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2022-05-31 13:10:00

HUNGARY AGAINST THE BAN OF RUSSIAN OIL

HUNGARY AGAINST THE BAN OF RUSSIAN OIL

PLATTS - 30 May 2022  - Hungarian Prime Minister Viktor Orban said May 30 he wants a complete exemption from the European Union's plans to ban Russian oil imports as EU leaders gathered to discuss a new proposal to win the support of the landlocked member state.

The European Council is meeting in Brussels May 30 and 31 to discuss the latest developments in relation to Russia's military aggression against Ukraine. Many are hoping that the meeting could also secure Hungary's backing for an oil embargo on Russia almost three weeks after Brussels first proposed an import ban on Moscow's oil designed to hit its revenues over the Ukraine war.

Despite a string of diplomatic efforts and informal talks in recent weeks, unanimous approval by EU member states for the European Commission's May 4 proposal has eluded the trade bloc because of objections from Hungary and Slovakia.

A new proposal to be discussed at the Council meeting includes Russian crude imports through the Druzhba pipeline to Europe being exempt from the import ban.

"The pipeline solution is not bad, it's a good approach," Orban said told reporters when arriving at the Brussels meeting "But we need a guarantee that, in the case of an accident in the pipeline through Ukraine, we have to have the right to get Russian oil from other sources. If we get it, it's fine."

The EU on May 4 announced plans to phase out imports of Russian oil into the trade bloc by the end of 2022 over the war in Ukraine, setting the stage for a further major upheaval in global oil trade. The commission's proposal needs unanimous approval by EU member states to become effective.

If approved by all EU member states, the proposal would hit some 2.3 million b/d of Russian crude imports within six months, excluding a possible extension of 200,000 b/d to Hungary and Slovakia. Another 1.2 million b/d of refined product imports would cease by the end of the year.

Separately, European Commission President Ursula von der Leyen reiterated that she doesn't expect a deal being struck with Hungary at the two-day European Council summit.

"We have been working intensively in the last days to move forward on this package. We're not there yet but it has matured for sure. My expectations are low that it will be solved in the next 48 hours but I'm confident that after there will be a possibility," she told reporters.

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Landlocked Hungary is heavily dependent on Russian Urals crude, which is delivered primarily through the Druzhba pipeline to its sole refinery, MOL's 165,000 b/d Duna plant. According to the IEA, Hungary imported some 90,000 b/d of Russian crude and products in 2021 when sourced 60% of its crude from Russia.

Hungary also wants EU funding to boost the capacity of the Adria oil pipeline from the Croatian coast and to upgrade and reconfigure its refinery so it can process alternatives to Russia's Urals crude.

EU has already offered investments of up to Eur2 billion to landlocked eastern European countries to cut the bloc's reliance on Russian crude imports through the Druzhba pipeline as part of plans to rapidly reduce its dependency on Moscow's oil and gas.

The EU had already offered a one-year extension to the phased ban for Hungary and Slovenia to the end of 2023.

In the wake of the invasion of Ukraine, Russia's Urals export-grade has been trading at significant discounts to other crudes. Platts assessed Urals at$83.09/b and Dated Brent at $119.665/b on May 27, data from S&P Global Commodity Insights showed. Urals was assessed at $90.72/b and Dated Brent at $100.48/b Feb. 23, the day before Russia invaded Ukraine.

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Earlier:

HUNGARY AGAINST THE BAN OF RUSSIAN OIL
2022, May, 30, 11:35:00
EUROPEAN ENERGY DEADLOCK
The European Union proposed banning seaborne oil from Russia while delaying restrictions on imports from a key pipeline
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Tags: EUROPE, RUSSIA, OIL, HUNGARY