Yves here. Forgive me for a long introduction to John Helmer’s discussion of German and Polish scheming over Germany’s hoped-for expropriation of Rosneft assets in Germany. The Russian government is not surprisingly exercised about these plans. But the Russian news coverage appears not to mention that Germany already did a big dirty to Russia, by seizing the assets of Gazprom’s German subsidiaries, which included storage facilities. Perhaps they did not want to call attention to the fact that Germany had already set a precedent of sorts.
And that precedent also includes Russia having made use of its “special retaliatory economic sanctions.” From a June 2022 post:
However, remember Russia’s retaliatory economic sanctions? The ones that seemed like a as if they had turned out to be a damp squib? From a May 12 post:
Russia published its initial list of parties subject to its “retaliatory special economic measures.” Putin established the program by decree on May 3, designed to address the unlawful taking of property and property rights by unfriendly parties. The order tasked officials to come up with targets in ten days and develop additional criteria.
We speculated that Germany’s seizure of Gazprom operations, which included storage facilities, would be a prime initial target. We were correct…TASS gives an overview:
The list includes 31 companies from Germany, France and other European countries, as well as from the USA and Singapore. In particular, it includes former European subsidiaries of Gazprom, traders and operators of underground gas storage facilities.
In particular, Russian authorities, legal entities and citizens will not be able to conclude transactions with the sanctioned entities and organizations under their control, fulfill obligations to them under completed transactions, and conduct financial transactions in their favor. This includes the concluded foreign trade contracts….
Now so far this is all very entertaining, but what does it mean? It appears Europeans in the gas and possibly also electricity business won’t know for sure until Russia counterparties tell them their contracts are cancelled or they otherwise won’t be doing business with them. Remember that the sanctions are sweeping in terms of subjecting all Russian individuals and legal persons to them. And their application goes beyond the entities listed to include “organizations under their control.”
It looks like Russia knew exactly what it was doing. Consider the impact of the most obvious step Russia would take under these sanctions, of no longer supplying gas to the stolen Gazprom businesses. From reader vao:
But there is more on the gas front in Germany, and costs for the German State are piling up.
Remember that story with Gazprom Germania taken over by the Bundesnetzagentur as trustee? Well,
1) After being placed under the administration of the Bundesnetzagentur, Gazprom embargoed supplies to its former German unit, i.e. Gazprom Germania and its host of subsidiaries storing and delivering gas in Germany. This means that GG has not yet managed to re-fill its storage tanks.
2) Furthermore, since GG had contracts to fulfil, it had to acquire gas elsewhere at much higher prices — which proved totally unprofitable, so much so that GG is nearly bankrupt.
3) The German government is now embarking on a reorganization to avoid the cessation of activities by GG. GG will be lent up to €10bn through the KfW to ensure the continuity of operations.
4) It is not yet certain whether the government will back the loan with a State guarantee, or whether it will convert it to equity (in which case the German State will become a shareholder of GG).
5) The trusteeship will be converted from October onwards to a permanent administration, and Gazprom Germania renamed to “Securing Energy for Europe GmbH”.
6) In another step, the Bundesnetzagentur has decided to grant a 40% rebate on the fees to be paid when feeding the German gas distribution networks from LNG supplies.
So it is not just the German industry and households that are feeling the pain because of high gas prices — the State budget is getting directly hammered as well because of the consequences of the spat with Russia.
Now admittedly Russia was able to mess with Germany (and Austria, it also refused payments from Austrian operations that were part of the seized Gazrprom entities) because Europe had not fully divorced itself1 from Russian energy. And recall this hurt because even though Europe might be able to round up enough LNG, that was at spot market prices, versus its old, lower long-term contract prices.
So Russia has set up the legal means to engage in economic retaliation. And it used them with the last biggish German asset seizure. But the response was targeted. What options does Russia have if the Rosneft seizure proceeds? Or if the Collective West is dumb enough to steal the frozen Russian central bank assets?
By John Helmer, the longest continuously serving foreign correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties. Helmer has also been a professor of political science, and an advisor to government heads in Greece, the United States, and Asia. He is the first and only member of a US presidential administration (Jimmy Carter) to establish himself in Russia. Originally published at Dances with Bears
This is how the war in the Ukraine doesn’t end, not for the Germans and the Poles.
So long as they can, they plan to steal or destroy Russian assets west of what used to be Kievan Ukraine; and mobilize the US military bases in both countries to reinforce and defend their larcenies.
The German political party which promises to continue this war for the employment of German workers and the enrichment of German executives and shareholders will win the next election, replacing the Social Democratic Party and the Greens as the party of war.
The post-Ukraine strategy of the Stavka starts here — Ha Берлин! To Berlin!
