The Soviet pipeline that keeps Europe hooked on Moscow’s oil


Europe’s dependence on a 58-year-old Soviet pipeline and millions of barrels a day of Russian crude has pushed the region’s leaders to resist an oil embargo as refiners from Shell to France’s TotalEnergies hunt for alternative supplies.

While Europe’s reliance on Russian natural gas has become a source of growing angst, the continent also depends on Russia for 30 per cent of its oil, which has been allowed to continue flowing despite the invasion of Ukraine.

Most of the oil and associated petroleum products come by sea, but the biggest single flow of Russian crude into Europe – almost 1mn barrels a day – comes via the 5,000km Druzhba (Friendship) pipeline from Almetyevsk in central Russia to refineries in Belarus, Poland , Germany, Slovakia, the Czech Republic and Hungary.

It has benefited from the fact western sanctions have to date been designed to allow European payments for oil and gas imports from Russia to continue. The pipeline’s crude would also be the hardest to replace.

Conceived by Soviet leaders in 1958 to supply allies in the Communist bloc, and opened in 1964, the so-called Friendship pipeline has been a central feature of the European energy system ever since, providing a direct feed to more than a dozen European refineries.

Two key facilities are Germany’s Schwedt and Leuna refineries – and the country’s dependence on them make it more exposed than other EU members to any further sanctions that block or limit imports of Russian oil, said Alex Booth, head of research at Kpler, a commodities research group.

“It’s one thing to rejig your waterborne supply network for alternative crudes but when you have refineries sitting on the pipeline, as you do in Germany, reorganizing your supply is considerably harder.”

Map showing the Druzhba pipeline

Whereas coastal refineries often take a mix of crudes delivered by sea from different destinations, those that sit on a pipeline tend to be designed for a specific fuel.

Russia’s state-owned Transneft, which operates Druzhba, aims to deliver roughly 914,000 b / d to Europe down the pipeline in 2022, of which 261,000 b / d will flow to Poland and 388,000 b / d to Germany, according to S&P Global. Transneft said flows via the pipeline were continuing. In total it provides a quarter of Germany’s crude oil.

The US and UK last week banned future oil imports from Russia but Olaf Scholz, a German chancellor, said he preferred to apply “sustainable” pressure on Moscow that would not impose too big a cost on German consumers. Developing alternatives to Russian energy, he said, “cannot be done overnight”.

A further complication for Berlin is that the Schwedt refinery not only processes Russian oil but is owned by Rosneft. The Kremlin-backed oil producer has 54 per cent stake in PCK Raffinerie GmbH, which operates the facility, alongside Shell and Italy’s Eni. Rosneft could not be reached for comment.

Rosneft is due to increase its ownership in the refinery by further acquiring Shell’s 37.5 per cent stake after the UK-listed energy major last year announced its intention to sell and the Russian group exercised a right of first refusal. The transaction remains subject to approval by the German authorities. Shell declined to comment.

Rosneft and Transneft have both been under EU banking restrictions since 2014 when Russia annexed Crimea. The EU last month imposed asset freezes and travel bans on Rosneft boss Igor Sechin and Transneft chief executive Nikolai Tokarev, along with 24 other Russian oligarchs, businessmen and government officials.

Eni, which owns 8.33 per cent of PCK, said refining activities had not been affected by the sanctions. It added that it intended to divest its shares in line with its strategy to withdraw from traditional refining, a decision made before Russia’s invasion.

Schwedt processes 12mn tons of crude a year – approximately 220,000 b / d – and supplies 90 per cent of gasoline, jet fuel, diesel and fuel oil in Berlin and the surrounding state of Brandenburg, according to the PCK.

Germany’s economics ministry referred questions to the Brandenburg state government, which said that although there may be “temporary and regional bottlenecks” it expected supply to be maintained. “The refinery has also taken precautionary measures and is stockpiling heating oil, for example, or can fall back on an alternative pipeline,” it said.

Patrick Pouyanné, chief executive of Total, which operates the 240,000 b / d Leuna refinery west of Leipzig, told a conference in Houston last week that of all the company’s European refineries, Leuna would face the greatest “difficulties” if its Russian oil supply was cut.

The company is exploring alternative options to supply Leuna, including a route through Gdansk in Poland, a person familiar with the matter said. Total declined to comment.

Although many banks, insurers and shippers have started to shun all Russia business, oil has continued to flow along the Druzhba, partly because no further transport is required. In addition, the oil is generally delivered under long-term contracts, meaning there has been limited need for refiners to do “new” business with Transneft, Kpler’s Booth said.

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Traders and refiners with long-term contracts to lift oil from Russian producers have also continued to receive seaborne oil cargoes on vessels mostly chartered before the conflict. Between the start of Russia’s invasion on February 24 and March 6, Europe imported 5.1mn b / d of oil and petroleum products from Russia by sea, according to Kpler, with the largest chunk going to refineries in the Netherlands for onward distribution.

At current prices investment bank Standard Chartered has estimated that EU countries are paying Russia roughly $ 550mn a day for oil, equivalent to $ 200bn a year.

But with pressure building for the EU to take stronger action, it is expected to become increasingly contentious to receive Russian oil of any kind.

After it was criticized for profiting from a cargo of cheap Russian crude, Shell announced last week it would stop buying all Russian oil and gas, which it said would lead to reduced output at some of its refineries while it sourced alternatives.

Sanna Marin, Finland’s prime minister, said outside an EU leaders’ meeting last week: . We have to get rid of Russian fossil fuels as soon as possible. ”

Additional reporting by Erika Solomon in Berlin and Sarah White in Paris.
Data visualization by Chris Campbell.



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