BREAKING: Ukraine blocks Russian oil imports to Hungary!
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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