Ukrainian company Ukrtransnafta has stopped pumping oil from the southern branch of the Druzhba oil pipeline. In this way, raw materials are delivered to the Czech Republic, Slovakia and Hungary. Transneft was unable to pay for transit services due to European sanctions.
Press Secretary, Advisor to the President of Transneft, Igor Demin, said that pumping was carried out from the southern branch of Druzhba. Completely stopped at 6:10 on August 4. At the same time, the transit of oil through Belarus to Poland and Germany continues as usual.
“When paying for transit through Ukraine, the funds were returned to the account of PJSC Transneft. Gazprombank, which serves payments, informed us that the payment was returned due to the introduction of EU regulations, namely the seventh package of sanctions.”
On July 22, money was sent for transportation.
You just stated Ukrtransnafta provides service with 100% prepayment conditions.. The Ukrainian company stopped transport “due to lack of cash receipts”.
Transneft reported that European correspondent banks “no longer have the authority to independently decide on the possibility of conducting a particular operation”.
According to the company, the bank now needs permission from the national authorized government agency to verify that a particular transaction does not fall under prohibited transactions.
“The situation is complicated by the fact that European regulators have not yet formed a unified position on the algorithm of actions of banks in various jurisdictions and have not developed a procedure for issuing these permissions,” Transneft said.
The company made sure to look for alternative ways to pay for oil transit services through Ukraine. Inability to pass the money and not make the payment Transneft also informed the Ministry of Energy of the Russian Federation and the domestic transporters supplying fuel to the Czech Republic, Slovakia and Hungary.
Brent oil prices rose more than $1.5 to $97.8 a barrel due to the news about the interruption of supply. US WTI also rose 1.29% to $91.9.
Oil from the Druzhba pipeline is not subject to EU sanctions. European countries imposed an embargo against the rest of Russian oil as part of the sixth package of sanctions.
In December 2019, Transneft and Ukraine extended the contract to pump oil from the territory of Ukraine until January 1, 2030. The Druzhba oil pipeline passes through the city of Mozyr in Belarus, where it splits into northern and southern branches. The northern branch extends to Germany via Belarus and Poland, and the southern branch to Slovakia, the Czech Republic and Hungary via Ukraine.
Hungary will pay
The company’s press service told Interfax that the largest Hungarian oil and gas company MOL has begun negotiations to take over the payment for the oil transit through Ukraine. As stated in the press service, the company is aware that oil transportation has stopped due to technical problems of banks related to the payment of the transit fee of the Russian side.
“Although MOL has had oil reserves for several weeks, the company is working to resolve the situation and is also in talks to take over the commission,” the company said.
The Hungarian government’s press service noted that the country is in favor of the speedy restoration of its oil resources. At the same time, the Cabinet added that the country now has sufficient fuel reserves.
Sergey Kondratiev, Deputy Head of the Economics Department of the Institute of Energy and Finance, believes that Hungary and Slovakia will not have sufficient oil reserves to meet the lost volumes from the suspension of fuel pumping.
If the closure of the southern branch of Druzhba takes a few days, nothing critical will happen for Hungary and Slovakia. They have reserves at local refineries that can meet the falling volumes. But if the transit stop is longer – a week or more – this will mean serious problems for Hungary and Slovakia, ”Kondratiev explained in a conversation with socialbites.ca.
He recalled that Slovakia, the Czech Republic and Hungary are still heavily dependent on oil supplies from Russia via the southern branch of the Druzhba.
“Hungary is more than 70% dependent on the supply of Russian oil through the Druzhba pipeline, and more than 90% on Slovakia. The Czech Republic is in a better position. Prague can get to deliveries from Austria relatively quickly. However, the Czech Republic still depends on supplies from Russia by 40 percent.
What sanctions prevent payment?
EU countries agreed in June on the sixth package of sanctions, in which European states agreed to abandon Russian oil within six months and oil products within eight months. The European Union later acknowledged that Hungary and Slovakia would face difficulties if they embargoed Russian oil. Removed materials from sanctions Druzhba pipeline. The EU plans to reduce oil imports from Russia by 90% by the end of the year.
On 21 July, the European Union approved the seventh package of sanctions. It includes a ban on Russian gold imports. In addition, the restrictions include tightening the rules for accepting bank deposits from natural and legal persons, the majority of which are located in Russia.
European Union President Ursula von der Leyen said that Germany and Poland have decided to refuse any oil supplies from Russia, so by the end of 2022 raw materials will be pumped into the EU only from the southern part of the Druzhba oil pipeline. Commission. accounts for it only 10% of the total Russian oil imported by the European Union.
Barbara Dickson is a seasoned writer for “Social Bites”. She keeps readers informed on the latest news and trends, providing in-depth coverage and analysis on a variety of topics.