Russian oil or mass layoffs: A German town’s conundrum

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Russian oil or mass layoffs: A German town’s conundrum

In Schwedt, life flows through an oil refinery. If it doesn’t get help — or restart Russian imports — people worry their jobs will be gone.

By VICTOR JACK, JOHANNA SAHLBERG
and BEN LEFEBVRE in Schwedt, Germany

Annekathrin Hoppe’s town, her community, the people she oversees as mayor, are losing their lifeline. Many now fear their jobs are next.

They say a bit of Russian oil could change that.

In Schwedt, life flows through a partly Russian-owned oil refinery. The sprawling plant provides a living for around a fifth of the city’s 30,000 residents. Hoppe once worked there before becoming mayor. It’s been the community’s beating heart for six decades.

“The refinery is the reason the town exists,” Hoppe said, sitting in a spartan second-floor office overlooking the neat rows of the pale Plattenbau apartment blocks that once dominated Soviet-controlled East Germany.

Yet like those apartment blocks, the refinery may soon become a relic of the past. In late 2022, the plant lost its steady Russian energy diet when the aptly named Druzhba (Friendship) pipeline abruptly dried up due to sanctions. Moscow’s oil was no longer welcome after Russia invaded Ukraine.

The plant has yet to recover. And Hoppe is now appealing to Berlin for action — even if it means bringing back Russian oil.

“It is so difficult for people and for all of us here in Schwedt to accept this new economic reality,” said the center-left politician. “Of course we don’t accept the war,” she added, but “traditionally we have always had good relations with Russia,” echoing a sentiment felt across eastern Germany.

Her pleas showcase Europe’s growing conundrum. All over the continent, a bubbling chorus of business leaders and politicians is urging governments to revisit their hard-line stances on Moscow as ceasefire talk hangs in the air and economic anxiety mounts.

Standing in the way are a raft of legal and political hurdles. Officials in Berlin, Brussels and elsewhere are putting up walls, even pushing new plans to end the bloc’s reliance on Moscow for good. But that reserve won’t necessarily hold if political sentiment shifts, the fighting ceases, and struggling industries start demanding access to cheaper Russian energy.

For the first time in years, “the potential for restarting or increasing Russian supplies again seems like a possibility,” said Jonathan Stern, a Russia specialist and founder of the gas program at the Oxford Institute for Energy Studies, a research organization that receives money from fossil fuel firms and governments.

Backward flow

Shortly after Vladimir Putin’s troops marched toward Kyiv, the EU slapped sanctions on Moscow’s key economic lifeline, fossil fuels.

Three years later, the continent has nearly unwound its own long-held reliance on Russian energy. Gas pipeline imports are down by two-thirds, and oil and coal shipments by sea are banned.

Enter Donald Trump.

The returning president’s vow to end the fighting has given oxygen to EU voices arguing that a ceasefire could presage a return to Russian energy. Europe’s economic stagnation, and gas and power prices still at double prewar levels, are adding still more fuel to that fire.

The bloc’s far-right forces, from Austria’s Freedom Party to Bulgaria’s Revival, have long called for restarting supplies from Moscow. But now mainstream politicians, including Italy’s energy minister and officials from Germany’s ruling center-right, are also refusing to rule it out. Even Ukraine’s sanctions envoy said it would be “stupid” not to eventually restart imports.

Europe’s energy sector is keen, too. In France alone, energy firms TotalEnergies and Engie have said Europe could eventually up Russian gas buys by 40 percent.

“There are definitely companies out there who would take it,” said one gas trader, granted anonymity to discuss the politically charged topic. It has become “common sense that if there is peace, then gas will come.”

In Germany — the nucleus of Europe’s economic slump — the debate is crescendoing. Politicians from both the ruling Social Democrats and Christian Democrats have debated reviving the Russia-to-Germany Nord Stream pipelines, which were destroyed in 2022, although Friedrich Merz is now pushing to sanction the subsea links.

A spokesperson for Germany’s economy ministry said the country had “set itself the goal of becoming independent of Russian oil as quickly as possible — and has successfully achieved this.”

But “pressure will definitely grow,” said Stefan Meister of the German Council on Foreign Relations, as “more voices from different companies, but also from politicians on the local level … demand returning to cheap Russian oil and gas.”

