A new Ukrainian sanction, effective since late June, has halted Russian oil giant Lukoil’s supply to Hungarian company MOL Plc. via Ukraine. Due to Lukoil’s inability to lease the Ukrainian pipeline network, this disruption threatens MOL’s operations, as it processes around 70 percent of its oil from Russia. The situation raises concerns over a potential fuel supply crisis in Hungary and the surrounding region.
Lukoil halts oil supply to Hungary
Portfolio reports that Hungarian Foreign Minister Péter Szijjártó, after discussions with Russian Foreign Minister Sergey Lavrov in New York, confirmed that Lukoil had halted its oil supply to Hungary via Ukraine due to new legal constraints. Szijjártó emphasised the importance of Russian oil for Hungary’s energy security and stated that efforts are underway to find a legal solution to resume deliveries. MOL is collaborating with Lukoil to reestablish oil transit through Belarus and Ukraine.
Portfolio contacted MOL, but the company refused to respond, stating that negotiation details are confidential. The issue arose from a Ukrainian presidential decree effective 26 June, tightening sanctions on Lukoil before Hungarian PM Viktor Orbán’s early July visit to Kyiv. This decree bans Lukoil and Rosneft from renting Ukraine’s state-owned oil network, disrupting MOL’s Russian oil imports from Lukoil.
MOL to suffer from the ban on Russian oil
Lukoil, a major supplier of crude oil to Hungary via the Southern Friendship pipeline, has been affected by recent Ukrainian sanctions. This is significant for MOL, which relies on Russian supplies for two-thirds of its crude oil imports, with Lukoil alone accounting for about half of these imports, roughly 6-6.2 million tonnes annually. Consequently, MOL has lost around one-third of its crude oil imports in recent weeks, raising concerns about supply security.
Despite Fitch Ratings suggesting MOL could replace Russian crude by 2025, and the company’s strategy to diversify sources by 2026, the new Ukrainian measures pose a critical challenge depending on their duration and conditions, as highlighted by energy expert Attila Holoda. In addition, there is no deadline on the recent Ukrainian decree.
The outlooks
The security of Hungary’s oil supply is at increased risk due to the recent Ukrainian sanctions affecting Lukoil’s transit through the southern branch of the Friendship pipeline, which also supplies Slovakia and the Czech Republic. MOL’s Slovakian subsidiary, Slovnaft, is impacted, although it is blending more non-Russian crude during refinery maintenance. The EU sanctions require Slovnaft to significantly increase its non-Russian input to 60 percent by year-end, having already reached 30 percent.
Additionally, Hungary faces constraints with the Adriatic pipeline from Croatia, which cannot fully meet the combined needs of MOL’s Százhalombatta and Bratislava refineries. Strained Hungarian–Croatian relations and increased transit costs further complicate imports. However, strategic reserves and alternative non-sanctioned sources can mitigate supply difficulties, along with intermittent use of the Adriatic pipeline for non-Russian oil.
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It is apparent that Ukraine is losing and losing badly. Now, Zelensky is retaliating against everyone that did not support Ukraine’s demise.
Victor vacations while Hungary burns. His lips must be so sore from kissing up to Trump and Putin. I guess Peter is running the country now. So much for democracy.
Ukraine better quit this or we need to impose sanctions on IT. Even though it is pretty infuriating that we’re relying at all on Russia for anything, when it was clear more than a decade ago that Russia was untrustworthy at best, our energy supply must not be compromised, no matter what.
Maybe Slovakia and Serbia, the last neighboring countries that support Hungarian politics, will somehow come to help and deliver the needed oil sourced from somewhere else than Russia.
It did seem a bit odd that Ukraine allowed the oil to flow into Hungary from Russia even this long, considering how much Hungarian leaders have obstructed Ukrainians´ efforts in defending themselves. I hope the war ends soon with Russians going back home and rebuilding of Ukraine can start. I do think that putting more pressure on ending the war with Russians going back home is more important than our uncompromised energy supply. Maybe if Hungary stops obstructing the Ukrainian defense efforts, Ukraine will stop obstructing oil supply to Hungary?
Steiner Michael – you are in total support, through your membership of the Fidesz Party, your “Adoration” of Victor Mihaly. Orban – agreeing to the distillation of Democracy, in Hungary, wanting those “Commie” vehicles, back on the roads in force in number not just Budapest, but Hungary – your SUPPORT and agreement to the Orban – Fidesz Government of Hungary and RUSSIA there GROWING marriage.
