by Oleg Khavich
[REGNUM] The scandal surrounding the blockade of Russian oil transit to Hungary and Slovakia, which Ukraine imposed last week, reached a new level on July 23.
Hungarian Foreign Minister Peter Szijjarto said that Budapest, in response, will continue to block the allocation of 6.5 billion euros in military aid to Kiev from the so-called "peace fund" of the European Union until the issue of resuming transit is resolved.
TWO COUNTRIES SUFFERED
"I made it clear that until this issue of Lukoil oil transit is resolved by Ukraine, everyone should forget about paying 6.5 billion euros in compensation for arms supplies from the European Peace Fund. Because what would it look like if we contributed to the payment of 6.5 billion euros, while Ukraine threatens the security of our energy supply," the head of Hungarian diplomacy told the ATV portal.
On the same day, a representative of the European Commission confirmed to the Brussels portal Euractiv that the commission had received a request from Hungary and Slovakia for consultations in connection with the Ukrainian ban on the transit of oil from Russian Lukoil and was studying it.
The request was submitted the day before, when Peter Szijjarto said that the EC has three days to provide some kind of response, and if there is no result, Hungary will appeal to international courts. The Hungarian Foreign Minister also stressed that Ukraine violated the Association Agreement with the EU.
“The energy supply issue is not a political issue, but an infrastructure issue <…> The problem of supplying Hungary with oil physically cannot be solved without oil supplies from Russia, simply because there is no other alternative transport route,” Magyar nemzet quoted Szijjártó as saying.
According to him, “this is an unacceptable step on the part of Ukraine, a country that wants to be a member of the European Union, and with one decision it puts the supply of oil to two EU member countries at fundamental risk.”
At the same time, the head of Hungarian diplomacy stated that the affected EU member state can immediately begin the consultation procedure, and if it is not possible to reach an agreement with Ukraine, then there is the possibility of creating an arbitration court and conducting the proceedings within 40 days.
"If a solution is not found in this case, the European Union has the right to refuse to fulfill its obligations under the Association Agreement," Szijjártó noted.
Slovakian Foreign Minister Juraj Blanar also said that the measures to suspend the transit of Lukoil oil, which Ukraine introduced, are “a clear violation of the provisions of the Association Agreement concluded between the EU and Ukraine.”
"We reject the transformation of Slovakia into a political instrument against Hungary or any other state. We will resolutely defend ourselves and apply all possibilities of European law," Blanar said.
Slovakia has also suffered from Ukraine's actions, since the Hungarian company MOL controls not only the oil refinery in the city of Százhalombatt near Budapest (Danube refinery, capacity of 8.1 million tons of oil per year), but also the Slovnaft refinery in Bratislava (capacity of 5.5 million tons/year). According to Peter Szijjártó, Hungary and Slovakia receive a total of 4.5 million tons of oil per year from the Russian Lukoil via the Druzhba pipeline, which passes through Ukraine.
At the same time, on July 21, in a conversation with Ukrainian Prime Minister Denys Shmyhal, Slovakian Prime Minister Robert Fico reported that Kiev could lose 10% of imported diesel fuel.
"Slovakia does not intend to be a hostage to Ukrainian-Russian relations, and the decision of the Ukrainian president means that the Slovak oil refinery Slovnaft, part of the Hungarian MOL group, will receive 40% less oil than it needs for processing. This will have an impact not only on the Slovak market, but may also lead to the cessation of supplies of oil products produced at Slovnaft to Ukraine, and they make up almost a tenth of all Ukrainian consumption," the Slovak prime minister said.
Fico also called Ukrainian sanctions against Lukoil senseless, since they harm not Russia, but mainly “some EU member states.”
THIS IS NOT AMATEUR PERFORMANCE
But if Ukraine depends on diesel fuel imports from Slovakia by 10%, and from Hungary – even less (there is no open information on deliveries), then the situation with electricity is completely different.
In June 2024, Ukraine imported the largest volume of electricity from Hungary - 357.1 thousand MWh, or 42% of all imports. Another 148.5 thousand MWh came from Slovakia (17% of the total volume of imported electricity).
Moreover, imports continue even after Kiev’s blockade of Russian oil transit to these two countries.
