Hungary urges Ukraine to OK Russian oil loophole

A tense standoff over Hungary’s continued imports of Russian oil could be resolved by simply rebranding the barrels, Budapest said Thursday, imploring Ukraine to endorse the solution.
Gergely Gulyás, who serves as a minister in Prime Minister Viktor Orbán’s private office, claimed that crude shipped by Russian firm Lukoil via Ukraine could be officially sold to Hungarian energy giant MOL before it crosses the border.
The swap would allow the oil to evade Kyiv’s new sanctions, which bar Lukoil products from transiting across Ukraine. The penalties have instigated a diplomatic rift with Hungary and Slovakia, which still import Russian oil shipped through Ukraine. Both countries were granted a temporary exemption to the bloc-wide embargo on Russian oil pipeline imports, but have continued to buy Moscow’s fossil fuels.
Hungary last month called on the EU to force Ukraine to back down over the sanctions, which it claims amount to energy blackmail. The EU, however, declined to engage, indicating there were several options to ensure oil would still flow.
Now Gulyás is calling on Kyiv to approve a new plan that would see Lukoil’s products simply traded to another company at the border before going through Ukraine.
“As soon as we can sign the contracts with the Ukrainian side, they will enter into force,” he said. The arrangement would mean paying an additional $1.50 per barrel to secure transit outside of previous agreements.
Responding to a question from POLITICO, Ukraine’s energy minister, German Galushchenko, declined to commit to supporting the plan but said Kyiv would “see whether we would get some requests for negotiation from the Hungarians.”
The proposal is not entirely new, and may already informally be in use, experts claim.
“MOL proposed this on the first day of the crisis,” said Martin Vladimirov, director of the energy and climate program at the Center for the Study of Democracy. According to Vladimirov, the proposal will prove difficult for Kyiv to reject as long as other suppliers of Russian oil can move their products through the country.
“Druzhba exports almost doubled in July, despite Ukraine blocking Lukoil crude shipments to Hungary and Slovakia,” he added, referring to the oil pipeline that crosses Ukraine and downplaying the risks of shortages.
Calls from Hungary and neighboring Slovakia for Brussels to step in have fallen on deaf ears, with other EU countries questioning Orbán’s decision to strengthen economic ties with Russia while they raced to find alternative energy suppliers. Hungarian imports of oil via the Druzhba pipeline have risen 50 percent since 2021.
Ukraine imposed the restrictions on Lukoil in June in a bid to squeeze the funds filling Russia’s war chest. Budapest’s Foreign Minister Péter Szijjártó has insisted his country will veto EU military aid to Ukraine until the embargo is lifted.
Analysts say that a swap between energy companies or a change to contractual arrangements would be one way to ensure deliveries are resumed, but that it would still ultimately benefit both Lukoil and the Russian economy.