Germany: How does its oil deal with Kazakhstan benefit Russia?
This week, Kazakhstan shipped the first batch of crude oil to Germany via the Druzhba pipeline system, as the German government seeks to secure supplies at a key refinery in eastern Germany that until the turn of the year was supplied almost exclusively by oil. Russian.
The shipment of 20,000 tonnes, or about 145,000 barrels, is part of a broader plan by Germany to reduce its reliance on Russian oil. Europe’s biggest economy has stopped buying oil from Russia this year, even as pipeline crude remains exempt from a European Union embargo on Russian oil prompted by Moscow’s invasion of Ukraine.
Kazakhstan, an ally of Russia, intends to transport 1.2 million tonnes of crude oil to Germany this year. The country’s state-owned pipeline operator, KazTransOil, has already received approval from its Russian counterpart, Transneft, to deliver 300,000 tonnes via the Druzhba pipeline this quarter.
Druzhba, which means “friendship” in Russian, is one of the largest pipeline systems in the world, with the capacity to transport 2 million barrels a day.
Why Germany Is Buying Kazakhstan Oil
Oil from Kazakhstan goes to the German PCK refinery in Schwedt, located 120 kilometers (74 miles) northeast of Berlin. Until this year, the refinery was supplied with oil from Russia.
The Schwedt refinery – which supplies 90% of the capital Berlin’s fuel and is a major employer in an economically backward region – has been on difficult ground since Germany voluntarily decided to stop imports of piped oil from Russia.
Germany – which depended on Russia for more than a third of its pre-war oil needs in Ukraine, importing 687,000 barrels a day of crude in November 2021, most of it via the Druzhba pipeline – has managed to replace most of of Russian supplies in a relatively short space of time. However, it has struggled to find alternatives to Schwedt, which is not connected to West German pipelines and supply routes. That left the refinery working at just 60% of its capacity.
The supplies from Kazakhstan would ensure that the refinery operates at a higher capacity utilization level so that it remains economically viable.
The refinery, which was partly owned by Russia’s Rosneft until the German government took over last year, is currently supplied mainly with oil from global markets, including the United States, via a pipeline leading from the port of Rostock on the Sea. Baltic.
What’s in it for Russia?
Russia aims to raise additional revenue in the form of a transit tax that Transneft would earn for allowing oil to be shipped through its network of pipelines – a welcome source of cash for Moscow at a time when its oil revenues have taken a hit. by western sanctions and prices. capsules.
Furthermore, the oil must be transported thousands of kilometers across Russian territory, putting supplies at the mercy of Russian goodwill.
“We have to watch how Russia acts regarding the flow through the Druzhba,” a German Economy Ministry spokesman said on Monday, adding that Russia’s actions are difficult to predict, as demonstrated by the gas supply freeze. last year.
Does the deal violate the EU or German oil embargo?
Kazakhstan’s oil is not subject to the EU embargo, nor does it conflict with Germany’s voluntary ban on oil from Russia’s pipeline.
The oil is first pumped to Russia, where it is blended with Russian crude before being exported from Russian ports. Last year, Kazakhstan rebranded its cargo as KEBCO to decouple it from REBCO (Russia’s Crude Oil Export Blend), or Russia’s Urals, to avoid falling under Western sanctions.
However, the mixing of crude oil in Russia has raised concerns, especially in Poland, where Kazakh oil will flow to Germany, that it would be difficult to determine the source of the oil.
The German Economy Ministry says that while it is inevitable that some Russian oil will end up in Germany, it is important that no money is flowing into Russia as the oil supply will not be bought from a Russian company, but from a Kazakh one.
Source: DW
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