Budapest – A diplomatic standoff over Hungary’s continued imports of Russian oil may be resolved through a proposed loophole, Hungary urged Ukraine on Thursday. Gergely Gulyás, a minister in Prime Minister Viktor Orbán’s office, suggested that crude oil supplied by Russian firm Lukoil via Ukraine could be officially sold to Hungarian energy company MOL before crossing the border.
This proposal aims to circumvent Ukraine’s new sanctions, which prohibit the transit of Lukoil products through Ukrainian territory. The sanctions have led to a diplomatic rift with Hungary and Slovakia, both of which still import Russian oil through Ukraine. Both countries received a temporary exemption from the European Union’s broad embargo on Russian oil pipeline imports but continue to receive Moscow’s fossil fuels.
Last month, Hungary requested the EU to intervene and pressure Ukraine to lift the sanctions, alleging that they constitute energy blackmail. However, the EU chose not to get involved, suggesting there were alternative solutions to maintain oil supplies.
Gulyás is now appealing to Kyiv to approve a plan wherein Lukoil’s products would be traded to another company at the border, circumventing the need to transit through Ukraine. “Once we finalize the contracts with the Ukrainian side, they will come into effect,” he stated. This arrangement would incur an additional cost of $1.50 per barrel to facilitate the transit outside existing agreements.
In response to inquiries from POLITICO, Ukraine’s Energy Minister German Galushchenko did not commit to supporting the proposal but mentioned that Kyiv would “consider any negotiation requests from the Hungarians.”
Experts suggest that this proposal is not entirely novel and may already be in informal use. Martin Vladimirov, director of the energy and climate program at the Center for the Study of Democracy, noted that MOL proposed this solution at the onset of the crisis. He indicated that Kyiv might find it challenging to reject the proposal, given that other Russian oil suppliers are still able to transit through Ukraine.
“Druzhba exports nearly doubled in July, even with Ukraine’s restrictions on Lukoil shipments to Hungary and Slovakia,” Vladimirov added, referring to the oil pipeline crossing Ukraine and suggesting that concerns about shortages are overstated.
Hungary and Slovakia’s appeals to Brussels for intervention have not been heeded, as other EU nations question Orbán’s decision to strengthen economic ties with Russia while seeking alternative energy sources. Hungarian imports of oil via the Druzhba pipeline have increased by 50 percent since 2021.
Ukraine imposed restrictions on Lukoil in June to limit funding for Russia’s war efforts. Budapest’s Foreign Minister Péter Szijjártó has asserted that Hungary will veto EU military aid to Ukraine until the embargo is lifted.
Analysts suggest that restructuring energy company agreements or altering contractual terms could resume oil deliveries, although this would still benefit Lukoil and, by extension, the Russian economy.
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