On Friday last, the Russian language edition of the German state medium Deutsche Welle (DW) published a report of German and Polish government plans for the expropriation of PCK, the Rosneft crude oil refinery at Schwedt in northern Germany, and the Rosneft network of operating assets in Germany, Poland, and Austria.
The German assets of Rosneft, the Russian state oil production company under worldwide sanctions, had been placed under what the German government called “fiduciary management” by an “independent” state regulator in September 2022. This was announced at the time as a temporary arrangement to comply with the sanctions, renewable every six months, but leaving undisturbed the Russian ownership of the assets. This scheme was renewed at six monthly intervals, as Rosneft has reported.
There was nothing independent about the BNA or what it has been doing every six months. BNA stands for the Federal Network Agency — Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen. It claims to be “an independent higher federal authority with its main office in Bonn operating within the scope of business of the Federal Ministry for Economic Affairs and Climate Action (BMWK) and the Federal Ministry for Digital and Transport (BMDV). We have been responsible for Germany’s essential electricity, gas, telecommunications and postal infrastructures for over 20 years.”
“Within the scope of” is a German fig leaf for “under control”.
“Our task,” BNA says, is “to ensure fair and non-discriminatory competition for all market participants. Our success and our expertise in regulation led to the energy and rail sectors also being placed under our responsibility.”
This was not what the government of Chancellor Olaf Scholz intended when it commenced its takeover of Rosneft and assigned BNA the role of camp guard. BNA described what it was doing to “safeguard security of supply in Germany…on the basis of the Energy Security of Supply Act (section 17 EnSiG) until 15 March 2023. This basis enables the fiduciary to take action to keep the business running in accordance with its importance for the functioning of society in the energy sector. The fiduciary management may be extended under certain conditions… The decision to introduce fiduciary management was prompted by…by the sanctions imposed on Russia…The fiduciary management means that the original owner no longer has authority to issue instructions.”
MAP OF ROSNEFT’S MAIN ASSETS IN GERMANY
Source: https://www.rosneft.de/
According to BNA’s first “letter of comfort” at its takeover, “RDG has stakes in PCK Raffinerie GmbH (PCK) in Schwedt/Oder, Bayernoil Raffineriegesellschaft mbH (Bayernoil), Mineralölraffinerie Oberrhein GmbH & Co. KG (MiRO) and in various oil pipelines in Germany (Deutsche Transalpine Oelleitung GmbH), Austria (Transalpine Ölleitung in Österreich GmbH), Italy (Soc IT per I’Oléodotto Transalpino SpA) and France (Société du pipeline Sud-Européen SA). RDG has crude oil processed in the refineries PCK in Schwedt, MiRO in Karlsruhe and Bayernoil in Ingolstadt and is also responsible for distribution of the petroleum products produced in the refineries in line with its stake in each refinery and the crude oil processed there. RNRM [Rosneft Refining & Marketing GmbH] supports RDG [Rosneft Deutschland GmbH] as a service company and holds shares in AET Raffineriebeteiligungsgesellschaft mbH, which in turn holds shares in PCK. RDG and its associate RNRM, together hold a majority stake in PCK.”
“The business activities of RDG and RNRM are of decisive importance for the functioning of society in the energy sector and the maintaining of security of supply. Owing to the scope of its oil transactions and its various stakes in refineries and pipelines, RDG is a central company in Germany’s oil supply. The PCK refinery, which is operated jointly by RDG and RNRM, is one of the largest refineries in the Federal Republic of Germany and ensures a basic supply of petroleum products to the north-east of Germany and Berlin airport. RDG and RNRM thus fulfil key functions that are essential for the security of supply in Germany and Europe.”
In the new report from Deutsche Welle, it is now made clear that with the start of military collapse of the Ukrainian and NATO forces east of the Dnieper River, and the election of the Donald Tusk coalition to govern Poland, a scheme of expropriation has been prepared that will continue the sanctions war against Russia for the foreseeable future.
“Increasingly likely”, the phrase with which this report by Andrei Gurkov leads, is future tense and not yet a certainty. The debate inside and outside the Berlin Chancellery is reported here, concluding with the Scholz government spokesman saying it is “examining the possibility [of expropriation]. A decision has not yet been made.”
Rosneft has replied through its German law firm, Malmendier Legal, which has ties to the German Christian Democratic Union (CDU) party and to Moscow. “Such an expropriation would represent a measure that would remain unprecedented in the history of the Federal Republic of Germany and would forever damage investment security…As a listed stock corporation, Rosneft will take all measures to protect the rights of its shareholders.”
