Hungary demands EU large compensation for refusing Russian oil

Hungary is ready to give up Russian oil by the end of 2026, but only on condition of compensation of "several hundred million dollars" from the European Union, according to György Bacsa, executive vice president for strategic operations at the MOL Group.

MOL, which operates Hungary’s only refinery processing Russian crude, has stated it could transition to alternative oil imports by late 2026, ahead of the EU’s informal 2027 deadline to end Russian oil purchases, Caliber.Az reports, citing foreign media.

However, Bacsa stressed that the transition would require EU funding, estimating the cost of adapting MOL's refineries at around $500 million.

Currently, EU funding for refinery adaptation is unavailable.

Bacsa criticized this exclusion, stating, "We get zero because it's refining, so it's not eligible for any aid from the EU even if it's about decoupling from sourcing, even if it's about supply security." He added that MOL must proceed at its own financial pace.

Hungary is one of the few EU countries still permitted to import Russian oil due to a 2022 exemption for pipeline imports, which was intended as a temporary measure. Despite this, Hungary has increased its reliance on Russian oil, citing discounted prices. The MOL Group has a contract with Russia's Lukoil, set to expire in June 2024, and Bacsa indicated the company would renew the contract "if it's legally doable."

Concerns over EU policy changes loom. The incoming EU energy commissioner, Dan Jørgensen, has pledged to develop a roadmap for ending Russian fossil fuel imports. Bacsa cautioned that regional differences in dependency must be considered, warning, "From Slovakia, from Hungary, it seems to be that we are left alone."

While Hungary has signed temporary agreements with Russia’s Gazprom for gas supplies, other Central European countries, such as the Czech Republic, have reduced their reliance on Russian energy. MOL recently resolved a potential supply crisis by securing Kyiv’s permission to classify Russian oil imports through Ukraine as Hungarian-origin, bypassing restrictions. However, the European Commission may still consider these imports as Russian, raising compliance concerns.

The Hungarian government indirectly owns a significant stake in MOL and has used windfall taxes on the company’s earnings to support its budget. As Hungary navigates its energy strategy, tensions with EU policies persist, highlighting the challenges of balancing economic interests and geopolitical alignment.

By Khagan Isayev