Russia says oil flows to three European countries have been halted

By Melissa Eddy

MOSCOW  – In another sign of the fragility of Europe’s dependence on Russian energy, flows of oil from Russia to Central Europe have halted over a pipeline payments dispute, raising fears that an “energy war” between Moscow and its European oil customers could escalate.

Authorities in Hungary, Slovakia and the Czech Republic on Tuesday (9) confirmed that Russian oil deliveries from a critical pipeline stopped last Thursday (4). The three countries, which rely heavily on Russian oil to fuel their economies, are exempted from a European Union decision to ban imports of Russian oil starting later this year.

The dispute centres on the southern leg of a Cold War-era pipeline — called Druzhba, the Russian word for friendship — that carries crude oil some 2,500 miles from the Urals, through Ukraine, to Central Europe.

Transneft, the state-owned operator of the Russian portion of the pipeline, pays transit fees to its Ukrainian counterpart, UkrTransNafta, for the oil to pass through the country. But on Tuesday, Transneft said its July payment had been returned, and it blamed issues related to European sanctions aimed at punishing Russia for its invasion of Ukraine. Transneft said UkrTransNafta then halted oil flows to Hungary, Slovakia and the Czech Republic.

UkrTransNafta had no immediate comment.

Jozef Sikela, the minister of industry and trade for the Czech Republic, said in a statement on Twitter that his country was no longer receiving oil from Russia and was in contact with “all relevant actors” in hopes of finding a resolution to the situation.

“The next few days will show whether this is another escalation of the energy war by Russia or a technical problem in payments,” Sikela said.

Both Transpetrol, the pipeline operator in Slovakia, and MOL, the operator in Hungary, confirmed that no crude was reaching their countries because of the payment problem between Russia and Ukraine.

All three said they had oil reserves that would allow them to cover any shortfall over the coming weeks. But an extended disruption could cause trouble for the refineries connected to the link.

MOL said in an emailed statement that it was “continuously working on a solution, and is also in talks about assuming the fees itself.”

An alternative pipeline through the Adriatic Sea could be used to supply oil to all three countries, according to IHS Markit, a research firm. But it cautioned that the capacity reaching Hungary and Slovakia might not be enough to fully cover shortfalls if Russia were to fully cut off deliveries.

It estimated that as of last January, Hungary, Slovakia, the Czech Republic were receiving about 250,000 barrels a day from Russia through the pipeline.

Germany and Poland, which sit at the northern end of the pipeline, were not affected by the interruption, Transneft said.

The price of Brent crude oil, the international bench mark, rose on the news of the pipeline shutdown but later fell back, trading 0.5% lower, at just over $96 per barrel.

In another sign of the fragility of Europe’s dependence on Russian energy, the state-owned pipeline operator said Tuesday that oil had stopped flowing through the southern branch of the main link to Eastern Europe.

Since invading Ukraine in February, President Vladimir Putin of Russia has shown that he is willing to use his control of the energy spigot as leverage over Europe. He has also demonstrated his knack for keeping his adversaries off-balance by sending mixed signals and trying to play Western allies against one another.

In the spring, Russia cut deliveries of natural gas to several European countries, starting with Bulgaria and Poland, then adding Finland. In June, on the day that the leaders of France, Germany and Italy visited Kyiv, Ukraine, those countries reported a shortfall of deliveries of Russian gas, as did Austria and the Czech Republic.

Flows through the Nord Stream 1 pipeline to Germany, Europe’s main consumer of Russian gas, have been slashed by 60% and then by 80%. Moscow blamed the disruption on a pipeline component that was being refurbished by a German company at a factory in Canada, causing tensions between Canada and Germany.

-New York Times



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