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Russian oil movement halted by way of Druzhba pipeline to central Europe

Russian oil flow halted through Druzhba pipeline to central Europe

The movement 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 stated in a press release on Tuesday.

In keeping with Transneft, Ukraine reduce off the movement after a fee 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 price upfront to make use of the pipeline, value about $15mn final month.

Transneft stated the European banks that course of the fee had not obtained the required approval this time, claiming that EU regulators “have but to kind a standard place” on how or whether or not the banks ought to enable 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 stated the European Fee was trying into the difficulty however declined to remark additional.

Naftogaz, proprietor of UkrTransNafta, additionally declined to remark.

Map showing the Druzhba pipeline

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

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

Viktor Katona, a Kpler analyst, stated the shutdown was a significant drawback for Slovakia and the Czech Republic specifically. “If the pipeline volumes don’t come again in a comparatively brief time period — I’m speaking days not weeks — then they’re out of shares,” he stated.

Jozef Síkela, minister of business and commerce within the Czech Republic, stated his authorities was working with “all of the related actors” to resolve the scenario. “The subsequent few days will present whether or not that is one other escalation of the power conflict by Russia or a technical drawback in funds,” he stated.

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

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

The Kremlin has additionally stated the sanctions in opposition to it damage the EU greater than Russia by limiting the bloc’s entry to power.

“European nations which can be making an attempt to punish Russia are actively paying the payments for it,” Dmitry Peskov, president Vladimir Putin’s spokesperson, stated on Tuesday, in accordance with Russian information company Interfax. Peskov additionally hinted that EU nations would finally query whether or not supporting Ukraine was definitely worth the hit to their economies.

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

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

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

Its significance is such that imports by way of the pipeline might 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 by way of Belarus to Poland and Germany, has not been affected by the stoppage.

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

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