For decades, crude oil flowing in from Russia was funneled to a giant refinery in Schwedt, an industrial town on the banks of the Oder in Germany, providing jobs for thousands of workers and a reliable source of gasoline , jet fuel and fuel oil for Berlin residents.
Today, as member states of the European Union struggle to agree on the terms of an oil embargo to punish Moscow for its invasion of Ukraine, the Schwedt refinery has become the main stone of stumbling block in Germany’s efforts to break its dependence on Russian oil. The prospect alarmed the refinery’s 1,200 employees.
Germany depends on Russia for around a third of its oil, and Robert Habeck, the economy minister and vice-chancellor, has spent weeks preparing for an embargo, traveling from the United Arab Emirates to Washington to Warsaw to find other sources of crude.
“The last third is the problem,” Mr Habeck said in a video aimed at explaining the situation to the Germans. And most of this Russian oil goes through the Schwedt refinery.
The refinery is a looming symbol of how Germany’s oil and gas needs are tied to its energy exporting giant to the east. The PCK refinery – the name is a nod to its East German roots as a state-owned “Petrolchemisches Kombinat” or Petrochemical Combine – is owned by Rosneft, Russia’s state-owned oil company. It is connected to the Soviet-era Druzhba pipeline, one of the longest in the world, bringing oil from Siberian wells to Western Europe.
And it remains an essential part of Germany’s energy needs, producing fuels for Berlin – Germany’s largest city – and neighboring regions, including parts of Poland. Finding enough oil to replace the 12 million tonnes of crude processed annually at Schwedt – through German and Polish ports to the north – is only one piece of the puzzle, as Rosneft has told German officials that it will not had no interest in operating the refinery using non-Russian oil.
To address the issue, Germany’s parliament last week approved a law that would make it easier for the government to seize foreign-owned critical infrastructure to prevent a national emergency. If the oil embargo passes, German officials said the new law would allow Berlin to ensure an adequate supply of petroleum products until another company is found to acquire Rosneft’s stake.
Shell, Europe’s largest energy company, which has a 37.5% stake in PCK, recently said it would support the refinery, “even at the cost of economic losses in order to maintain supply to the region”. . Shell last year sought to sell its stake in the refinery and Rosneft decided to acquire it, but Germany’s economy ministry, which weighs political and strategic aspects of foreign investment, has yet to approve .
Another energy company, Alcmene, which is part of the private British energy holding Liwathon Group, has expressed interest in investing in Schwedt. “We would be able to ensure security of supply and full utilization of the PCK refinery through German ports” without government subsidies, Alcmene said in an emailed statement.
Chancellor Olaf Scholz has made it clear he is aware of the concerns surrounding the refinery and considers securing its future a priority.
“We are looking very closely at how this can actually work,” he told a recent party meeting in the state of Brandenburg. “We’re also going to make sure employees aren’t left to fend for themselves.”
Fear that layoffs were imminent drew hundreds of workers, many dressed in the CPK’s official fluorescent orange and forest green colors, to the company’s canteen earlier this month for a town hall meeting with Mr Habeck .
Like other regions of the former East Germany, Schwedt experienced widespread job losses after the collapse of communism. Memories of 25% unemployment still haunt the region.
Moreover, the refinery is not only a source of oil and revenue, it is also the heart of the city’s identity. Flattened by the Soviet Union at the end of World War II, the arrival of the pipeline – its name, Druzhba, means friendship in Russian – and the refinery in the late 1960s attracted thousands of workers and their families, attracted by secure jobs. PCK’s slogan is: “We move Berlin and Brandenburg!”
Today, about a tenth of the town’s 30,000 residents hold secure union jobs at the refinery and in support industries. Many workers took advantage of the meeting with Mr. Habeck to question the government’s approach.
“Why should we take a business partner who for decades has been reliable and always delivered, and impose an embargo on it?” said a man who identified himself as having worked at the refinery for 27 years.
“My wish would actually be to keep the Druzhba pipeline completely out of the embargo,” said another employee, who identified herself as the mother of three young children. “There is no alternative that is profitable.”
Journalists have been asked not to identify employees who spoke at the event, in order to protect their privacy.
Mr. Habeck tried to assure the crowd that the refinery would continue to operate. “If everything works as it does on paper,” crude from Norway or the Middle East could be shipped from the ports of Rostock and Gdansk, Poland, both connected to the refinery by pipelines.
At the same time, he acknowledged, there were several points in the process where it could run into a problem.
The PCK facility, like other refineries, is designed to process the particular type of crude oil from Russia. Crude from other countries would have to be mixed with oil held in reserve tanks on Germany’s northwest coast to create a suitable mix.
Getting this oil reserve to the Rostock pipeline would require a seven-day sea voyage, as no pipeline crosses the former border that divided East and West Germany, and the main rail freight operator of the country has almost no tank wagons.
Another potential complication: the Polish government refuses to work with Russian entities, and it has told German officials that as long as Rosneft has an interest in the refinery, no oil will come in from Gdansk.
“We can’t be completely sure what we’re doing,” Habeck told refinery workers. “But at least it has been carefully discussed and thought through.”
Eventually, Mr. Habeck and local officials would like to see the refinery move away from fossil fuels and focus on processing renewable energy. Over the past few years, PCK has invested in synthetic fuel development with an emphasis on hydrogen. Verbio, a company producing ethanol from local sources, operates at the refinery site, supplying bioenergy to the city’s heating system.
Berlin officials highlighted the economic appeal of the surrounding region, pointing to Tesla’s recently completed assembly plant and Intel’s announcement of a $19 billion chip manufacturing plant. Both companies have been drawn to an abundance of renewable energy, said Carsten Schneider, Chancellor Scholz’s East Liaison Germany, who also spoke to the people of Schwedt.
“I assured them that the German government would not just abandon them, but would make an effort, both for a short-term solution to secure oil from elsewhere and for the long-term restructuring towards the production of regenerative energy,” he said.
City Mayor Annekathrin Hoppe said she would like to set up a campus for start-ups, incubators and other energy innovators near the refinery to promote the transition to green energy production. But, she said, that would require “sums in the millions or billions”.
Despite all the attention Berlin politicians have given her city, she said she has yet to see a timeline or concrete assurances that people will be able to keep their jobs, or promises of ‘financial aid.
“It was a good start,” she said of the flurry of visitors in recent weeks. “But it was just the start.”