The Kremlin spokesman has announced: “This is nothing else than the expropriation of someone else’s property. These are steps that undermine the economic and legal foundations of European states, these are steps that absolutely devalue the investment attractiveness of these countries and have very deep consequences for those who make such decisions. We do not exclude anything to protect our interests and to counter the illegal steps that we are talking about.” Rosneft is already suing in Germany’s Constitutional Court against the BNA trustee management scheme.
The value of the Rosneft assets proposed for seizure is about $7 billion. The German newspaper Handelsblatt reported on February 9 that Rosneft chief executive Igor Sechin had sent a formal letter proposing that the German government buy Rosneft out at the market price. Habeck’s ministry has denied receiving such a letter.
Translated verbatim from the Russian original, the following report explains the strategic political and commercial calculations in Berlin and Warsaw. The map and illustrations appeared in the DW publication. The picture and caption of Vice Chancellor Robert Habeck in Warsaw on February 13, and the illustration and caption reporting the leadership purge at Orlen, the Polish oil company, have been added.
Source: https://www.dw.com/
February 16, 2024
Germany nationalizes Rosneft Deutschland, Poland will help
by Andrei Gurkov
Expropriation of Rosneft’s German assets is becoming increasingly likely. Warsaw is ready to provide oil to the Schwedt refinery and replace supplies from Kazakhstan. But what about compensation?
The PCK Raffinerie Schwedt refinery in Schwedt, Germany.
The nationalization of Rosneft’s German assets is becoming more and more likely, and new signals from Poland reinforce this impression. The German government is running out of time: on March 10, when the next decision on the transfer of Rosneft Deutschland under the so-called trust management of the state expires. Berlin, apparently, no longer wants to extend this regime introduced in September 2022 for six months, because they seek a stable, not temporary, solution to the fate of the oil refinery in Schwedt — PCK Raffinerie Schwedt.
Germany and Poland discuss the fate of the Schwedt refinery
This is exactly the case, although Rosneft has other assets in Germany. But in this refinery, the state-owned Russian concern actually owns 54%, and maintaining Moscow’s control over a strategically important enterprise seems to the German authorities to be too much of a risk, especially against the background of the growing threat from Russia. After all, PCK Raffinerie Schwedt provides petroleum products to a significant part of East Germany and, above all, to the capital of the country, Berlin, with its approximately four million inhabitants.
Left: Berlin, February 12, 2024: the new Polish Prime Minister Donald Tusk (left) visits German Chancellor Olaf Scholz. Right, Vice Chancellor Robert Habeck in Warsaw on February 13. For a report of his talks there, read this.
The intention of the German government to put an end to the legally suspended state of the plant has clearly strengthened after the recent elections in Poland. They brought to power a pro-European coalition, which German politicians trust much more than the previous Polish government. Relations between the two countries are currently warming rapidly, as evidenced by the talks between the new Polish Prime Minister Donald Tusk and German Chancellor Olaf Scholz in Berlin on February 12.
Therefore, the visit of Vice Chancellor and Minister of Economy of Germany Robert Habeck to Warsaw the next day, February 13, played an important, and perhaps decisive role in determining the next concrete steps with regard to Rosneft Deutschland.
“Poland has helped a lot in the past to provide oil to the east of Germany,” the German minister recalled after the talks and made it clear that in the event of the expropriation of Rosneft, the supply of the plant in Schwedt would improve, since the Polish side is ready to significantly increase the pumping of oil through its territory towards Germany from the port of Gdansk. According to the Reuters news agency, citing an informed source, Warsaw assured Berlin even before Habeck’s arrival that it would be able, if necessary, to completely replace the volumes of Kazakh oil currently flowing to Schwedt.
Warsaw: Oil from Kazakhstan can be completely replaced
Some explanations are needed here. Until 2023, this refinery, built six decades ago in the GDR on the border with Poland, operated exclusively on oil coming from the USSR and then from Russia via the Druzhba oil pipeline. In response to the full-scale Russian aggression against Ukraine, the European Union imposed an embargo on Russian oil transported by tankers, but not on supplies via the Druzhba pipeline system, since several Eastern European EU members are still heavily dependent on them. However, the German government decided for its part to completely abandon Russian oil.
Since last year, the Schwedt plant has been supplied with oil purchased on the world market in three ways. From the German Baltic port of Rostock via a longstanding and not very powerful pipeline that was originally laid down as a backup — through the Polish port of Gdansk, from where oil is pumped through Poland using the westernmost segment of the Druzhba, and from Kazakhstan in transit through the Russian territory on the same Druzhba.
Germany strongly emphasizes its desire to increase oil purchases in Kazakhstan, cooperation with which is becoming more intensive. However, there are fears that in the event of the nationalization of Rosneft’s German assets, Moscow will block the Druzhba oil pipeline as a retaliatory measure and thereby [stop] the supply of Kazakh oil.
