Russia stopped the supply of raw materials through the Druzhba pipeline: who will suffer

Despite political differences, Moscow continued pumping energy resources to Europe to the last

There is no oil left in the Russian Druzhba export pipeline for Polish consumers. Moscow stopped deliveries to the European state, since Warsaw did not pay for the import of “black gold” for the last ten days of February. The Poles intend to get the missing resources from alternative sources – from mining companies in the US and the Persian Gulf. True, you will have to pay for the refusal of raw materials from our country almost a quarter more expensive.

The scandal surrounding the suspension of Russian oil supplies to Poland via the Druzhba pipeline is gaining momentum. Igor Demin, a representative of Transneft, which is responsible for the export of “black gold” from our country through land routes, said that the state-owned company did not receive route instructions with payment for the volumes of hydrocarbons announced earlier by Warsaw, and therefore blocked the raw taps. Now the northern branch of Druzhba, through which Germany has refused to buy Russian oil since January this year, is close to a complete freeze. Only the southern line of the pipeline remained in operation, leading through Ukraine to the Czech Republic, Slovakia and Hungary, which the EU allowed to continue energy cooperation with Moscow.

Warsaw’s attitude towards Russian energy resources over the past two years can be called rather strange, if not mysterious. First, the Poles refused to supply Gazprom, hoping to compensate for the lost imports at the expense of American and Middle Eastern LNG, and then announced that they would soon stop buying our oil as well. The second ultimatum turned out to be just a sly game: in November, Orlen, Poland’s national energy concern, applied to Transneft for pumping at least 3 million raw materials through Druzhba in 2023. In other words, Warsaw pre-booked itself a place in the export pipeline, promising to buy the corresponding volume of raw materials. Russian Deputy Prime Minister Alexander Novak then called the current situation “a theater of the absurd.”

Refusing Russian oil, Poland, as in the case of gas, expects to cover the lack of fuel through deals with producers from the States and the Gulf countries. The share of Russian “black gold” in the import of the European state is only 10%, so it is quite possible to find the required amount of raw materials.

Now Warsaw intends to convince its EU partners that it is necessary to stop deliveries along the southern branch of Druzhba, through which the Czech Republic, Slovakia and Hungary received more than 14 million tons of Russian oil in 2022. However, such appeals are not aimed at protecting the economic interests of the countries of the continent, but serve as a mercantile attempt to obtain legal grounds for terminating existing contracts with Russia without penalties.

According to the head of the analytical research department of IVA Partners Dmitry Aleksandrov, Poland will not be able to completely cut off the transit of raw materials along the northern segment of Druzhba: in addition to raw materials from our country, oil from Kazakhstan, which is not under sanctions, comes to Europe via this route. Preservation of stable political relations between Astana and Brussels will play into the hands of domestic producers. The fact is that the German refineries, for which the Russian grade Urals was supplied through the northern branch of Druzhba, cannot promptly reconfigure their processing units for the lighter Kazakh raw materials Tengiz Light, so both grades will be mixed in the Transneft transport system, after which will go through Poland to Germany.

In addition, the cessation of Russian oil supplies via the northern branch to Poland should not affect exports via the southern branch. “According to data for January 2023, the volume of deliveries through Druzhba to the Czech Republic and Hungary increased by 6 and 10%, respectively. Transit to Slovakia, although it has decreased, but by insignificant volumes. The southern branch, which remains the main operating section of Druzhba, not only does not reduce capacity utilization, but also increases pumping,” says Alexey Fedorov, TeleTrade analyst.

Meanwhile, severing energy ties with Moscow is clearly not going to benefit Warsaw. Poland will now have to buy oil from other countries at a market price that exceeds $80 per barrel. Russian Urals was most often delivered to Europe at a discount to Brent, which reached $20 per barrel. In addition, as Natalya Milchakova, a leading analyst at Freedom Finance Global, explains, Polish refineries, like German distilleries, are set to work with heavy grades of hydrocarbons from our country. To completely abandon Urals, Warsaw will have to significantly modernize its plants, which will require significant investments. For money, the Poles, apparently, will have to turn to other EU countries, and it is far from certain that a positive response will follow from them.