BERLIN—Germany is now ready to stop buying Russian oil, clearing the way for a European Union ban on crude imports from Russia, government officials said.
Berlin had been one of the main opponents of sanctioning the EU’s oil and gas trade with Moscow.
However on Wednesday, German representatives to the EU institutions lifted the country’s objection to a full Russian oil embargo provided Berlin was given sufficient time to secure alternative supplies, two officials said.
The development comes as EU nations scramble to help member states Poland and Bulgaria make up for a natural gas shortfall after Russia stopped deliveries this week in reaction to what it said was the two countries’ refusal to pay for imports in rubles. The Kremlin demands EU buyers pay into special bank accounts where deposits would be converted from euros and dollars into rubles.
The EU pays state-controlled Russian firms around one billion euros, equivalent to $1.05 billion, a day for energy, according to estimates by Bruegel, a think tank. Critics have said that these funds are bankrolling Russian President Vladimir Putin’s regime and its war in Ukraine.
Berlin’s change of mind on oil came after it struck a deal with Poland that will enable Germany to import oil from global exporters via the Baltic Sea port of Gdansk, officials said Wednesday.
The Polish port is located close to the PCK oil refinery in Schwedt, Germany, which is controlled by the Russian oil giant Rosneft and receives crude via a Russian pipeline known as Druzhba, Russian for friendship.
The Gdansk port infrastructure, which is equipped to receive oil supertankers, is connected to the Russian pipeline with a separate link operated by Poland. This means oil imports to Gdansk could be immediately channeled through the pipeline to the Schwedt refinery, replacing Russian supplies, government officials said.
The Schwedt refinery was the biggest obstacle to Germany accepting a ban on Russian oil imports because thousands of jobs in the region depend on it and there was no alternative supply to feed it until now, the officials said.
The Polish deal was necessary because the German port closest to the refinery, Rostock, doesn’t have the capacity to receive supertankers. In addition, Germany’s railways no longer operate oil wagons. The landmark deal was announced on Wednesday by German Economy Minister Robert Habeck during a visit to Poland.
Some 12% of Germany’s oil consumption relies on Russian imports, down from 35% before the war, Mr. Habeck said in a video statement posted on his ministry’s social media. He said Germany was now ready for the possibility that Rosneft would stop channeling oil, a scenario he said would no longer spell disaster for the German economy.
“Rosneft is a Russian state company and they have no interest in processing non-Russian oil,” Mr. Habeck said.
Should Rosneft refuse to process non-Russian oil imports, Germany could put the refinery under state management under laws protecting strategic assets. Berlin has already assumed stewardship of the main Russian gas-trading hub in Germany, a subsidiary of Russia’s state-controlled Gazprom.
Separately, European gas importers are considering ways to keep importing Russian gas without falling foul of EU sanctions on Moscow.
While the gas market is fully liberalized in most countries, allowing private companies to operate autonomously, in Poland and Bulgaria the government controls most gas purchases from Russia. European officials say that 97% of gas contracts with Russia are euro or dollar denominated.
According to a Russian March 31 decree, companies from so-called unfriendly countries, including EU member states, have to pay for gas in rubles.
The decree instructs European companies to set up a euro and a ruble account in Gazprombank, which is not under sanctions, say EU officials. The Russian central bank takes the money from the euro account to pay for the gas through the ruble account. Only once the payment comes from the ruble account does Russia consider the payment made.
European officials say the system breaches EU sanctions on transactions with the central bank. It says EU companies are free to pay into a euro account held by Gazprombank but they can’t set up a parallel ruble account for payment. However that risks European companies sending money to Russia without Moscow acknowledging that the gas payment has been made.
Austrian energy group OMV AG said it is working on a “sanctions-compliant solution” on payments to Russia without providing more detail on how the payments would work.
Austrian Chancellor Karl Nehammer on Wednesday said that OMV would continue to pay for gas deliveries from Russia in euros. “Austria is sticking to the jointly agreed EU sanctions to the point and comma,” he said.
German utility Uniper SE said on Thursday that it will continue to pay in euros for now but was in talks with Gazprom about specific payment modalities. The company was coordinating with the German government, a spokeswoman said.
“We consider a payment conversion that is compliant with sanctions law and the Russian decree to be possible,” the spokeswoman said. “For our company, and for Germany as a whole, it is not possible to do without Russian gas in the short term, as this would have dramatic consequences for our economy.”
Some EU member states have expressed concerns about the modalities of payment, including the exchange rate used in those transactions.
Bulgarian Prime Minister Kiril Petkov on Thursday compared the new payment terms to a landlord telling their tenant to transfer the money to another account and in a different currency.
“We will not pay in rubles. And we will not pay to parties that are not part of the contract. If you agree to this, what will be the next condition?,” he said in Ukraine where he is on a visit.
Not much choice at this point.
When the dust settles, Germany’s stance in this crisis will be remembered.
Do we know who the holdouts are? Hungary surely can’t be on board with this. Who else?
