Russia resumes crude oil flows to Central Europe after tariff payment

By: Franyi Sarmiento, Ph.D., Inspenet, August 11, 2022

Russia resumed oil shipments through a pipeline to Central Europe after Hungary’s only refinery resolved an obstacle related to the payment of a transit fee to Ukraine.

Operator Transneft has received confirmation from Ukraine that the country is ready to resume flows. The southern section of the Druzhba pipeline, which supplies Russian crude oil through Ukraine to Hungary, Slovakia and the Czech Republic, halted flows on August 4 after European banks refused to transfer a payment from Transneft to its Ukrainian counterpart Ukrtransnafta JSC given EU sanctions on Moscow over its conflict with Ukraine.

Once resumed, the flows will resolve one of the many energy supply risks facing Europe. Had the shutdown been prolonged, Hungary could have suffered fuel shortages. However, the continent continues to grapple with limited Russian natural gas supplies and low river levels, which hinder the distribution of coal and diesel.

The dispute was resolved after Hungary’s MOL Nyrt, which also owns the Slovak Slovnaft refinery, paid the transit fee to Ukraine on Wednesday. The disruption of the Druzhba pipeline had again put pressure on Hungary’s already scarce fuel supply, prompting warnings against panic buying.

The return of Druzhba flows from the south should prevent a worsening of what was already a tight fuel market in Central Europe at the start of the refinery maintenance season. Germany’s Bavaria region, Austria and Switzerland have also had to contend with reduced supplies, exacerbated by reduced deliveries across the Rhine River, which is expected to be impassable for navigation in a few days due to drought.

This material from BloombergLí was edited for clarity, style and length.