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Russia shuts off the oil tap to Poland

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Poland – The Polish oil group PKN Orlen announced on Saturday, 25 February, that oil deliveries from Russia via the Druzhba pipeline had come to a stop. In recent times, the Druzhba pipeline had been carrying some 10% of Polish oil imports. Poland had already stopped importing Russian oil by sea since the beginning of the war in Ukraine, but not imports through the pipeline from Russia, which is not covered by EU sanctions.

But Russia’s official policy is to stop the delivery of oil and oil products to countries supporting the West’s price cap on Russian oil, which applies in the case of Poland. The halt in oil deliveries to that country comes on the heels of the tenth package of sanctions against Russia adopted by the EU. Even before that sanctions package, in December 2022, the European Union put in place an embargo on Russian crude oil transported by ship, and since the beginning of February, Russian oil derivatives have also been subject to an EU embargo.

Announcing Russia’s decision to shut off the oil tap to Poland, PKN Orlen’s CEO, Daniel Obajtek, adopted a reassuring tone, playing down the impact it would have: “We are effectively securing the supply of raw materials. Russia has stopped oil supplies to Poland, but we are fully prepared for that.

Only 10% of crude oil was coming from Russia and we will replace it with oil from other directions.

 This is the result of the diversification we have carried out in recent years.

The exemption of oil transported by pipeline from the EU’s sanctions regime is something that Hungary, in particular, had requested as a condition for supporting the EU embargo on Russian oil. This is because, for that country, “it would take several years and several hundred billion forints of investment to replace Russian oil.” Czechia and Slovakia also lobbied in Brussels last year for such an exemption, as they are in a similar situation of dependence on Russian oil. And indeed, companies like Hungary’s MOL and Slovakia’s Slovnaft continue to import Russian oil by pipeline.

As the sanctions do not apply to those supplies, PKN Orlen also had to keep buying the Russian oil flowing through the Druzhba pipeline. Had the Polish oil company not done so, it would still have had to pay for the oil, which was contracted under “take or pay” terms.  As energy expert Mariusz Marszałkowski pointed out when interviewed by Do Rzeczy, under the sanctions regime Russia can still bring a case against the EU to the World Trade Organization, but not against the Orlen company. However, as far as the oil delivered by pipeline is concerned, since the Russian side has now taken the initiative to end deliveries to Poland, Orlen does not have to fear the financial consequences of a breach of contract.

Last November, PKN Orlen signed an agreement with Saudi Aramco to secure its supplies. The 2.5 million tons of crude oil per year provided for in the last Russian contract that was still in force (between Poland’s Orlen and Russia’s Transneft) should thus be easily replaced by Saudi oil. In 2021, the share of Russian oil in Polish imports was still 60%, down from the 90% recorded before PiS came to power in 2015. With the cessation of Russian seaborne oil imports and the non-renewal of expired contracts for the oil sent through the Druzhba pipeline, that share was down to 10% at the beginning of this year. Here as in other areas, the current conservative parliamentary majority had sought to reduce dependence on Russian energy before the war in Ukraine, which now makes Poland’s accelerated transition to Russia-free energy easier.