Explanation & consequences of the denial of oil by Russia

Germany has long resisted an EU embargo on Russian oil. Now it’s supposed to come. What would be the consequences of the import ban for Germany?

Recently put it EU new sanctions against Russia in front. Also included: possible ban on Russian oil imports. Germany has resisted this for a long time – but now supports an oil embargo. In fact, anything could happen very quickly, Finance Minister Robert Habeck (Greens) now described the oil embargo as “very likely”. What are the consequences for Germany?

What is an oil embargo?

Embargoes are financial constraints. Trade with certain states or persons is prohibited or restricted by the state. It is one of the most effective political sanctions. So far no embargo has been imposed on Russian oil due to the war in Ukraine, as it is considered one of the harshest sanctions ever. Russia’s huge importance in world energy supply is one of the reasons why Russia defines itself as a world power. There is already an embargo on Russian coal. Now follows the oil.

How much does Germany depend on Russia for oil?

Once it was 35 percent, now it is only twelve: Sanctions in Russia over the aggressive war in Ukraine Impact on the oil market. The share of Russian oil in German oil consumption fell by three in just a few weeks, Finance Minister Robert Habeck said in a new progress report on energy security on Sunday.

Germany also now considers it possible to ban Russian oil imports altogether. The European Union is already implementing a possible oil embargo, according to the DPA. It is very likely that the ban on the import of Russian oil will actually come on Wednesday, when the EU will introduce new sanctions. The consequences for Germany are still uncertain.

EU sanctions: Will there be an oil embargo on Russia?

It is very likely that the EU will decide on the oil embargo. Member States are under pressure, the pressure is mounting on them – especially after the Russian atrocities in Ukraine, for example in Bukha. It was a trigger for even the most hesitant Federal government has now backed a ban on Russian oil imports. Other states that are critical of the embargo are concerned Austria and Slovakia. They depend on Russian oil. In particular, the head of the Ukrainian government, Viktor Orban, is blocking the planned EU oil embargo. to EU Council President Charles Michel. They were also skeptical Spain, Italy and Greece. They are afraid of further increase in energy prices.

That is why there is no agreement within the EU yet, Habeck said on Monday afternoon. Germany could impose an oil embargo, he said in Berlin after meeting with small and medium-sized associations.

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However, an embargo would not leave Germany unharmed, Habek continued. You have to calculate the high price jumps. In addition, the changeover to the euro could also be a waste of time, Habeck said, referring to the Schwedt refinery, which is controlled by Russia’s state-owned Rosneft. But: An embargo no longer means that Germany is slipping into an “oil crisis”.

In an interview with ZDF Today’s Newspaper Hubeck explained that the embargo was “in scope”. Habeck showed understanding for the concerns expressed by Hungary and other countries. The EU could certainly take that into account. For example, there are longer transition periods for countries that are highly dependent on Russian oil to talk about securing energy supply in another way.

Prohibition of oil imports from Russia: when will the oil embargo come?

EU energy ministers are meeting in Brussels on Monday for consultations. According DPA The EU Commission and its President Ursula von der Leyen want to present a plan for new sanctions on Russia as soon as possible. A six-month phase-out phase of a ban on crude oil imports is likely to be planned. After an eight-month phase-out phase, a ban on the import of petroleum products could follow.

Video: dpa

But there are other ideas, such as an EU oil price cap from Russia. This would be an alternative to a complete import ban. However, Russia’s revenues will be cut.

Oil embargo: Where will the energy for Germany come from in the future?

The Bruegel think tank estimates that the EU has recently imported about 450 million euros worth of Russian oil a day. In 2021, Germany still received about 35% of its oil from Russia. About a third of it came to West Germany by ship. the remaining two-thirds via the Druschba pipeline at the refineries in Leuna, Saxony-Anhalt and the Schwedt in Brandenburg.

According to Habeck, buyers in West Germany are already looking for new suppliers. And Leuna Totalenergies also wants to get out of Russian oil by the end of the year – and preferably faster. The remaining 12 percent, which is Russian oil on the German market, is processed at Schwedt. “The last third is the real problem,” says Habeck.

