This week Kazakhstan delivered the first cargo of crude oil to Germany via the “Druzhba” pipeline system. This is intended to secure the supply of the important refinery in Schwedt in eastern Germany, which processed almost exclusively Russian oil until the turn of the year.
The delivery of 20,000 tons (145,000 barrels) is part of a plan to make Germany less dependent on Russian oil. The largest European economy stopped buying oil from Russia this year. And this despite the fact that crude oil from pipelines is exempt from an embargo imposed by the European Union on Russian oil because of Moscow’s war in Ukraine.
Kazakhstan, an ally of Russia, wants to transport 1.2 million tons of crude oil to Germany this year. Kazakh state-owned pipeline operator KazTransOil has already received approval from its Russian partner Transneft to ship 300,000 tons through the Druzhba pipeline this quarter.
Druzhba, which means “friendship” in Russian, is one of the largest oil pipeline systems in the world. Around two million barrels can be transported daily.
Why is Germany buying oil from Kazakhstan?
The Kazakh oil is destined for the PCK refinery in Schwedt, which is 120 kilometers north-east of Berlin. Until the German government placed it under state control last year, the site was partially owned by the Russian company Rosneft. The Schwedter refinery supplies 90 percent of the fuel for the capital and is an important employer in the economically weak region. But the refinery has been in a precarious position since Germany decided to stop importing oil from Russia via pipelines. Until now, Schwedt has worked with oil from Russia.
Until Moscow started the war in Ukraine a year ago, Germany got more than a third of its oil needs from Russia. In November 2021, Germany imported 687,000 barrels of crude oil per day, most of it via the Druzhba pipeline.
The Druzhba pipeline – here a receiving station in Hungary – is one of the largest pipeline networks in the world
Within a relatively short period of time, Germany managed to replace most of the Russian supplies. However, it was difficult to find alternatives for Schwedt as the town is not connected to West German pipelines and supply routes. As a result, the refinery is only running at 60 percent capacity.
The deliveries from Kazakhstan would ensure that the refinery could work at a higher capacity and thus economically. The refinery is currently supplied with crude oil from the world market, for example from the USA, mainly via a pipeline from the Baltic Sea port of Rostock.
How does Russia benefit from the trade?
Russia will have revenue from transit fees Transneft receives for allowing oil to move through its pipeline network – a welcome source of revenue for Moscow at a time when Western sanctions and price caps are hurting the oil business.
Also, the oil has to be shipped thousands of miles across Russian territory, making delivery dependent on Russian goodwill. “We have to watch how Russia acts in order to pass through the Druzhba,” said a spokeswoman for the German Ministry of Economic Affairs on Monday. She added that it is difficult to reliably predict Russia’s actions, as demonstrated by last year’s gas freeze.
Does the deal violate the EU’s oil embargo?
Oil from Kazakhstan is not subject to the EU embargo, nor does it fall under Germany’s voluntary waiver of pipeline oil from Russia.
Kazakhstan’s oil is first pumped to Russia, where it is blended with Russian crudes before being exported from Russian seaports. To avoid problems with Western sanctions, Kazakhstan last year rebranded its export oil as KEBCO to distinguish it from Russia’s REBCO (Russian Export Blend Crude Oil), or Ural crude.
However, Poland in particular, through which Kazakh oil will flow to Germany, fears that mixing the crude oils could make it difficult to trace their origin.
According to the German Economics Ministry, it is inevitable that part of the Russian oil will reach Germany in this way. But it is important that no money flows to Russia, since the deal is being done with a Kazakh and not a Russian company, they say.
Adapted from the English by Uta Steinwehr.