Exclusive: Poland seeking German support to sanction Russian Druzhba oil pipeline

A view shows oil processing facilities of an PCK oil refinery in Schwedt, Germany October 1, 2022. REUTERS/Annegret Hilse

WARSAW, Nov 25 (Reuters) - Poland is seeking German support to slap EU sanctions on the Polish-German section of the Druzhba crude pipeline so Warsaw can abandon a deal to buy Russian oil next year without paying penalties, two sources familiar with the talks said.

The sources also said the pair were nearing an agreement for Poland to coordinate seaborne oil supplies to Germany via Gdansk and part of Druzhba to facilitate Poland's purchase of the Russian-owned Schwedt refinery in Germany.

The EU has pledged to stop buying Russian oil via maritime routes from Dec. 5, but Druzhba is currently exempt from sanctions. That presents a problem for Polish refiner PKN Orlen (PKN.WA) which has a long-term deal to purchase Russian oil via the pipeline and would need to pay penalties to break the contract.

If the EU were to impose sanctions on Druzhba - or at least its northern section supplying Poland and Germany - both countries would be able to get out of their Russian oil importing commitments penalty-free.

The southern section of the pipeline supplies Hungary, Slovakia and the Czech Republic which, unlike Poland and Germany, would struggle to diversify their oil imports.

According to the sources, the Polish climate ministry and German economy ministry are in the final stage of talks on a memorandum of understanding on oil logistics, which could unlock non-Russian flows and help Poland's top refiner pursue its interest in Schwedt.

Germany remains committed to not using Russian oil from 2023 and is working on a solution with Poland to secure the supply of Schwedt, a spokeswoman for the economy ministry in Berlin said on Friday. Meeting pledges by Poland and Germany to stop buying Russian oil requires regulation at the EU level and both countries are cooperating to achieve this, the Polish climate ministry said on Friday.

Germany has put Schwedt under a six month trusteeship, stopping short of nationalising the refinery, and is seeking ways to supply it with oil.

Poland and Germany promised in spring to try to end Russian oil imports via Druzhba's northern leg by the end of year but Orlen remains tied to its contract with Russian oil and gas company Tatneft.

The Polish refiner has nominated supplies for Druzhba for 2023 as stipulated by the contract but these would stop if the pipeline was hit by sanctions, one of the sources said.

Orlen declined to comment on Friday.

The company has already cut its reliance on Russian oil to 30% of its requirement, replacing it with deliveries from Saudi Arabia and Norway among others.

Kommersant newspaper reported earlier this month that Orlen had submitted an application to the Russian oil pipeline operator Transneft for the supply of 3 million tonnes of oil to Poland through Druzhba in 2023.

Control over Schwedt, which also supplies western Poland, would boost Orlen's refining capacity and control over the flows of oil and its products in the region with assets in Poland, Czech Republic, Lithuania and Germany.

Reporting by Marek Strzelecki; Additional reporting Markus Wacket; Editing by Kirsten Donovan, Louise Heavens and Alex Richardson

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