Slovakia and Hungary paid for the transit of Russian oil through Ukraine

The Hungarian oil and gas company MOL said it paid for the transit of Russian oil through Ukraine through the southern branch of the Druzhba oil pipeline, which was stopped on August 4 due to problems with payment from Transneft. reported Reuters.

The Bratislava TV channel TA3 reported that MOL and the Slovak plant Slovnaft have already agreed with the Ukrainian side to resume supplies.

The Ukrainian side responded positively to the proposal of Slovnaft, the Slovnaft refinery has already transferred funds to the Ukrainian side and expects that on the basis of this, oil supplies will resume in the coming days, Anton Molner, a representative of the plant, said.

“By taking over the payment, MOL was able to ensure a quick resolution of the issue: the Ukrainian side undertook to resume the transportation of crude oil within a few days, which was stopped a few days ago due to technical problems on the banking side,” MOL said (quoted by RIA News”).

August 9Transneft” announced the termination by Ukrtransnafta from August 4 of oil transit along the southern branch of Druzhba towards Hungary, the Czech Republic and Slovakia, since the Russian side was unable to pay for pumping due to EU sanctions. The day before, MOL announced its readiness to pay for transit.

The Druzhba pipeline was used to transit Russian oil to Europe. Oil flows along its northern branch towards Poland, Germany and the Baltic States, and along its southern branch to the Czech Republic, Hungary and Slovakia. According to Transneft, oil exports to non-CIS countries via Druzhba in 2021 amounted to 35.9 million tons. In February, the company announced plans to increase pumping to 45.5 million tons per year. According to the Comtrade platform, 3.3 million tons of oil from the Russian Federation were exported to Hungary in the amount of $1.707 billion.

“Transneft” on Wednesday reported that the pumping of oil along the southern branch of the Druzhba to Hungary and Slovakia was resumed from 16:00. “The pumps are working, they turned on at 16:00, reaching the operating pressure mode within 15 minutes,” Igor Demin, adviser to the president of the company, told RIA Novosti. The pumping will go along the Brody-Budkovtsy section and further on Feneshlitka, so the oil will first go to Slovakia and then to Hungary.

At the end of 2021, the Slovnaft refinery in Bratislava processed, according to the company, about 5.5 million tons of crude oil. The plant also produced 267,000 tons of polypropylene and 195,000 tons of polyethylene. The total oil consumption in Slovakia in 2021 was, according to BP and Vedomosti, about 86,000 barrels per day (4.2 million tons per year). According to the Federal Customs Service, about 5.3 million tons of oil were exported from Russia to Slovakia in 2021.

Hungary in 2021 consumed about 171,000 barrels per day (8.5 million tons per year) of oil, the Czech Republic – about 200,000 barrels per day (9.9 million tons per year). At the same time, the Russian Federation exported 3.3 million tons of oil to the Czech Republic last year, the FCS does not disclose data on Hungary.

The European side was interested in a quick search for a way out of the current situation, which happened, said Pavel Ickert, managing partner of the law firm Ickert and Partners. The transit of oil along the southern corridor of Druzhba provides the largest Hungarian and Slovak refineries dependent on Russian supplies with crude oil, recalls Nikita Blokhin, senior analyst at Alfa Bank. The expert noted that given the risk of shutting down existing refineries, the Slovak Slovnaft and the Hungarian MOL were forced to make such a kind of compromise. “It is much easier than stopping the process [переработки нефти]the resumption of which will require additional time and significant investment,” the expert said.

Ickert stressed that the formation of a special exception or order for this case on the part of the EU requires a lot of coordination and time, which consumers of Russian oil do not currently have. “I suppose that this incident may create preconditions for the European Commission (EC) to work out more carefully the mechanism of the imposed sanctions in the future,” he said.

According to Ickert, after the Druzhba incident, EU law enforcement practice will be adjusted, but it is still too early to talk about the prospects for a serious easing of sanctions. “In this case, the EU can adjust the regulatory framework solely in its own interests,” he said.

EU sanctions prohibit transactions with securities of Gazprombank, through which, in this case, Transneft’s payment for transit through Druzhba was transferred, but not other financial transactions, Anton Imennov, senior partner at the Pen & Paper Bar Association, drew attention. According to the lawyer, the refusal of Ukrtransnafta to accept the payment is due to the fact that it was made through Gazprombank, which is under the sanctions of Ukraine. “As such, EU sectoral sanctions do not prevent payments for oil transit,” he added.

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