Hungary calls on EU to mediate over Ukraine-Russia oil spat

With the focus in Brussels these days on the selection of the 27 new EU commissioners, one from each member country, many had hoped Hungary's six-month EU presidency would pass by uneventfully.

Political analysts, like Thu Nguyen from the Jacques Delors Center think tank, have said that since "little legislative work will be carried out during this period, for which a council presidency is particularly important," Hungarian Prime Minister Viktor Orban would not have a chance to overly influence the daily work of the EU.

But Hungary, often described as the enfant terrible of the bloc, is determined to ruffle feathers and stay in the limelight.

After deliberately creating confusion over his recent visits to Kyiv, Moscow and Beijing and implying the tour was under the EU's auspices, Orban has stirred things up once again. At issue this time is the shortage of Russian oil supplies to Budapest, which come via Kyiv. 

Hungary says its energy security faces 'fundamental risk'

On Monday, as the EU's foreign ministers were meeting in Brussels, Hungarian Foreign Minister Peter Szijjarto said Ukraine's transit ban on Russian oil company Lukoil — which sends about 50% of its oil to Hungary and Slovakia through the Druzhba pipeline's southern spur — endangered Hungary's energy security.

Szijjarto said it was "unacceptable" on the part of Ukraine, especially since it wants to be a member of the European Union, to put the oil supply of two EU member states at "fundamental risk." His comments came after Hungary once again blocked the allocation of over €6 billion ($6.5 billion) in crucial EU military aid for Ukraine during Monday's meeting.

The EU imposed sanctions on the purchase of Russian crude oil after the Kremlin launched its full-scale invasion of Ukraine in 2022, but exempted landlocked Hungary, Slovakia and the Czech Republic from the ban until they could diversify their energy sources. 

Szijjarto's accusation came after Ukraine imposed its own restrictions on Lukoil in June, in an effort to dent Moscow's oil earnings — a whopping $180 billion (€165.9 billion) just over the last year, according to the Kyiv School of Economics.

The move saw an immediate drop in Hungary's oil imports, and the threat of electricity shortages and high energy prices for Hungarians. Vaibhav Raghunandan, an analyst at the Centre for Research on Energy and Clean Air think tank, told DW that according to data available until July 20, "Hungary's import volumes have dropped by a third compared to June."

It's noteworthy that Kyiv's ban does not apply to other Russian oil companies who use the same pipeline, including Rosneft and Tatneft.

Hungary calls for EU mediation

Hungary and Slovakia have now called on the EU to mediate with Ukraine, with Szijjarto insinuating that Ukraine runs the risk of an interruption to its electricity supply from the EU, which runs over Hungarian high-voltage power lines, if it doesn't give in. 

"The Commission has three days to execute our request, after which we will bring the issue to court," said Szijjarto, emphasizing that the EU must support a member state in the dispute.

On Tuesday, an EU spokesperson confirmed that EU Trade Commissioner Valdis Dombrovskis had received a letter from Hungary and Slovakia, and that the contents of the letter were being studied. He said further discussion would take place on Wednesday, but clarified that in such procedures, only the European Union, represented by the Commission, "may initiate any further action and proceedings." 

Over the weekend, Slovak Prime Minister Robert Fico also spoke out against Ukraine's sanctions, saying Slovakia would not be held "hostage" to Ukraine-Russia relations.

Why is Hungary still dependent on Russian oil supplies?

Raghunandan said Orban had already had a "long time" to find an alternative energy supply and pointed out that Hungary's imports of Russian oil had instead increased "by 56%" since before the war. And, he added, despite being landlocked Hungary did have access to alternative routes. 

"They could definitely get supplies from Croatia via the Adria Pipeline," or through the Transalpine Pipeline from Italy, he said. 

Analysts have said that instead of reducing dependence on Russian oil supplies, Orban is deliberately aiding the Russian economy and helping to fund the Kremlin's war.

EU struggles to deal with Hungary 

The European Commission has been long concerned over Orban's close ties with Russian President Vladimir Putin, and the impediments to Hungary's rule of law introduced by the ruling nationalist Fidesz party. In order to encourage Orban to enact judicial reforms, Brussels has frozen billions in EU funds earmarked for Hungary.

But despite the trouble Orban has caused the EU, it hasn't been able to rein him in. In fact, the EU actually unfroze a tranche of €10 billion for Hungary at a summit in December, much to the consternation of the European Parliament, which has sued the Commission over the decision. Since the decision was taken shortly before the EU decided to open accession negotiations with Ukraine, it was reported that the funds may have been intended to keep Orban on side. 

There is still the "nuclear option" of suspending Hungary's voting rights under the EU's Article 7, for contravening the bloc's values, but some fear that move may further enhance Orban's appeal in Hungary and among Europe's far right. 

Susi Dennison, an EU foreign policy expert at the European Council on Foreign Relations, said activating Article 7 would require much more cohesion in the EU than currently exists, when it comes to Hungary. She pointed out that there are several backers of Orban's ideas in the EU, including in Slovakia but also in Italy. 

There will be no official EU boycott of Hungary's informal ministerial meetings during the six-month presidency, in response to Orban's controversial diplomatic tours described by German Foreign Minister Annalena Baerbock as "ego trips." But it will be up to individual member states whether they want to attend such meetings.

The EU has, however, decided to shift the venue of an August meeting of the foreign and defense ministers from Budapest to Brussels. The EU's outgoing foreign policy chief, Josep Borrell admitted the move was just symbolic, but told reporters on Monday that "we had to do something."

Edited by: Martin Kuebler