The European Union (EU) rejected a request by Hungary and Slovakia for urgent consultation over a decision by Ukraine to ban transit of crude oil owned by a major Russian supplier.
 
European Commission Vice President Valdis Dombrovskis notified Hungary and Slovakia on Thursday that a preliminary analysis shows Ukraine’s new sanctions on Russia’s Lukoil PJSC don’t affect transit operations carried out by trading companies via the Druzhba pipeline as long as Lukoil isn’t the formal owner of the oil.

Dombrovskis noted in a letter to the two countries seen by Bloomberg that several member states asked about the availability of alternative supply routes for importing crude and “questioned why Hungary and Slovakia had apparently not explored alternatives so far”.

He discussed the issue with Ukrainian Prime Minister Denys Shmyhal in a phone call on Thursday after Hungary and Slovakia rang alarm bells over the sanctions slapped by Kyiv on Lukoil. The two east European governments raised concerns over the security of supplies and called on the EU to help resolve the situation.

A commission spokesperson said the bloc’s analysis shows no immediate risk to the security of supply for the two countries and that the commission is now waiting for more details from Hungary and Slovakia. 

Good meeting with PM @Denys_Shmyhal, discussed:

Situation in Ukraine & international support, preparation of extraordinary revenue accelaration loans.

Got confirmation that ongoing oil transit operations to are not affected, as long as Lukoil is not owner of the oil. pic.twitter.com/lKYDgBsC7C

- Valdis Dombrovskis (@VDombrovskis) August 1, 2024

One issue that the EU’s executive arm is seeking to clarifiy is the status of the oil imported by the Hungarian company MOL. The trading firms selling the oil are considered the formal owners of the shipment.

“The commission services were informed that MOL set out in formal letters that Lukoil was indeed not the owner of the oil transported via Ukraine for the MOL Group. We would appreciate a confirmation from you that this is indeed the case.”

In June, Ukraine toughened sanctions against Lukoil, which has used the war-torn country as a transit route to some customers in central Europe.  

Hungary has been reluctant to diversify its oil supplies claiming, without evidence, that costs would be significantly higher to import from alternatives like Croatia. Budapest’s reliance on Russian oil increased last year compared to 2021, according to Eurostat data.

  - Bloomberg