A southern section of the Druzhba oil pipeline has paused oil deliveries as Ukrtransnafta halted pumping. The gap affects shipments headed to the Czech Republic, Slovakia, and Hungary, while Transneft cites European sanctions as the reason for the outage and its inability to cover transit fees.
According to Transneft spokesperson and presidential adviser Igor Demin, pumping from the southern Druzhba line was stopped completely at 6:10 on August 4. The Belarus-to-Poland-Germany corridor through the northern branch continues to operate as normal, with no disruption to that route.
Payments for Ukrainian transit would normally flow to Transneft, but funds were returned to the company after European regulators tightened rules. Gazprombank, the payment conduit, notified Transneft that the funds could not clear due to the seventh package sanctions. This has left the pipeline operator seeking alternative arrangements.
Earlier on July 22, funds were sent to cover transit, but Ukrtransnafta reportedly operates on 100 percent prepayment terms and resumed transport only after cash receipts were confirmed. Transneft has observed that European correspondent banks have lost the ability to authorize transactions on their own, requiring clearance from national authorities to verify that a given payment does not breach sanctions.
Transneft described the situation as unsettled because regulators across the EU have not established a unified procedure for banks to obtain these permissions. The lack of a cohesive framework has complicated cross-border payments for oil transit through Ukraine.
In response, the company explored alternative pathways to settle transit charges through Ukraine and informed the Russian Ministry of Energy as well as domestic fuel suppliers to the Czech Republic, Slovakia, and Hungary about the funding blockage.
Market observers noted a price uptick, with Brent crude rebounding more than 1.5 percent to around 97.8 dollars per barrel and US WTI rising about 1.29 percent to roughly 91.9 dollars. Officials stressed that Druzhba oil is not under EU sanctions; rather, the six-package measures target other Russian energy exports and sanctions compliance. The Druzhba line remains a key conduit, with the northern leg delivering to Germany via Belarus and Poland, and the southern leg supplying Slovakia, the Czech Republic, and Hungary via Ukraine.
Historically, a December 2019 agreement extended the pumping contract for oil from Ukrainian territory until January 1, 2030. The Druzhba complex traverses Mozyr, Belarus, and splits into two branches before reaching its end users in Central Europe.
Hungary will pay
Interfax reported that MOL, Hungary’s largest oil and gas company, began talks to assume responsibility for the Ukraine transit payments. The Hungarian firm acknowledged that the suspension stemmed from bank-related technical issues linked to sanction compliance and noted it is actively pursuing a resolution, including assuming the commission for transit.
The Hungarian government press service affirmed its support for a rapid restoration of oil resources, while also noting that Hungary currently holds adequate fuel stocks. Economic analysts emphasize that any shortfall in oil flow would strain Hungary and Slovakia if the disruption lasts longer than a few days.
Sergey Kondratiev, deputy head of the Economics Department at the Institute of Energy and Finance, cautioned that both Hungary and Slovakia could face insufficient stocks to cover the lost volumes if the halt extends. He also highlighted that the Czech Republic retains some flexibility due to alternative routes, but Russia remains a meaningful supplier for all three nations. Hungary relies heavily on Druzhba for Russian oil, Slovakia is even more dependent, and the Czech Republic remains the most diversified among the three, though still dependent on Russian deliveries to a notable degree.
What sanctions prevent payment?
EU members agreed in the sixth package to curb Russian oil within six to eight months, a move that complicates payments for transit through Ukraine. The bloc later acknowledged that Hungary and Slovakia could face difficulties if broader embargoes are applied. The Druzhba pipeline itself remains exempt from certain sanctions, while the EU aims to reduce reliance on Russian oil by roughly 90 percent by year-end.
On July 21, the seventh package gained approval, extending restrictions to include Russian gold and tightening rules for accepting deposits from individuals and entities connected to Russia. EU officials have stated that Germany and Poland intend to cut Russian oil supplies, with the southern Druzhba route expected to bear a smaller share of imports as per EU projections. The commission notes that southern Druzhba accounts for a portion of Russia’s total oil entering the union, with ongoing enforcement and compliance efforts shaping future supply dynamics.