Secluded and nestled between a dense thicket of trees on the edge of town, the Schwedt refinery encapsulates that shift.

Responsible for supplying over 90 percent of Berlin’s oil, its giant airport and a network of businesses from paper mills to pipeline processors, the facility is facing a battery of difficulties. With its Russian imports gone, the site now operates at 80 percent capacity and receives oil from Germany’s Rostock pipeline, Poland’s Gdańsk port and Kazakhstan via Druzhba.

That leaves the refinery “in the red,” given the site’s fixed running costs, according to Danny Ruthenberg, who heads the facility’s works council. Last month, the government extended an employment guarantee at the facility until the end of the year, giving its workers temporary respite. But within the next two years, up to 1,000 jobs will be at risk, Ruthenberg claimed.

Russian energy could prevent that. Plus, Ruthenberg said, it “doesn’t require any [new] investment.”

“When peace is there again, then you have to trade with Russia,” he added.

The PCK consortium, which owns the refinery, didn’t respond to a request for comment from POLITICO.

Politics over law

But bringing Moscow back into the fold won’t be easy — even if the barriers remain more political than legal.

For Schwedt, plugging the tangled metallic mesh of pipelines, distillation units and towering chimneys back into Moscow’s oil pump first means dealing with its convoluted legal structure.

After the war broke out, Berlin put the refinery under a temporary trusteeship, seizing Russian firm Rosneft’s majority stake. But Rosneft still owns its shares.

Any attempt to restart supplies from Moscow would therefore require the EU to lift its oil embargo, Poland to accept Russian crude passing through its pipeline network and Germany to force Rosneft to sell its shares to banks and suppliers on board, said Tibor Fedke, a senior energy lawyer at the Noerr law firm.

After that, signing new legal contracts would be “in theory very, very easy,” he said. While the new owner would still have to convince other shareholders and suppliers that they would not be hurt by future sanctions, it’s largely “a political matter,” Fedke added.

The story is similar for Nord Stream. European backers of the pipelines, which lie shattered deep under the Baltic Sea, have demanded that Russia’s Gazprom iron out its legal disputes before revival talk seriously begins. Germany’s regulator must also approve the flow of Moscow’s gas.

“Assuming there’s political will,” said Stern, the gas expert, that signoff can be done overnight, he said. The physical fix could be done in “months,” he added.

Ukraine is the other potential postwar path for Russian gas to reenter the EU, Stern said. Pipelines criss-crossing Ukraine once carried half of Moscow’s exports to Europe. But those flows ended in January after Kyiv let a transit deal with Moscow expire.

“I think if we saw a meaningful ceasefire, we might see traders from all over asking Gazprom: ‘Will you sell us gas on the Ukrainian border … where we’ve got people who’ll buy it?’” he said.

Elsewhere, countries like the Czech Republic have upgraded oil pipeline infrastructure to ensure their refineries are supplied with non-Russian fuels. But that doesn’t lock them into those alternatives.

“Logistically, it wouldn’t be an issue at all,” said Homayoun Falakshahi, head of crude analysis at Kpler, a commodities firm that tracks global oil shipping. “It would be very, very easy to switch back to Russian crude” — whether it arrives by ship or pipeline.

Creaking center

So far, mainstream politicians have stayed resolute on ending Russian imports.

Germany’s Merz in May vowed to ensure “that Nord Stream 2 cannot be put back into operation,” even backing fresh EU sanctions on the pipelines for good measure.

The EU, too, is steaming ahead with plans to quit Russian supplies. Brussels last month proposed legislation to fully phase out Moscow’s gas imports by 2027.

“It’s quite clear that we have already learned the lesson that dependency on energy imports from Russia is not without a price,” Lithuanian Energy Minister Žygimantas Vaičiūnas told POLITICO. “So sooner or later, we are paying the price for that.”

“We’re not going back,” echoed one EU official, speaking anonymously to discuss the sensitive subject. Even a ceasefire in Ukraine is not equivalent to a “long-term peace,” the official added.

But achieving that is far from a given. There’s legal uncertainty about Brussels’ gas-quitting legislation, while countries such as Austria, Slovakia and Hungary want to leave the door open for Russian imports. At the same time, Budapest and Bratislava are constantly threatening to tank the EU’s Russia sanctions in retaliation.

Meanwhile, the Kremlin has hollowed out a Western price cap on Russian oil, selling its oil via an army of creaky tankers with opaque ownership.