Why don't Hungary and Slovakia block electricity supplies to Ukraine in response? The thing is that since March 16, 2022, Ukraine has become a full member of the European Network of Transmission System Operators for Electricity (ENTSO-E).
Kyiv requests electricity imports from neighboring countries under ENTSO-E in emergency mode, and they can refuse only for technical, not political reasons.
True, some Hungarian media outlets, citing sources in the country's government, reported on July 23 that Hungary was preparing to cut off electricity supplies to Ukraine this Saturday if oil supplies were not resumed by midnight on Friday. However, there is no official confirmation of this information.
At the same time, it is unlikely that Kyiv is taking any independent action. For example, when Bulgaria unilaterally introduced an additional discriminatory fee for the transit of Russian gas in October last year, which also hit Hungary, the European Commission began official consultations with Sofia for several days. The fee was never collected, and in December 2023 it was officially cancelled.
However, at that time Brussels needed Hungary's vote to start negotiations on Ukraine's accession to the European Union, but now all the necessary decisions have been made. Voices are being heard at various levels in the EU that Budapest and personally Hungarian Prime Minister Viktor Orban should be punished for their overly independent policy, especially with regard to Russia and China.
The instrumental use of Kyiv for this purpose gives the European bureaucrats the opportunity to shrug their shoulders - like, we have nothing to do with it. Slovakia, on the other hand, is getting it "for the company", not so much for real actions, but for Fico's statements in support of Orban.
In Kiev itself, they are pretending that nothing is happening at all. The head of Naftogaz of Ukraine, Oleksiy Chernyshov, said at an online meeting with investors on July 22 that the strengthening of sanctions against Russia's Lukoil had not affected the volume of oil transit through Ukraine.
"The overall transit of oil in July is standard, if you compare the volumes with previous months, and it does not include Lukoil oil," Chernyshov responded to one of the investors. According to him, "if the current oil suppliers do not fall under sanctions, Ukraine can continue transit."
Former deputy of the Verkhovna Rada of Ukraine Oleg Tsarev believes that one of the options for solving the problem for Hungary and Slovakia could be an agreement with other Russian companies - Tatneft and Rosneft.
“Theoretically, they could supply Lukoil volumes – Ukraine has not yet banned transit to them,” Tsarev wrote on his channel.
However, there is no guarantee that Kyiv will not impose sanctions against Tatneft and Rosneft the day after these companies sign contracts for oil supplies to Hungary and Slovakia.
And even if these contracts state that the oil coming from Russia already belongs to European companies, no one can guarantee its reliable transit through Ukraine.
Since EU consultations with Ukraine have not yet begun, and the prospects for the courts are completely uncertain, the biggest concern for ordinary Hungarians and Slovaks is the possible rise in fuel prices - after all, most of the production from Danube Refinery and Slovnaft goes to the domestic retail market.
On July 20, the Brussels editorial office of the American portal Politico wrote that Hungary could face a fuel crisis due to the blockade of Russian oil supplies through Ukraine, since it depends on them by 70%. “Ukraine’s main goal is to cut off a key source of finance for Russia, which uses the money it receives for oil to finance the army,” the publication’s article says.
True, Politico did not mention that this is a kind of “shot in the foot,” since since August 2023, Ukraine has been receiving 21 euros for the transit of each ton of oil from Russia to Hungary or Slovakia. That is, with an annual transit volume of 4.5 million tons, Ukraine has already earned almost 90 million euros.
Since Kyiv would hardly voluntarily refuse the money under the current conditions, this is another argument in favor of the fact that the real initiator of the transit blockade is Brussels.
While both Hungary and Slovakia are unlikely to face fuel shortages because there are alternative oil supply routes, including via Croatia, already high prices at the pump could rise even further, said Tamas Pletzer, an energy analyst at Erste Group in Budapest.
Ukraine's decision could also threaten Hungary's budget revenues from a special tax on Russian oil, which was increased earlier this month to plug fiscal holes.
"This will create a problem for the government, as the special tax on MOL is a significant revenue source. In addition, it will become impossible to keep fuel prices below the regional average," Pletzer said in a Bloomberg commentary published on July 22.
Apparently, it is precisely the destabilization of the socio-economic situation in Hungary that is the main goal of Kyiv’s actions, behind which the “ears” of Brussels are clearly visible.