Russian oil flow halted through Druzhba pipeline to central Europe


The flow of oil alongside a key pipeline transporting Russian crude to central Europe has been halted amid a row over funds, threatening provides to the area and exposing the EU’s continued reliance on Russian imports.

The southern department of the Druzhba pipeline, which takes Russian oil throughout Ukraine to refineries in Slovakia, the Czech Republic and Hungary, stopped pumping 5 days in the past, Russia’s state-owned pipeline operator Transneft mentioned in a press release on Tuesday.

According to Transneft, Ukraine reduce off the flow after a cost for transit charges was blocked due to issues associated to the implementation of EU sanctions. The Russian firm pays Ukraine’s state-owned UkrTransNafta a month-to-month payment prematurely to use the pipeline, price about $15mn final month.

Transneft mentioned the European banks that course of the cost had not obtained the required approval this time, claiming that EU regulators “have yet to form a common position” on how or whether or not the banks ought to permit the transactions.

The EU has banned transactions involving Russian state-owned entities, together with Transneft, though this doesn’t apply to the import or transport of oil and gasoline into the bloc. An EU official mentioned the European Commission was trying into the difficulty however declined to remark additional.

Naftogaz, proprietor of UkrTransNafta, additionally declined to remark.

The shutdown exposes the continued dependence of central Europe on the pipeline, simply as the remainder of the continent is in search of to cut back its reliance on Russian oil. TransPetrol, which operates the part of the Druzhba pipeline that runs through Slovakia, additionally confirmed that flows had stopped.

Hungary, Slovakia and the Czech Republic imported a mean of 318,000 barrels per day of crude through the Druzhba final month alone, up from 246,000 b/d in July final 12 months, in accordance to knowledge supplier Kpler. The transit charges Transneft should pay to Ukraine are roughly $1.61 per barrel, Kpler added.

Viktor Katona, a Kpler analyst, mentioned the shutdown was a significant downside for Slovakia and the Czech Republic specifically. “If the pipeline volumes do not come back in a relatively short period of time — I’m talking days not weeks — then they’re out of stocks,” he mentioned.

Jozef Síkela, minister of business and trade within the Czech Republic, mentioned his authorities was working with “all the relevant actors” to resolve the state of affairs. “The next few days will show whether this is another escalation of the energy war by Russia or a technical problem in payments,” he mentioned.

Russia has beforehand been accused of purposely slicing vitality exports to Europe to stress the EU to ease its financial sanctions.

Moscow claimed final week that it had been pressured to restrict gasoline deliveries to northern Europe through the Nord Stream 1 pipeline as a result of western sanctions had blocked the supply of a key turbine.

The Kremlin has additionally mentioned the sanctions towards it damage the EU greater than Russia by limiting the bloc’s entry to vitality.

“European countries that are trying to punish Russia are actively paying the bills for it,” Dmitry Peskov, president Vladimir Putin’s spokesperson, mentioned on Tuesday, in accordance to Russian information company Interfax. Peskov additionally hinted that EU nations would ultimately query whether or not supporting Ukraine was well worth the hit to their economies.

MOL, which operates the Hungarian part of the pipeline and whose refineries depend on provides from Druzhba, mentioned it had “several weeks” of oil reserves that it might use if wanted.

It additionally mentioned it was engaged on an answer, together with probably paying the Ukrainian transit charges itself.

The Druzhba pipeline has been a central characteristic of the European vitality infrastructure because it was opened in 1964 as a manner for the Soviet Union to provide its allies within the Communist bloc.

Its significance is such that imports through the pipeline will probably be exempt from an EU ban on bringing Russian oil into the bloc, which comes into full impact in December.

Brent crude, the worldwide benchmark, rose as a lot as 1.8 per cent on Tuesday to $98.40 per barrel earlier than declining barely.

The northern leg of the Druzhba pipeline, which runs through Belarus to Poland and Germany, has not been affected by the stoppage.

Additional reporting by Roman Olearchyk in Kyiv and Alice Hancock in Brussels

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