Czech industry profiting from Russian oil sanctions loophole, research reveals

The Czech Republic, one of Ukraine’s closest allies, has let oil refineries earn over a billion euros in surplus profits through discounted Russian fuel purchases despite alternatives long being available, new research seen by POLITICO shows.
The conclusions come in a report published Monday by analysts at the Center for the Study of Democracy and the Centre for Research on Energy and Clean Air. They found that “the Czech Republic has spent over €7 billion on Russian oil and gas — more than five times the €1.29 billion it has provided in aid to Ukraine.”
One company in particular, Polish firm Orlen Unipetrol, has benefited handsomely from the arrangement. The researchers found its ability to continue buying Russian fuel — which was, on average, 21 percent cheaper than alternative Azerbaijani oil in 2023 — allowed it to make large revenues, which the state in turn gets to tax. 
“This strategy contributed to surplus profits of around €1.2 billion,” they write. 
The situation is possible because the European Union granted the Czech Republic an exemption to its Russian oil ban after Moscow invaded Ukraine. The carve-out was intended to give landlocked countries in Central Europe like Hungary, Slovakia and the Czech Republic extra time to find new fuel routes.
However, the two think tanks argue, the Czech Republic’s dependence on Russian oil actually rose in 2023 to around 60 percent, despite the government’s intentions to phase out purchases from Moscow. While that figure has since dropped to a preinvasion level of 50 percent earlier this year, the report argues the market has more than enough spare capacity for Prague to end its reliance on Russia altogether.
“Czechia could secure normal supplies of non-Russian crude oil by taking advantage of the spare capacity on the Trans-Alpine pipeline bringing oil from the Italian port of Trieste, the Adria pipeline connecting to Druzhba in Slovakia and by increasing refined products imports and petroleum stocks withdrawals,” said Martin Vladimirov, director for energy and climate at the Center for the Study of Democracy.
According to Vladimirov, the Czech Republic already has healthy oil reserves and could stably transition away from Moscow’s exports.
Responding to the news on Monday, Ukraine’s sanctions commissioner, Vladyslav Vlasiuk, told POLITICO it was “disappointing to see friendly states” still skirting around an outright rejection of Russian energy.
“The exemptions that the EU has provided to some of its member states were not supposed [to] increase the dependencies [on] Russian oil, but rather to find alternative fuel routes,” he said. “Have those exemptions defeated their purpose?”
In its defense, the Czech Ministry of Industry and Trade insisted the country is committed “to ending our reliance on Russian fossil fuels as quickly as technically possible.” The ministry noted it is working to boost the capacity of a pipeline linking it to Germany, Austria and Italy, aiming to fully divest from Russian oil by next year.
And it pointed the finger at Orlen, saying the Czech government can’t control its decisions.
“It’s important to note that Russian oil is imported by a private company Orlen Unipetrol,” the ministry told POLITICO. “The government does not have direct control over private business decisions.”
A spokesperson for Orlen Unipetrol told POLITICO that the company “complies with all applicable domestic and international laws and regulations,” and was operating under the EU-granted sanctions exemption.
“ORLEN has taken a number of efforts to make its Czech refineries independent of raw materials from the east,” the company said in a statement.  “ORLEN is preparing for a full transition to non-Russian grades of oil; currently 90 percent of the oil processed at ORLEN Group refineries comes from outside Russia.”
The sanctions carveout has long been a source of controversy as Hungary has used it to drastically increase — rather than reduce — imports of Russian crude. The Moscow-friendly government of Prime Minister Viktor Orbán has even openly sought to forge new energy deals with the Kremlin, providing it with funds to help bankroll Russia’s death and destruction next door in Ukraine.
Prague, by contrast, has been one of Kyiv’s closest allies, shipping military hardware and humanitarian support, while also raising funds for much-needed ammunition.
The reason for the continued imports, the analysis alleges, is that Russian pipeline oil is sold off at lower prices than alternatives, like crude imported from Azerbaijan. That means it can be refined and sold on as petrol, diesel and jet fuel for a larger profit.
Luke Wickenden, an analyst with the Helsinki-based Centre for Research on Energy and Clean Air, said that “this exemption, granted to Czechia, Slovakia, and Hungary, was intended as a temporary measure, yet Orlen continues to use it to funnel roughly €50 million each month to the Kremlin in oil tax revenues.”
“Time and time again we see exemptions in the EU sanctions exploited to increase imports of Russian fossil fuels to boost companies’ profits,” he said.