Russian oil flows stopped due to sanctions

Russian crude flows through Ukraine to Hungary, Slovakia and the Czech Republic were stopped last week after sanctions prevented payment of the transit fee, according to Russia's pipeline operator Transneft PJSC.

The northern leg of the Druzhba pipeline, which runs through Belarus to Poland and Germany, was unaffected, according to Transneft, oil prices in London went up. As of 12: 25 p.m., Brent crude was 1.4% higher at $97.97 a barrel.

Russia blamed international sanctions for preventing flows of natural gas to Europe through the Nord Stream pipeline. Similar disruptions to oil flows would deepen the energy crisis, adding to pressure on inflation and amplifying the risk of a recession.

Ukrtransnafta JSC, which operates Ukraine's oil pipeline network and oversees the transit of crude via the southern leg of the Druzhba link, stopped providing oil-transport services through its territory on August 4, Transneft said on Tuesday. There was no immediate comment from Ukrtransnafta.

The Transneft and Ukrtransnafta contract requires 100% prepayment for transit flows. The Russian pipeline operator received the money back on July 22, despite the fact that it paid the August transit fee on July 22, according to Transneft.

The European banks involved in the transaction are not authorized to make their own decisions on cross-border payments from Russia because of sanctions and need approval from their national regulators, according to Transneft.

The Russian pipeline operator said it had appealed to an authorized bank for further transfer of information to the European regulator in order to get permission to conduct settlements under an agreement with Ukrtransnafta. It is looking at alternative ways to transfer funds.

The financial dispute is going to be resolved within a few days, according to Erste Bank analyst Tamas Pletser. If the dispute is prolonged, Hungarian refiner Mol Nyrt. He said that the country would have to tap its strategic oil reserves beyond that and has fuel reserves for a couple of weeks. Mol's shares fell by 5%.

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