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August 10, 2022

Ukraine halts oil flows via Russia pipeline to Europe over payment issue

The suspension of oil flow has impacted Hungary, Slovakia, and the Czech Republic.

Understand the impact of the Ukraine conflict from a cross-sector perspective with the Global Data Executive Briefing: Ukraine Conflict

Ukraine has suspended oil flows from Russian pipeline to parts of central Europe as Western sanctions prevent it from accepting transit fees from Moscow, reported Reuters citing Russian state-controlled pipeline transport company Transneft.

Oil flows along the southern route of the Druzhba pipeline have been halted since early this month, impacting countries such as Hungary, Slovakia, and the Czech Republic.

Via the southern leg of the Druzhba pipeline, Russia supplies 250,000 barrels per day (bpd).

However, the northern route of the Druzhba pipeline, which supplies Poland and Germany, remains unaffected.

Slovak pipeline operator Transpetrol and Hungarian energy firm MOL confirmed the halt of oil flows for a few days via the Druzhba pipeline, in the wake of issues related to transit fees payment.

Transneft told the news agency that it made payments for oil transit for August 2022 to Ukrainian pipeline operator UkrTransNafta on 22 July 2022. Russian bank Gazprombank handled the payment.

However, the money was returned on July 28 due to the processing of the transaction failed due to European Union restrictions.

Subsequently, UkrTransNafta halted oil flows from the critical pipeline.

As per the new sanctions imposed on Russia by the Western nations, banks in Europe are required to receive approval from a relevant government authority to allow a transaction, Transneft said.

Transneft, which is considering alternative ways to make the payment, has sought a request to allow the transaction with UkrTransNafta, the pipeline monopoly said.

Czech Industry and Trade Minister Jozef Sikela was quoted by the Associated Press as saying: “The following days will show if it’s another escalation of the energy war by Russia or a technical problem about payments.”

Russia has already reduced gas flows via Nord Stream 1 pipeline to several EU members, citing problems with turbine maintenance.

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