I fear for you if you have, as often you do, like the wind, change your POSITION on Political matters, and don’t agree – in line with your Fidesz membership remain in SUPPORT of the Orban – Russia “Love Nest”.
There’s a building in Andrassy, that you could find yourself – in the “depth” of the night, be DELIVERED to.
Rubbery individual – mouth and thought process COMMUNICATION that is dismissed of Truth, Facts and INTEGRITY, that in any shape or form, plays a role that is FACTUALLY informative to the readers of this News Paper other than being viewed as REPLUSIVE and WORTHLESS.
Oddly I find myself for once in agreement with mariavontheresa, where we likely differ is in who to ‘blame’ for this outcome. It was always a risk that by adopting a hostile posture towards Ukraine, Ukraine could in turn retaliate by turning off the transit of Russian oil. You can maintain the best relationship you want with the supplying country, but if a transit country doesn’t want to cooperate, you’re stuffed. It rather looks like Ukraine has taken a strategic decision that they would rather forego the payments for the use of their pipeline in order to cause pain in Hungary. The Hungarians will finally wake up to the foreign policy of their government when the fuel pumps run dry and/or the price skyrockets due to the need to source crude oil from elsewhere and have it expensively imported via road and rail. Capacity is finite and I doubt the country can source sufficient crude this way having done little to diversify its supply and start investing in alternative capacity when the writing was on the wall. It was naive to think they could continue using the ‘Friendship’ pipeline in perpetuity on the basis that Ukraine will be desperate for the transit payments; I’m sure the western world at the stroke of a pen can easily financially compensate Ukraine’s loss and they probably will. The political motivation to do so after the recent weeks will be marked as Hungary has lost what little goodwill it previously had by the Prime Minister’s jetting off on ‘peace missions’ to shady parts of the world. This could be the straw that breaks the camel’s back as far as Fidesz voters are concerned. Orban will try to cry foul but it still won’t resolve the oil supply problem because there’s no overnight solution.
So Hungarian goverment is going to complain to the EU that they spend their life’s criticizing, for what exactly? why should Ukraine be forced to lease their pipeline network to people who are attacking them? to supply an unfriendly government that supports the attackers non the less? yeah right… Orban is dreaming like the American’s say, FAFO.
I fully support Ukraine right to limit Russian Hydrocarbons from crossing its territory. Did Orban think his political decisions would not have any consequences?
As the Hungarian people decided to vote for Orban, they must pay for their decision. One day the Hungarian people will wake up and take responsibility for their democracy.
Hungary had two years to find alternative supplies of oil and did nothing. $180 billion per year of Russian oil flows through Ukraine to finance the Russian invasion of Ukraine which is completely absurd. Ukraine needs to cut off this source of funding to Russia and Hungary needs to stop financing the Russian war effort. The Fidesz government is completely evil obstructing European weapons supplies and funding to Ukraine while demanding Russian oil pass through Ukraine to fund the Russian barbarians. Cut Hungary off period!.
mariavontheresa perhaps you can give up 20% of your country to russia and you won’t need as much fuel? Clearly you expect Ukraine to do that and not ‘retaliate’ against those funding it…talk about utter arrogance!
The issue is this … The current contracts (which are being honored) are expiring and there is no appetite to renew (quel surprise!).
Sanctions – given the fact Ukraine is being bombed back to the stone age, should be understandable (and terribly “Sovereign!” – our Politicians will understand). Our “Sovereign!” consists of blocking military aid to Ukraine, “peace missions” / fraternizing with the enemy, and similar “fun” stuff. Let´s pretend to be totally shocked and perplexed that there may be a little tit-for-tat. And that having good neighbours (EU, NATO, Ukraine, Croatia…) is preferable to having friends, far away (China, Russia, Argentina, Azerbeidzjan).
@mariavontheresa – “losing badly” – does this include having Ukrainians taking Russian land without the imminent “red line” reaction from Mr. Putin, nor the ability of pushing the Ukraine forces back over the border? All this “special military operation” stuff is coming at tremendous expense. Both in hardware and in people terms. So, all of this “winning” is … Well. What is “winning”, really? Hope, pray and Bot-assist a DonOld re-election?
Nice one on the Black Fleet. More damage since! PS having to “regenerate” means you lost a lot of hardware.
https://www.fpri.org/article/2024/02/russias-black-sea-fleet-in-the-special-military-operation-in-ukraine/