EU should expose Orban’s oil lies – Euractiv

Europe can survive without Russian oil. Hungary, Slovakia and the Czech Republic are no exception, despite lobbying hard for an exemption from the EU’s ban on Russian oil imports, writes Martin Dimitrov.

Martin Vladimirov is director of the Energy and Climate Program at the Center for the Study of Democracy (CSD).

Recently, Ukraine imposed sanctions on Lukoil, prohibiting the company from ordering crude oil on the Druzhba pipeline, which transports crude oil through Ukraine to Central Europe. The Hungarian government is trying to incite fear about an impending supply crisis. Such fear-mongering only serves the interests of the Kremlin.

Kremlin enabler

Opposition to Ukraine’s production cuts is rooted in vested political and economic interests. Hungarian oil company MOL, allied with Prime Minister Orban, wants to hold on to lucrative contracts with Lukoil, which dominates central Europe with cheap Russian crude. The central European market has ample alternative supply to keep it going, and concerns about logistics and pricing are overblown.

Between 2021 and 2023, successive Bulgarian governments similarly claimed reliance on Russian crude oil (from Lukoil) to maintain its exemption from the oil ban. Correctional Services Department under pressure The Bulgarian government’s termination of the exemption, if finalized, will come 10 months earlier than the deadline agreed under the EU regulation. This means $1 billion The Kremlin’s tax revenues will decrease in 2024.

Despite all the pessimistic predictions, the halt in Russian oil imports has not led to supply disruptions or a spike in domestic fuel prices.

Obvious loopholes

Since the oil ban began on December 5, 2022, Russia continues to sell 300,000 barrels of oil per day (50% of which is delivered by Lukoil) through the Druzhba pipeline, bringing $3 billion in revenue to its budget each year. About 80% of these imported oil goes to Hungary and Slovakia, and the rest to the Czech Republic.

Although exemptions have been granted to countries dependent on Druzhba to prepare for a complete halt in Russian oil supplies, these countries have taken few steps to diversify their supplies.

Instead, they have doubled down on their reliance on Russian crude. Since the invasion, Hungary’s reliance on Russian oil has risen from 50% to over 60%, and Czech Republic’s reliance has risen from 36% to 45%. Slovakia remains completely dependent on Russia, even exporting excess refined oil back to Ukraine, thereby increasing Russian profits.

Excuses, Excuses

There will be no supply security crisis and no need to panic. Hungary, Slovakia and the Czech Republic all have other supply options because CSD Evaluate Before the EU voted to impose an oil embargo on Russia.

Reducing oil flows through the Druzhba pipeline is not without precedent.In 2019, receiving countries responded to severe supply disruptions caused by contaminated Russian oil by drawing down inventories and maximizing the use of alternative supplies.

The Adriatic Pipeline from Croatia’s Omišalj terminal can supply crude oil to refineries in Croatia, Hungary, the Czech Republic and Slovakia with a daily supply capacity of 400,000 barrels, enough to meet their needs at 80% utilization.

The use of drag reducers can further increase capacity.MOL, which operates refineries in Hungary and Slovakia, has been importing about 120,000 b/d of oil from Croatia since April 2024, covering 75% of Hungary’s oil needs.

Importing crude oil through Russia Druzhba Pipeline. Source: Eurostat

TerraThe Alpine pipeline from Italy to Austria, southern Germany and the Czech Republic provides additional supply routes. Connecting Austrian refineries near Vienna to Slovak refineries near Bratislava requires little investment due to their short distances. A previous project to connect these facilities was originally built for Russian oil and can now supply non-Russian crude.

Even a complete shutdown of Slovenian oil refineries would not trigger a supply crisis. Proper management of emergency stocks and commercial stocks, as well as direct imports of refined products from neighboring markets, could prevent any supply disruptions.

As is the case in Bulgaria, the removal of the exemption will not have a significant impact on fuel prices, which are already among the lowest in the EU.

Calling Orban’s bluff

Hungarian and Slovak officials threatened to block a 6.5 billion euro compensation package for member states that shipped weapons to Ukraine if the ban on Ukrainian oil shipments was not lifted. They also warned Kiev they would halt fuel and electricity exports if sanctions on Lukoil were not lifted.

The EU must finally implement its sanctions policy rather than fall prey to false blackmail once again.

In the oil sector, this means eliminating all exemptions, banning the re-export of Russian-made oil products from third countries, and imposing sanctions on major Russian oil companies with assets in the EU, including Lukoil, which use loopholes in the embargo to maximize Russian oil sales to Europe.

The next step should be to ban all Russian liquefied natural gas and pipeline natural gas imports. EU member states have already Ample opportunities The global gas market is searching for alternative supplies, and European gas infrastructure has been sufficiently upgraded over the past decade to cope with this supply shock.

If the EU really wants to defend its economic security and Ukraine, it needs to extricate itself from its toxic energy relationship with the Kremlin once and for all.