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 Ukraine has suspended Russian oil flows to southern Europe since early this month because Western sanctions prevented it from receiving transit fees from Moscow, Russia's pipeline monopoly Transneft said on Tuesday.

International benchmark Brent crude jumped by $2 per barrel to trade near $98 as the news added to concerns about reduced energy supplies.

Transneft (TRNF_p.MM) said it made payments for August oil transit to Ukraine's pipeline operator Ukrtransnafta on July 22, but the money was sent back on July 28 as the payment did not go through. It said the shipments were halted from Aug. 4.

Gazprombank, which handled the payment, said the money was returned because of European Union restrictions, Transneft said in a statement.

Instead of deciding themselves whether to allow a transaction, European banks now have to receive approval from a relevant government authority, Transneft said, adding that European regulators have yet to decide on algorithms for all the banks, which complicates the dealings.

Transneft is considering alternative payment systems, but had sent a request for the transaction to be allowed, the pipeline monopoly said.

Hungary's MOL and Unipetrol, controlled by PKN Orlen, are the main buyers of oil via the Druzhba route, also known as the Friendship pipeline, while Russia's Lukoil, Rosneft and Tatneft are main suppliers of oil.

MOL, PKN Orlen amd Ukrtransnafta did not immediately respond to Reuters' requests for comment.

From March this year, Hungary, Slovakia and the Czech Republic have relied extensively on supplies of Russian Urals crude via the Druzhba pipeline and reduced their purchases of maritime crude.

A decline in European demand for Russian oil since Russia invaded Ukraine at the end of February has pushed the value of seaborne Urals, which serves to price Druzhba deliveries, to the widest discount in history against the dated Brent benchmark. ,

Moscow refers to the invasion as a "special military operation".

Russia normally supplies about 250,000 barrels per day (bpd)via the southern leg of the Druzhba pipeline.

Russia, the world's second biggest oil exporter and leading gas exporter, has already reduced gas pipeline flows to many EU members, citing problems with turbine maintenance on the Nord Stream 1 pipeline as well as sanctions against some buyers Moscow describes as "unfriendly". (Reuters)