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BRUSSELS — The European Union on Tuesday said it would step in after Hungary and Slovakia accused Ukraine of threatening their oil supplies with its partial ban on Russian crude exports passing through the country.
Kyiv last month adopted sanctions blocking the transit of pipeline crude sold by Moscow’s largest private oil firm, Lukoil, to Central Europe, sparking fears of supply shortages in Budapest and Bratislava.
On Monday, Hungary and Slovakia sent a letter to the European Commission asking the EU’s executive to begin talks with Ukraine, a precursor to legal action, arguing the measure violated a 2014 association agreement between Brussels and Kyiv.
Commission spokesperson Olof Gill told POLITICO that the EU executive was “currently studying the contents of this letter,” while adding that it “stands ready to support the impact of [EU] member states in finding a solution together with Ukraine.”
Budapest relies on Moscow for 70 percent of its oil imports — and on Lukoil for half of that amount. Slovakia, which imported 88 percent of its crude from Russia last year, according to the Kpler market intelligence firm, has warned the Ukrainian measure could reduce the crude supplies for its primary refinery by 40 percent.
“This is an unacceptable step on the part of Ukraine, a country that wants to be a member of the European Union, and with a single decision puts the oil supply …. in fundamental danger,” Hungary’s Foreign Minister Péter Szijjártó said Monday.
Szijjártó escalated his war of words on Tuesday, vowing Hungary will block funds used to reimburse EU countries for military aid sent to Ukraine in protest over Kyiv’s sanctions.
“As long as this issue is not resolved by Ukraine, everyone should forget about the payment of the €6.5 billion of the European Peace Facility compensation for arms transfers,” the Hungarian foreign minister vowed.
Budapest has already been blocking the reimbursements for over a year, offering ever-shifting reasons — a tactic the EU’s top diplomat, Josep Borrell, has branded as “shameful.”
Hungary and Slovakia can still buy Russian oil because of a carveout in EU sanctions that allowed landlocked countries to keep buying the product via the Russia-to-Europe Druzhba pipeline until they could find an alternative solution. All seaborne shipments of Russian oil to the EU are banned.
Moscow lashed out at Ukraine on Tuesday over the new sanctions. Foreign Ministry spokesperson Maria Zakharova claimed that Kyiv had turned “the transit of energy resources into a literal button for manipulating people, countries and nations.” Russia itself has slashed gas exports to numerous EU countries amid tensions following its full-scale assault on Ukraine.
The Commission insists the risks of Kyiv’s move so far are limited.
“At the moment, there is no immediate impact on the security of oil supply to the EU,” the Commission spokesperson said, adding it would discuss the matter further on Wednesday after Hungary and Slovakia requested a meeting of the bloc’s trade policy committee, which handles the bloc’s trade disputes with non-EU countries.
In a meeting with investors on Monday, the head of Ukraine’s state energy firm Naftogaz, Oleksiy Chernyshov, also said the Lukoil sanctions had not affected supplies.
“The transit of oil in July is normal if you compare the volumes with previous months, and there is no Lukoil oil in it,” he said. “We don’t believe there is a risk of a shortage in Europe. This is more of a political issue.”
But according to Viktor Katona, head of oil analytics at Kpler, the cutoff could soon create an energy security crisis for Hungary and Slovakia.
“Even though up until now flows have not really been impacted by Ukraine’s sanctioning of Lukoil, there remains a notable gap in supply towards the end of the month,” he said.
“The European Commission is seeking to pacify tensions that are running high but in the medium-to-long-term, Brussels needs to take a stance,” he added.
