Combat “Friendship” – Newspaper Kommersant No. 216 (7417) dated 11/22/2022

Ukraine, which during 2022 increased the cost of transporting Russian oil through the Druzhba pipeline by almost 34%, is going to raise the rate by another 18% from 2023, to €13.6 per 1 ton. Ukrtransnafta attributes this to increased costs due to intense hostilities and damage to the energy infrastructure. The increase in the tariff is likely to be passed on to the end buyers of oil, mainly to the Hungarian MOL.

The state-owned Ukrtransnafta warned Transneft of its intention to raise the tariff for pumping through the southern branch of the Druzhba oil pipeline, through which Russian oil goes to Hungary, the Czech Republic and Slovakia. The agency reported Bloomberg and confirmed “Kommersant” in “Transneft”. The company explained that Kyiv expects to increase the rate to €13.6 per 1 ton. This is 18.2% higher than the current level and 58.1% more than the price at the beginning of the year. During the year, the tariff has already increased in April – from €8.6 to €11.5. Igor Demin, adviser to the president of Transneft, noted that the company intends to hold consultations with relevant Russian ministries and companies that supply oil to its system. The decision will be made by the end of the year, he explained.

Earlier, Ukrtransnafta argued the need to increase the tariff by the partial destruction of the oil transportation infrastructure during the Russian military special operation. This time, arguments are made about the partial destruction of the energy infrastructure, the lack of spare parts, as well as the increased costs of organizing the safe work of employees in the conditions of hostilities.

But, according to Kommersant’s sources, the damage on the Friendship branch is minimal and does not require such amounts.

In mid-November, Ukraine suspended the pumping of oil through the Druzhba in the direction of Hungary, explaining this by damage to the transformer station as a result of a Russian missile attack and a voltage drop in the power grid. Transportation was restored on 16 November.

About 1-1.5 million tons of oil per month is pumped through Ukraine along the southern branch of the Druzhba. Last year, transit amounted to 12 million tons, of which 5.2 million tons were received by Slovakia, 3.4 million tons each by the Czech Republic and Hungary. It is on the buyers of oil from these countries, that is, on the Hungarian MOL (it also owns a refinery in Slovakia) and the Polish Orlen (owns the Czech refinery through Unipetrol), that the increase in transit costs through Ukraine will fall, according to Kommersant’s interlocutors on the market.

At the same time, against the background of repeated tariff increases in the Ukrainian direction, Belarus, through which the northern branch of the Druzhba oil pipeline passes, can also raise the issue of an increase in the cost of pumping.

But on this route, the tariff is formed according to a formula, Kommersant’s interlocutors remind, in addition, potential consumption on the northern branch may be sharply reduced against the backdrop of Germany’s refusal from pipeline supplies. Poland, which was also officially going to stop accepting Russian raw materials through Druzhba, submitted an application for 2023 (see “Kommersant” dated November 10).

According to Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, Ukraine is actually trying to take advantage of the current situation by using the last existing route for the supply of Russian oil to Europe, on which Hungary primarily depends. He notes that the money accumulated by raising the pumping tariff in April would have been enough for Kyiv not only to repair the recently damaged transformers, but also to completely replace all diesel generators throughout the entire Ukrainian section and transfer the oil pipeline to autonomous power supply. In this situation, he notes, it makes sense for European companies, primarily MOL, to insist on an audit of the expenses received from the tariff, since this increase is passed on to them.

Without control from the EU consumers, Ukraine will more than once demand an increase in transit tariffs, the expert is sure.

Hungary, within the framework of European sanctions, has provided for itself the opportunity to use sea supplies of oil from Russia if pumping through Druzhba through the territory of Ukraine stops. Such deliveries are possible via the Adriatic oil pipeline through the Croatian port of Rijeka, which is operated by the local company Janaf. However, in order to completely replace supplies via Druzhba, the northern branch of the Adriatic oil pipeline must be expanded.

Olga Mordyushenko