By Geoffrey Smith
Investing.com -- The German government is to take over the local operations of Russian oil giant Rosneft, further deepening the rupture between the two countries caused by Russia's invasion of Ukraine.
The move aims to end the crisis facing Rosneft's refinery in Schwedt in north-eastern Germany, which depends almost exclusively on supplies of Russian crude oil through a Soviet-era pipeline. Schwedt is a key supplier of vehicle and jet fuel to Germany's capital, Berlin.
The move also covers two other refineries in Karlsruhe in southwest Germany and in Bavaria. All told, Rosneft accounts for 12% of oil refining capacity in Europe's largest economy. All of its gas stations in the country will also be taken under state control.
"State administration counters the growing threat to the security of energy supply and lays the foundations for the survival and the future of Schwedt," the Federal Economy Ministry said in a statement, adding that the government will soon announce a "comprehensive" package of support measures that will include arrangements for supplies of crude from other sources. Reports have suggested an upgrade of the transport infrastructure leading from Polish ports on the Baltic.
Chancellor Olaf Scholz and Economy Minister Robert Habeck will present details of the package at a press conference at 08:30 ET (12:30 GMT).
The government's statement made no mention of compensation for Russia's largest oil producer.
The action by Berlin reprises a similar step against Russian gas monopoly Gazprom (MCX:GAZP) earlier in the year, after it cut supplies through its pipelines, causing an intense price squeeze that has sent shockwaves through the German economy, crippling major gas suppliers such as Uniper (ETR:UN01), which acknowledged earlier this week that it's now in talks for the government to take a majority stake in it.
Under current EU-coordinated plans, Germany intends to stop importing Russian crude oil and refined products from the end of the year. Schwedt had been granted an exemption from the embargo, but Rosneft's majority control of the refinery - where it owns a 54% stake - made it impossible to negotiate deals to source supplies from elsewhere. Another factor complicating the issue of finding replacement sources is that Schwedt is configured to take the Russian benchmark crude blend Urals, which is relatively heavy and high in sulfur content.