Russian oil in Germany: why is the Schwedt refinery not looking for new suppliers?

Quite simply: The PCK refinery is operated by the Russian state-owned company Rosneft. “And of course they have no interest in not refining Russian oil,” says Habeck. The last resort would be expropriation – and the federal government is actually considering it. The basis for this should be an amendment to the law on energy security. It will probably be decided in mid-May. And that would lower the expropriation bar much lower, according to Habeck optimistically: “Ending dependence on Russian crude oil imports by the end of the summer is realistic.”

Energy supply: can Germany cope without Russian oil?

The report on energy security states: “From a technical point of view, an alternative supply to the Schwedt refinery could be made through the ports of Rostock and Gdansk.” A tanker oil pipeline from Rostock could meet about 60 percent of the Schwedt refinery’s oil needs – with an expansion of up to 90 percent, energy expert Steffen Bukold confirmed in a Greenpeace study.

Video: dpa-AFX business news

In order to meet the remaining demand, deliveries from the port of Gdansk will have to be made via the so-called Plock pipeline, says economist Jens Südekum from the University of Düsseldorf. This is also a new reference path for Leuna.

Energy prices in Germany: Will oil become even more expensive?

One catch remains, according to Südekum: “Replacement of Russian oil is only available at higher prices.” Due to a lack of demand, Russian oil has been significantly cheaper than oil from other sources since the beginning of the war. East Germany in particular has so far been dependent on Russian oil. there, losses must now be offset at higher prices. And this will also affect consumers in the area. Nine out of ten cars in Berlin, Brandenburg and Mecklenburg-Western Pomerania run on fuel from Schwedt. Leuna also supplies about 1,300 service stations in Saxony-Anhalt, Saxony and Thuringia.

Energy embargo: can the fuel run out?

A scenario that is conceivable. Habeck explained to ARD that not only were high price jumps expected, but that fuel could even be completely depleted in some parts of Germany. The Minister of Finance named Berlin and Brandenburg. “If we do not have a way to catch it, there will be an interruption in the delivery,” Hubeck explained.

Why are oil prices rising?

What could also increase prices: the refineries in Leuna and Schwedt will have to be upgraded if other types of oil are used instead of Siberian oil. And it is possible that refineries in West Germany will also have to supply the East, according to Bukold in the Greenpeace study. This would require the transport of fuel and heating oil via Germany. either by truck or by train. And that in turn means: more effort and more cost.

Energy Industry: Are Jobs at Risk?

The Schwedt refinery employs 1,200 people. They are very insecure. In addition, hundreds of employees work for suppliers and service providers on the site. They are also afraid for their jobs, says mayor Annekathrin Hoppe (independent). In a letter, she criticized Hubeck: “We feel at the moment that the Federal Ministry of Finance is not going very far.”

Because apart from a possible expropriation, a lot depends on whether the refinery gets enough oil from new sources to continue to be busy as before. In any case, Südekum considers it likely that a dispute will remain.

In any case, the Federal Ministry of Finance assures that it wants to avoid the negative consequences of the oil embargo on the workers at the PCK oil refinery in Schwedt. “The lights are not on immediately here,” said Parliamentary Finance Minister Michael Kellner (Greens) on Monday during a visit to Schwedt. “We as the Federal Ministry will do everything for employees and consumers.”

Brandenburg Finance Minister J Σrg Steinbach (SPD) sees the expropriation as a last resort: “There are consequences to any scenario,” he said.

Similar concerns are spreading in Leuna: Christof Günther, CEO of Infraleuna, which manages infrastructure in Leuna, said in March: 100% replacement would not be possible. Then the suppliers would also suffer. About 100 companies with 12,000 employees work in the Leuna area.

What are the consequences of an oil embargo against Russia on Germany?

According to economists, if oil imports stopped abruptly, this could dramatically increase world market prices and slow down the German economy. A transitional period will somewhat mitigate this effect of an embargo. Habeck believes an embargo could be tackled: “It would definitely lead to peripheral bottlenecks, it would definitely lead to higher prices and there could also be local disruptions. So you can not say no one will notice. But you will not. be careful now lead to a catastrophe “.

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