But now the Polish side has assured Berlin, according to a Reuters source, that in this event it will introduce oil currently being pumped through its territory towards Sweden to 2.5 million [metric] tons per year, and thereby fully compensate for supplies from Kazakhstan. Their volume, according to the agency, now ranges from 1.0 to 1.2 million tons. So far, about 1.2 million tons of products purchased on the world market are passing through Gdansk. Theoretically, it could also be oil from Kazakhstan. At the same time, Warsaw made it clear to the German side that as long as Rosneft remains the main co-owner of PCK Raffinerie Schwedt, even if it is formal in terms of external management, there will be no increase in supplies through Gdansk.
There is no question of selling Rosneft Deutschland
It is noteworthy that articles in the German media about Robert Habeck’s negotiations in Warsaw, and in general about the future of Rosneft Deutschland, in effect do not consider the option of Rosneft selling this company and its assets. This is despite the letter with such a proposal, as the economic newspaper Handelsblatt wrote in early February, from the head of the Russian concern Igor Sechin to the German government. But Berlin, the publication concluded, “has placed its bet on expropriation.”
This is probably due to the fact that the implementation of a deal in Germany that would allow Rosneft and thus Russia which continues the war in Ukraine, to earn a multibillion-dollar sum, would be illegal due to international sanctions against the Russian Federation — or at least it would look extremely strange. It is also likely that under the conditions of the sanctions regime, there are simply no people willing to deal with a Russian state-owned company that falls under this regime, and thereby expose themselves to the risk of secondary penalties.
In any case, the Polish oil company Orlen, which is considered one of the most likely contenders for Rosneft’s stake in PCK Raffinerie Schwedt, will definitely not go for such a deal with the Russian concern, since gaining control of this refinery would fit well into its strategy of international expansion. In this context already, Orlen owns a large network of petrol stations in Germany. Moreover, it is Orlen which imports oil to Poland through the port of Gdansk. At the same time, it seems quite likely that the German government will first nationalize Rosneft Deutschland, and then, after some time, sell its stake in the Schwedt refinery to Orlen. This is despite the fact that last year the Bundestag created legal grounds for such a sale even without nationalization.
“Daniel Obajtek, the CEO of state energy giant Orlen – the largest firm in Poland and the entire Central and Eastern Europe region – has been dismissed from his position. He was a close ally of the former ruling Law and Justice (PiS) party and the decision to remove him comes amid a wider overhaul of management at state-owned companies under Donald Tusk’s new government, which took office last month. Obajtek oversaw an ambitious expansion of Orlen, resulting in it last year ranking among Europe’s 50 largest firms. But he also faced accusations that he used the firm’s resources to support PiS, including during its election campaign last year…Ahead of last year’s parliamentary elections, Orlen was accused of artificially keeping fuel prices low to help PiS’s campaign. The firm denied it, but prices began to rise again just days after the elections, in which PiS lost its majority. According to the former Orlen CEO Jacek Krawiec, the price cuts before the election may have cost Orlen a total of 5.7 billion zloty (€1.31 billion)… The market appeared to react positively to the decision to dismiss Obajtek. At noon, the firm’s shares were up almost 3.5% on the day, trading at 64.8 zloty a share.” Read more at https://notesfrompoland.com/
Rosneft will be able to claim compensation
According to many experts, the German government has created the legal grounds for the nationalization of Rosneft’s assets due to the need to ensure the country’s energy security back in 2022, making appropriate changes to national legislation. But German lawyers for Rosneft Deutschland have already stated that in the event of expropriation they will do their best to challenge its legality.
However, they will have a much better chance of success in getting compensation for Rosneft for nationalized property, lawyers interviewed by the Frankfurter Allgemeine Zeitung newspaper believe. Their statements are given in an article titled “Rosneft is becoming a legal risk for Germany.”
When Gazprom Germania was nationalized in 2022, Gazprom did not get compensation for the lost property, since the Russian concern first tried to secretly change owners, thereby violating German law, and then itself abandoned its German subsidiary. In the case of Rosneft Deutschland, there do not seem to have been such egregious violations so far, according to the newspaper’s sources.
Therefore, in their opinion, the Russian side will be able to legally claim compensation in the international arbitration courts and, possibly even compensation for damages, and here the amounts may be even greater. Another question is whether the German state will have to pay a multibillion-dollar sum to a sanctioned Russian company right now, in the midst of the war in Ukraine. After all, court proceedings on such issues often last for years. It is possible that the German government is counting on this.
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1 Yours truly cannot keep track of all the moving parts, but I believe Europe is still getting Russia oil that has been laundered in Indian refineries into end products.