Nice looks like the 6th sanctions package in may during EU council leaders meeting will announce an oil embargo then
5 comments
BERLIN—Germany is now ready to stop buying Russian oil, clearing the way for a European Union ban on crude imports from Russia, government officials said.
Berlin had been one of the main opponents of sanctioning the EU’s oil and gas trade with Moscow.
However on Wednesday, German representatives to the EU institutions lifted the country’s objection to a full Russian oil embargo provided Berlin was given sufficient time to secure alternative supplies, two officials said.
The development comes as EU nations scramble to help member states Poland and Bulgaria make up for a natural gas shortfall after Russia stopped deliveries this week in reaction to what it said was the two countries’ refusal to pay for imports in rubles. The Kremlin demands EU buyers pay into special bank accounts where deposits would be converted from euros and dollars into rubles.
The EU pays state-controlled Russian firms around one billion euros, equivalent to $1.05 billion, a day for energy, according to estimates by Bruegel, a think tank. Critics have said that these funds are bankrolling Russian President Vladimir Putin’s regime and its war in Ukraine.
Berlin’s change of mind on oil came after it struck a deal with Poland that will enable Germany to import oil from global exporters via the Baltic Sea port of Gdansk, officials said Wednesday.
The Polish port is located close to the PCK oil refinery in Schwedt, Germany, which is controlled by the Russian oil giant Rosneft and receives crude via a Russian pipeline known as Druzhba, Russian for friendship.
The Gdansk port infrastructure, which is equipped to receive oil supertankers, is connected to the Russian pipeline with a separate link operated by Poland. This means oil imports to Gdansk could be immediately channeled through the pipeline to the Schwedt refinery, replacing Russian supplies, government officials said.
The Schwedt refinery was the biggest obstacle to Germany accepting a ban on Russian oil imports because thousands of jobs in the region depend on it and there was no alternative supply to feed it until now, the officials said.
The Polish deal was necessary because the German port closest to the refinery, Rostock, doesn’t have the capacity to receive supertankers. In addition, Germany’s railways no longer operate oil wagons. The landmark deal was announced on Wednesday by German Economy Minister Robert Habeck during a visit to Poland.
Some 12% of Germany’s oil consumption relies on Russian imports, down from 35% before the war, Mr. Habeck said in a video statement posted on his ministry’s social media. He said Germany was now ready for the possibility that Rosneft would stop channeling oil, a scenario he said would no longer spell disaster for the German economy.
“Rosneft is a Russian state company and they have no interest in processing non-Russian oil,” Mr. Habeck said.
Should Rosneft refuse to process non-Russian oil imports, Germany could put the refinery under state management under laws protecting strategic assets. Berlin has already assumed stewardship of the main Russian gas-trading hub in Germany, a subsidiary of Russia’s state-controlled Gazprom.
Separately, European gas importers are considering ways to keep importing Russian gas without falling foul of EU sanctions on Moscow.
While the gas market is fully liberalized in most countries, allowing private companies to operate autonomously, in Poland and Bulgaria the government controls most gas purchases from Russia. European officials say that 97% of gas contracts with Russia are euro or dollar denominated.
According to a Russian March 31 decree, companies from so-called unfriendly countries, including EU member states, have to pay for gas in rubles.
The decree instructs European companies to set up a euro and a ruble account in Gazprombank, which is not under sanctions, say EU officials. The Russian central bank takes the money from the euro account to pay for the gas through the ruble account. Only once the payment comes from the ruble account does Russia consider the payment made.
European officials say the system breaches EU sanctions on transactions with the central bank. It says EU companies are free to pay into a euro account held by Gazprombank but they can’t set up a parallel ruble account for payment. However that risks European companies sending money to Russia without Moscow acknowledging that the gas payment has been made.
Austrian energy group OMV AG said it is working on a “sanctions-compliant solution” on payments to Russia without providing more detail on how the payments would work.
Austrian Chancellor Karl Nehammer on Wednesday said that OMV would continue to pay for gas deliveries from Russia in euros. “Austria is sticking to the jointly agreed EU sanctions to the point and comma,” he said.
German utility Uniper SE said on Thursday that it will continue to pay in euros for now but was in talks with Gazprom about specific payment modalities. The company was coordinating with the German government, a spokeswoman said.
“We consider a payment conversion that is compliant with sanctions law and the Russian decree to be possible,” the spokeswoman said. “For our company, and for Germany as a whole, it is not possible to do without Russian gas in the short term, as this would have dramatic consequences for our economy.”
Some EU member states have expressed concerns about the modalities of payment, including the exchange rate used in those transactions.
Bulgarian Prime Minister Kiril Petkov on Thursday compared the new payment terms to a landlord telling their tenant to transfer the money to another account and in a different currency.
“We will not pay in rubles. And we will not pay to parties that are not part of the contract. If you agree to this, what will be the next condition?,” he said in Ukraine where he is on a visit.
Not much choice at this point.
When the dust settles, Germany’s stance in this crisis will be remembered.
Do we know who the holdouts are? Hungary surely can’t be on board with this. Who else?
Nice looks like the 6th sanctions package in may during EU council leaders meeting will announce an oil embargo then