The oil-processing plant in Schwedt, which is ensures fuel supplies for Berlin’s international airport, most fuel stations in the capital and the surrounding state of Brandenburg, will need to bring in alternative deliveries via the German Baltic port of Rostock.

German authorities have established that an old pipeline linking Rostock and Schwedt can be used, but its relatively small size means it could only cover some 60% of the refinery’s full capacity for now, the officials said. Authorities are working to increase the pump pressure of the pipeline and modernize the infrastructure so that more oil can reach Schwedt.

Also under consideration is covering the Berlin airport’s fuel demand from a different refinery, possibly in Bavaria.

Non-Russian oil for Schwedt would initially come from a national reserve near the port of Wilhelmshaven, from where it would be shipped through the Kiel Canal to Rostock and from there through the beefed-up pipeline to the refinery.

Since Rosneft is seen as having little incentive to switch suppliers for Schwedt, Germany is preparing legislation that would wrest control of the refinery from the Russian company as early as June 1.

Netherlands, Qatar

Oil sanctions and energy security are expected to be high on the agenda next week when Scholz travels to the Netherlands for talks with Dutch Prime Minister Mark Rutte on Thursday and hosts Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, in Berlin on Friday.

Shell Plc has suspended the sale of its stake in the Schwedt refinery and is in talks with the German government over its share after agreeing last year to sell it to Rosneft.

The EU proposal seeks to ban crude oil over the next six months and refined fuels by early January. Hungary and Slovakia were offered until the end of 2024 and the Czech Republic until June 2024 to comply. All three rely heavily on Russian oil.

Hungarian Prime Minister Viktor Orban has suggested that any oil ban would need to be discussed by EU leaders at a summit. The next one is scheduled for late May.

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