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Germany Seizes Control of Russian Refinery in Midst of Energy Crisis

On Friday, Germany took control of a significant Russian oil refinery, risking reprisal from Moscow in an effort to secure energy supplies and fulfil the European Union’s vow to stop importing Russian oil by the end of the year.

The economy ministry announced that it was taking over the Schwedt refinery of Russian oil company Rosneft, which provides 90% of Berlin’s fuel, and placing it under the trusteeship of the industry regulator.

As they ratchet up sanctions against key supplier Russia for its invasion of Ukraine, governments throughout Europe have been rushing to support their power providers and ensure fuel supply.

Moscow has replied by cutting off gas supplies and threatening to turn off all the taps, which has caused prices to spike and increased the possibility of energy rationing in Europe this winter.

The Federal Network Agency regulator has taken over trusteeship of Rosneft Deutschland, which was mostly held by the Russian oil firm and accounts for around 12% of German oil processing capacity. The regulator declared that the initial owner was no longer able to provide orders.

According to sources in Berlin and Warsaw with knowledge of the situation, Polish refiner PKN Orlen is interested in acquiring a controlling position in the Schwedt refinery, which is the fourth largest in Germany and also feeds areas of western Poland.

For long time, Shell has wanted to sell its 37.5% ownership in Schwedt. The German decision to assume ownership of the refinery, according to Shell on Friday, had “no impact” on the company.

Since the Schwedt refinery receives all of its crude from Russia, it has been a problem for Berlin for a few weeks. However, Germany is determined to stop importing Russian oil by the end of the year due to sanctions imposed by the European Union.

Polish pipelines and a Gdansk oil terminal may be used to supply the refinery with seaborne oil in place of Russian crude, according to earlier statements made by Poland this year.

Without providing further information, the German economy ministry stated that the action taken on Friday included a package to ensure that the refinery could obtain oil via alternate methods.

At 11:30 GMT, Chancellor Olaf Scholz, Economy Minister Robert Habeck, and the state premier of Brandenburg are scheduled to provide more information.

The government announced this week that it would increase lending to businesses at risk of going bankrupt due to skyrocketing gas prices, and power utility Uniper said the state could take a controlling stake, adding that a previous government rescue package worth $19 billion was no longer sufficient.

In addition, after Russian energy giant Gazprom abandoned SEFE in April, the government placed it under trusteeship. SEFE was originally known as Gazprom Germania.

Berlin is struggling to deal with Russia’s decision to stop gas shipments through the Nord Stream 1 pipeline, which had been the main gas supply route supplying the largest economy in Europe.

The Federal Network Agency will acquire Rosneft Deutschland’s stakes in the MiRo refinery in Karlsruhe and the Bayernoil refinery in Vohburg as a result of Friday’s decision.

United States to Further Increase Tariffs, Impose More Sanctions on Russia

Economic sanctions are commercial and financial penalties applied by one or more countries against a targeted self-governing state, group, or individual. Economic sanctions are not necessarily imposed because of economic circumstances—they may also be imposed for a variety of political, military, and social issues.

The United States is increasing import tariffs on hundreds of goods from Russia and imposing a number of additional sanctions against that country in response to its ongoing war against Ukraine.

For more information on the wide range of trade restrictions the United States has imposed on Russia and how to ensure your company is in compliance, please contact attorney Kristine Pirnia at (202) 730-4964 or via email.

Under an April 2022 law that revoked permanent normal trade relations status for (and thus increased tariffs on) imports from Russia, President Biden has issued an executive order that, effective July 27, will further increase to 35 percent United States import tariffs on more than 570 groups of goods from Russia.

The annex to the proclamation listing the affected goods by HTSUS number is available here, and the Office of the United States Trade Representative said it includes steel and aluminium; minerals, ores, and metals; chemicals; arms and ammunition; wood and paper products; aircraft and parts; and automotive parts.

The White House said the United States and other G-7 member countries will “seek authority to use revenues collected by new tariffs on Russian goods to help Ukraine and to ensure that Russia pays for the costs of its war.”

The United States is also prohibiting new imports of gold from Russia, which is the world’s second-largest producer and has gold as its second-biggest export behind energy.

Information from the United Kingdom, which along with other G-7 members is also imposing this ban, states that the ban will apply to “newly mined or refined gold” but not “Russian-origin gold previously exported from Russia.”

The White House pointed out that most of Russia’s gold exports go to the United Kingdom and that the United States imported less than $1 million in Russian gold in 2021.

Other measures the United States intends to take in the near future include the following:

  • adding companies “engaging in backfill activities in support of Russia” to the Entity List, which will prohibit those companies from purchasing United States-made goods and technologies;
  • imposing blocking sanctions against (1) major Russian state-owned defence enterprises, defence research organisations, and other defence-related entities and (2) persons tied to aiding Russia’s efforts to evade United States sanctions;
  • issuing an alert to financial institutions to aid in detecting potential violations of export controls.

For more information, please contact Charles L. Crowley at (914) 433-6178 or ccrowley@strtrade.com or Robert D. DeCamp at rdecamp@strtrade.com or (212) 549-0141.

Staying in The Technology Race and Avoiding Pitfalls

It is vital for law firms and in house counsel that they are at the forefront when advising on the specifics and legalities of the technology supply chain, which increasingly relies on mining raw materials for use within the manufacturing process of ‘smart’ products. However, an acute awareness of the barriers is also essential.

Given the increase in protectionist policies, and the inherent link that exists between these and mining essential raw materials, it has never been more important that in house teams work closely with their advisers to anticipate market changes and implement strategies to manoeuvre through what can be difficult events and circumstances.

What is becoming evident, as set out in the report, is that there is a startling correlation between countries that pursue digitally protectionist policies as well those that are protectionist in relation to their natural resources – in particular China, Russia, India, Vietnam, Argentina and Turkey – six key global players in both areas of the economy.

Given that countries like these are the very same which house the essential raw materials that need to be mined to fuel the development of technology, it is crucial to understand how to anticipate the impact of such behaviour on the technology supply chain.

General Counsel could be forgiven for focusing more on the operational and trading aspects relating to the existing uncertainty surrounding Brexit and global trade – and simply seeing digital protectionism as a side-line issue to focus on at a later date.

This would be a mistake, given that these measures pose as much a threat to international trade and development as the more traditional tools of trade protectionism that seem to be most in focus at present.

Not only do the identified countries above have a strong track record in imposing trade barriers and tariffs on imports, they also have a high number of restrictive data laws and large deposits of the vital raw materials needed to make smartphones, connected devices and batteries for electric vehicles.

While this is happening in real time, many technology focused brands – focused on the manufacturing side of the industry – may not yet have anticipated how this will affect their sourcing and subsequent supply chain partners and processes.

This makes it even more important that General Counsel communicate the effect of this on the output of their businesses in order to assist internal relationships or indeed, using the foresight of their selected legal advisers.