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Reuters
07-04-2025
- Business
- Reuters
Why one Eastern European country won't kick its Russian oil habit: Vladimirov
April 7 - Czechia has the infrastructure, reserves, and access to alternative suppliers to eliminate its Russian oil imports. Yet, three years into Russia's full-scale invasion of Ukraine, the Czech Republic continues to delay this strategic shift, despite the availability of viable alternatives. In 2024, Czechia imported 2.7 million tonnes of Russian crude oil, worth an estimated 1.5 billion euros ($1.6 billion), according to a recent analysis, opens new tab by the Center for the Study of Democracy. Although this is a 30% decrease in volume compared to 2023, the cut was not due to a proactive policy to phase out Russian crude but largely the result of three major disruptions to the Druzhba pipeline. here. The completion of the Trans-Alpine (TAL) pipeline expansion at the end of 2024 should have enabled Czechia to fully replace Russian crude. However, the state-owned pipeline operator MERO ČR and the dominant refiner Orlen Unipetrol have yet to fully utilize this new resource. As a result, more than 100 million euros continue to flow to the Kremlin each month. This delay is not due to technical constraints. Even prior to the final certification of the TAL-plus project, MERO ČR confirmed that spare capacity in the pipeline was sufficient to meet Czechia's total annual crude demand. Additionally, the country's strategic reserves of 3.6 million tonnes could cover nearly half of its annual consumption. Nevertheless, Russian oil imports surged by 30% year-on-year in the final quarter of 2024, reaching 970,000 tonnes, the highest quarterly volume since the European Union's oil embargo took effect in 2022. The trend continued in 2025, with Czechia purchasing an additional 220,000 tonnes of Russian crude. Orlen Unipetrol says that long-term contractual obligations with Rosneft, expiring in mid-2025, prevent an immediate exit from Russian supply. However, it is not clear that this is necessarily the case. For one, take-or-pay clauses – often cited as justification – are rare in global oil trade, where supply flexibility is the norm. Orlen's reluctance appears to be primarily driven by financial concerns, as Russian crude was around 20% cheaper than Azeri crude on average in 2023 and 2024. Yet retail fuel prices remained stable during this time, with gasoline and diesel averaging between 1,500 and 1,360 euros per tonne, respectively. Orlen Unipetrol was therefore able to capitalize on the cost differential, reporting EBITDA exceeding 600 million euros annually during the peak years of Russian crude reliance. Looking forward, the discount on Russian crude may widen further, as the widespread tariffs recently imposed by the U.S. administration could dampen global oil demand, forcing Russia to slash prices. REPERCUSSIONS This passive approach has had significant geopolitical repercussions. Since the onset of the war, Czechia's crude oil imports have contributed nearly 3 billion euros in tax revenues to the Russian state. In total, Czechia has spent 8.4 billion euros on Russian oil and gas since February 2022, more than six times the 1.32 billion euros it has provided in aid to Ukraine. Additionally, Czechia continues to import refined oil products from Slovakia and Hungary, where refineries process Russian crude under an extended EU exemption until June 2025. In 2024, Slovakia exported 710,000 tonnes of fuel to Czechia, worth 520 million euros, despite the availability of alternatives. Germany, for instance, offers gasoline and diesel at only a 6–7% premium compared to Slovak suppliers. Czechia's natural gas imports also show a similar pattern. In anticipation of Ukraine's termination of Russian gas transit in January 2025, Czechia increased its Russian gas purchases by nearly 400% in 2024. In the final quarter of 2024 alone, monthly imports surged to 0.34 billion cubic meters, 62% higher than the average for the rest of the year. In short, the Czech government has the power to unilaterally ban Russian crude oil imports, halt purchases of fuels refined from Russian oil in Slovakia and Hungary, and make full use of the TAL pipeline and domestic reserves. Bulgaria has already shown a complete Russian oil phase-out is possible. Sofia terminated its own exemption, opens new tab in early 2024, invoking a force majeure clause and cutting off Russian crude overnight. This led to neither oil supply security risks nor to an increase in domestic fuel prices despite the fact that Bulgaria relied on Russian oil for around 90% of its crude imports in 2023. It appears that Czechia can align its actions with European energy security imperatives without severe economic repercussions, so it may increasingly struggle to justify why it is not doing so. (The views expressed here are those of Martin Vladimirov, the Director of the Geoeconomics Program of the Center for the Study of Democracy (CSD)) ($1 = 0.9123 euros)
Yahoo
24-03-2025
- Business
- Yahoo
Czech Republic should end use of Russian oil, minister says
The Czech Republic should finally stop receiving Russian oil supplies through the Druzhba pipeline, Industry Minister Lukáš Vlček said on Monday. He told the public television channel CT that the final decision lies with the refinery operator Orlen Unipetrol, which has been under Polish ownership since 2005. No Russian oil has been flowing through the Druzhba pipeline to the Czech Republic since March 4. According to earlier reports, this is because of payment problems due to the US sanctions imposed on Russian banks because of the war in Ukraine. Orlen Unipetrol is taking steps to diversify and has already placed orders for oil deliveries from the North Sea and other production areas, Vlček said. The government in Prague has also made up to 330,000 tons of oil from the state reserves available on loan, which will cover demand for around 90 days, he added. For decades, the Druzhba pipeline, which was built while the country was under socialist rule, formed the backbone of the Czech Republic's oil supply, running from the Russian oil fields to Central Europe. The Czech Republic, along with Slovakia and Hungary, was granted a temporary exemption from the European Union's ban on Russian oil imports in order to give it time to develop alternative supply routes. The country may now be able to end its dependence on Russian oil sooner than planned. The Transalpine Pipeline (TAL), which supplies Central Europe with crude oil from the port of Trieste in northern Italy, could provide an alternative supply. Its capacity has recently been increased as part of the TAL-Plus project.