Additionally, an EU offer in 2022 to spend €2 billion on helping plants pivot away from Russian energy has come to little, at least in the bloc’s most heavily dependent countries of Slovakia and Hungary.

That missing money is being felt in Schwedt. The German government once pledged €400 million to upgrade Germany’s Rostock oil pipeline and help Schwedt replace its Russian supplies. But Brussels never approved the new cash.

“We’re disappointed,” said Ruthenberg, the refinery’s works council chief. “The chancellor promised money that never came.”

Hoppe, the mayor, stressed she would rather see the refinery shun Russian oil — but the frozen funding might leave the city with little choice but to consider Moscow. “The new federal government and the EU must act together to start on the developments they promised,” she said.

According to one senior German lawmaker, decisions about the refinery’s future are “still pending” in Berlin. “Ultimately, it is important that there are sustainable prospects for the site that will also secure jobs,” the lawmaker said, granted anonymity to discuss the process.

A European Commission spokesperson said that the EU executive was “in close and constructive contact with the German authorities” on the funding, while declining to give further details. The German economy ministry spokesperson said that sales talks with Rosneft were “ongoing,” while discussions with Brussels over cash funding were still “underway.”

“Ensuring security of supply remains the top priority” regarding the refinery, the economy ministry spokesperson added.

In the meantime, political pressure is starting to boil. Flanked by two Russia-friendly parties — the vociferous Alliance Sahra Wagenknecht on the left and an ascendant far-right Alternative for Germany (AfD) on the right — German centrist regional government leaders from Brandenburg to Saxony to Thuringia are cautiously backing a Russia return, said Meister, the political scientist.

In the country’s east, especially, “you just have a very Russia-friendly society,” he said. “You cannot [pursue] a fully-fledged policy against this mood.”

Many East Germans still see themselves as second-class citizens compared with the country’s more historically affluent West, according to recent polling, while Germans with Russian ethnic roots are almost twice as likely to support the AfD as their peers.

Behind closed doors, opponents fear a German volte-face could spark a domino effect. Three EU diplomats fretted that Italy, Austria, Bulgaria and the Czech Republic are all at risk of following suit on Russia if Germany caves.

A Bulgarian official said the country remains “fully aligned” with the EU’s strategy to quit Russian energy. “Austria does not comment on such speculations,” said a spokesperson for the country’s energy ministry.

The Czech and Italian permanent representations in Brussels didn’t respond to a request for comment from POLITICO.

The Trump card

More powerful than those internal pressures is an external force: Trump.

Despite his campaign pledge to end the bloodshed in Ukraine in “24 hours,” the U.S. president has struggled to make progress on a ceasefire. The former reality show star has wavered on further sanctions against Moscow, while heaping praise on the Russian leader and persistently backing closer economic ties with the Kremlin.

“Russia wants to do largescale TRADE with the United States when this catastrophic ‘bloodbath’ is over, and I agree,” Trump wrote after a two-hour call with Putin in May.

That debate is also firing up his administration. While White House special envoy Steve Witkoff wants to lift energy sanctions on Russia, according to two people familiar with the matter, Interior Secretary Doug Burgum would rather displace Moscow to make room for more U.S. imports.

In any case, Europe’s energy sector is at the heart of that potential cooperation. Moscow is in talks with Washington over restarting Nord Stream, backed by U.S. investors.

That’s sparking anxiety in Brussels. Trump and Putin “want to divide the European energy market and create [separate] spheres of influence,” said a second EU official, also granted anonymity.

Schwedt, too, could be swept into a U.S.-Russia peace deal. American investors are reportedly exploring buying up Rosneft’s shares in the refinery, according to German investigative outlet Correctiv. That would give U.S. firms a majority share in the facility.

“In an alternate universe in which Russia makes peace with the West and Ukraine specifically, Schwedt would look a lot more appealing,” said Clayton Seigle, an energy analyst at the Washington-based Center for Strategic and International Studies think tank.

For locals, that solution is as good as any. “Americans are ultimately our friends,” said Ruthenberg, the refinery’s works council leader. If the U.S. “wants to invest here … we will no longer be at a standstill.”

That does, of course, mean a Trump-branded partnership.

But “Trump is for a limited time,” Hoppe quipped with a chuckle. “We hope.”

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