Oil can reach Hungary only via Ukraine, Hungarian minister says

Oil can reach Hungary only from Russia and only through Ukrainian territory; there is no alternative because the necessary infrastructure is lacking, Hungarian Foreign Minister Péter Szijjártó said today. Hungary and Slovakia have not received oil from Russian company Lukoil via the Druzhba pipeline for about a week, after Kyiv added the company to its sanctions list in June. Ukraine is now citing this as the reason it will not allow Lukoil oil to transit to Hungary and Slovakia.

„To procure oil from other sources, we would need new infrastructure of our own. And if we don’t have it and nobody can provide it for us, then we cannot enjoy the freedom that diversification gives us,“ the Hungarian minister said, according to Reuters.

International ratings agency Fitch Ratings subsequently warned that Ukraine’s decision to add Lukoil to its sanctions list and block the transit of Lukoil oil to Hungary and Slovakia poses a significant credit risk to the refineries owned in both countries by Hungarian petrochemical company MOL. Fitch said Ukraine’s move could have a considerable impact on energy supplies to Hungary and Slovakia over the medium term.

Last week, Szijjártó and Slovak Foreign Minister Juraj Blanár sent Kyiv a letter concerning the suspended oil supplies. According to the European Commission, Ukraine received the letter over the weekend and is now analysing it before deciding on specific steps.

This week, Szijjártó reiterated in the Hungarian media that until the issue of oil from Lukoil is resolved, Hungary will continue to block the disbursement of a tranche from the European Peace Facility (EPF), through which the EU provides support to Ukraine.

The head of Ukrainian energy company Naftogaz acknowledged the loss of Lukoil oil supplies. He claimed, however, that the volume of oil transported remains the same as in previous periods, even without these supplies. Ukraine and Western countries are using sanctions to punish Russia for its military invasion of Ukraine in February 2022.

Lukoil supplies via the southern branch of the Druzhba pipeline account for about 50 percent of its volume. MOL’s refineries in Slovakia and Hungary are entirely dependent on oil supplies from Lukoil. The Druzhba pipeline begins in Russia on the eastern bank of the Volga River and splits into two branches in Belarus – the northern branch runs to Poland and Germany, while the southern branch passes through Ukraine to Hungary, Slovakia and the Czech Republic. Other Russian companies whose oil Ukraine allows to transit also export oil via this route.

Oil supplies to the Czech Republic are continuing normally, according to a statement issued on Monday by pipeline operator Mero.