Russia-Germany energy initiative that began under
the Chancellorship of Willy Brandt in the Seventies culminated during the
tenure of Gerhard Schroeder in September 2005 as Nord Stream 1. His successor Angela
Merkel supported throughout because it was a sweet deal of sour crude. Sadly, February
2022 saw this pipeline blasted and Germany got entrapped.
Facts
Crude oil is divided broadly into two categories:
sour crude is the heavier one containing 0.5 to 1.0% of sulphur. German refineries
located in the eastern part processed the type known as Russian sour crude named
‘Urals’ pumped via Druzhba pipeline. Until 2021, Russia accounted for nearly
35% of the total crude imports of Germany. Refineries such as Leuna and Pck Schwedt carried the
bulk of the work where the latter generated electricity as well.
Generally sour crude processing brought out several
by-products the main one being elevated sulphur which is heavily used in
chemical industries and also in farming as fertilizers. The next one in
importance is petroleum coke used in heavy industries. Others include fuel oil,
asphalt and hydrogen sulphide. All these supported the industrial backbone of Germany since the end of
WWII.
Analysis
Russian invasion of Ukraine in 2022, stormed a
thorny relationship between Western Europe and Russia. Being the lead economy, Germany wholeheartedly
supported sanctions against Russia that included her crude oil exports. Furthermore,
Germany postponed certification of Nord Stream 2 as well. In July 2022 the Nord Stream 1 pipeline was bombed and rendered
useless.
Germany is now forced to search for alternate
sellers. There is nobody who could match up with the Russian crude in its
properties. Hence, the decision was made to switch over to using sweet crude.
This move required heavy capital expenditure of establishing new refinery system that
could process sweet crude.
In the meantime, the demand for oil related
products started to climb up. Petrol for light vehicles, Diesel for heavy vehicles,
gas and kerosene for household uses and generating electricity all of these saw
uptick. In 2025, total crude imports
alone coughed up more than US$ 41 billion. Monthly usage of crude ranges 5 to 6
million tons adding to annual
figure of 75 million tons.
Major Sweet crude suppliers include Norway ranging
between 16 to 20%, USA 15 to 18%, Kazakhstan 13%. Recently, Russia ordered suspension
over pumping Kazakh oil via Druzhba pipeline. Libya which was then found as an
additional party starting with 9% of the total crude imports. Some imports from Middle Eastern countries gave
a breathing space to Germany. However, Hormuz blockade ended this. Libya
is now filling the vacuum created by this blockade. Hence, imports from Libya
might go up as high as 18% in the coming months.
Synthesis
While sweet crude lends a helping hand in the state
policy of de-carbonisation the production of sulphur based items used in
chemical industries and fertilizers in the farmland has declined immensely. The deadliest punch delivered to
Germany recently was the jacking up of fertilizer price globally affecting
German farmers severely.
Strategy Advice
The bottom line is sweet crude has entrapped
Germany in her most vulnerable point: geoeconomics. Food security and energy
security are vital parts of national security. National security is contaminant
part of geoeconomics power structure.
Hence, navigating strategy impels Germany to resort
to the use of both sour crude and sweet crude evenly as far it is feasible!
Cheers!
Muthu Ashraff
Strategy Adviser
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Strategy Adviser
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