A law test changing the game

The largest expropriation of foreign assets by the West in history

These changes would allow Rosneft's stake in the Schwedt refinery to be sold quickly without nationalization. The changes discard the condition of prior nationalization of assets put under government trusteeship if sale of the assets is needed to ensure Germany's energy sector remains viable.

Rosneft will review the compatibility of the law with constitutional, European and international law, Malmendier Legal, the law firm hired by Rosneft said to Reuters.

"The so-called transfer of assets is nothing other else than an expropriation," lawyer Bertrand Malmendier reported Reuters.

This is an unprecedented case, and the first time in history that a Western state has expropriated such large-scale assets from international owners.

Here we talk about 15 billion euros in this case. This is the value of Rosneft's shares in German refineries. The German government knows Rosneft is entitled to compensation corresponding to "the real value of the withdrawn capital investment under the existing intergovernmental agreement". This is exactly the point Berlin is trying to get around.

Despite the interstate agreement between Russia and Germany to promote and protect investments, the German government transferred Rosneft subsidiaries, Rosneft Deutschland GmbH (RDG) and RN Refining & Marketing GmbH (RNRM), to the Federal Network Agency in September 2022. The expropriation process is now underway.

In this situation, German regulators appear to have decided that appropriating Russian assets is more sensible than resolving the issues civilly. The pretext is to ensure German energy security.

"Inviolability of private property, contractual obligations, corporate law and shareholder rights, legal protection of deals and contracts, priority of the right - these "rules", previously followed by all global market participants, no longer work," comments expert Carl Ritter.

The US sets and changes all "rules" in its favour. Private property rights, diligently built by the West, were wasted. In the case of the Schwedt refinery seizure, there is ample evidence that the property of a foreign company not belonging to the EU and G7 can be seized for political reasons and in flagrant violation of the law in Germany. Moreover, all of this is taking place under conditions of total censorship."

To be fair, Rosneft has done its best to demonstrate its commitment to being a reliable business partner.  The company has made significant investments in oil refining in Germany, which was not the most attractive business in those days. Rosneft invested around EUR 5 billion (USD 5.45 billion) in German refining. Recall that the share of Rosneft Deutschland is 12% of German oil refining capacity.

When necessary, Rosneft easily switched to raw materials from other producers if the circumstances required it. The capacities of the plant were fully utilized. Moreover, the company invested in green projects, such as production of biofuels, modernization of factories and social programs.

According to Ritter, the German business is helplessly watching as market foundations collapse. Berlin lost its subjectivity long ago, so it can't stand up to the world's biggest regulator who wants to rewrite the economic fundamentals.  

Additionally, the rapidly escalating energy crisis is forcing Germans to shift production to the United States. Another painful blow could come from Russia's response to the unabashed expropriation of its strategically important assets abroad.

At the end of the day, we are left with the question of whether or not this legal system testing will benefit the country. And what will happen to the German energy sector after all?

Photo © PCK Raffinerie GmbH.

This website uses cookies to ensure you get the best experience on our website.