Hungary’s dependence on Russian oil is problematic, according to analyst – Here’s why

While this issue is not yet fully reflected in the stock price of the Hungarian energy company MOL, Russian oil poses a serious threat, according to an analysis by Erste Bank. The European Commission has also expressed significant concerns over Hungary’s reliance on Russian energy.

Hungary’s dependence on Russian oil

Pénzcentrum reports that Hungary’s Minister of Foreign Affairs, Péter Szijjártó, stated in an interview with Russian TV channel RBK that the country is heavily reliant on Russian oil to maintain its energy supply due to a lack of alternative infrastructure. He warned that current developments could lead to a sharp increase in oil prices. Zsolt Hernádi, CEO of MOL, noted that the eastern transport route remains the most feasible option for Hungary and Slovakia, while transitioning to the Adriatic pipeline would require substantial investment and several years to complete.

European Commission raises concerns

The European Commission has voiced concern over Hungary‘s growing dependence on Russian oil. Imports rose from 58 percent to 77 percent between 2021 and 2023, in stark contrast to the efforts of other EU countries to reduce their reliance on Russian energy.

According to Erste Bank, MOL faces significant external economic challenges. The situation could worsen if Russian oil supplies are disrupted or in case the Hungarian government imposes additional taxes. Such measures could seriously impact the company’s financial outlook and its ability to distribute dividends to shareholders.

Potential blockade of the Friendship pipeline

Tamás Pletser, an oil and gas analyst at Erste Bank, warned that a disruption in oil supplies from Russia could become inevitable due to political or technical reasons, particularly given the ongoing war in Ukraine. He suggested that Ukraine might resort to missile strikes or impose blockades on Russian oil, posing a severe threat to the operation of the Friendship (Druzhba) pipeline, which is crucial to Hungary’s energy supply.

Read also:

• Russian oil dispute in Hungary: Market struggles or internal conflicts
• Hungarian MOL reaches agreements securing Druzhba crude deliveries

Featured image: depositphotos.com

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