Hungary-EU standoff deepens over Ukraine aid and sanctions

Hungary is delaying approval of the European Union’s latest sanctions package against Russia in an effort to pressure the European Commission to authorise its request for a €16 billion defence loan, two EU diplomats familiar with the negotiations told POLITICO.

Budapest is currently engaged in a serious dispute with Brussels over assistance to Ukraine. On Friday, Prime Minister Viktor Orbán threatened to veto both the EU’s 20th sanctions package targeting Moscow and a proposed €90 billion loan for Kyiv unless Ukraine restores oil transit through a pipeline that, according to Kyiv, was damaged during a Russian attack.

EU officials remain hopeful that a commitment to repair the pipeline could convince Orbán to withdraw his opposition to the loan. However, the two diplomats, who spoke on condition of anonymity due to the sensitivity of the talks, said Hungary may continue blocking the sanctions package until its defence loan application receives approval.

The European Commission unveiled the new sanctions proposal on February 6, expanding restrictions on Russian energy exports, banking activities, goods, and services. EU leaders had aimed to secure final approval for both the sanctions — which require unanimous backing from member states — and the €90 billion financial package before Tuesday, marking the fourth anniversary of Russia’s full-scale invasion of Ukraine.

With Ukraine expected to face a cash shortfall by April, the same month Hungary will hold national elections, EU officials are seeking ways to persuade Budapest to lift its objections while avoiding a legal confrontation with Orbán that could strengthen his domestic political position ahead of the vote.

Hungary has applied for €16 billion under the EU’s SAFE program, designed to provide low-cost financing to member states purchasing weapons collectively to strengthen the bloc’s defences against Russian aggression.

The Commission has not yet approved Hungary’s request and, according to officials cited earlier by POLITICO, has been “slow-walking” an initial €2.4 billion payment in an apparent attempt to increase pressure on Budapest. The Commission has rejected claims that it is deliberately blocking the application.

The two diplomats said the Commission should complete its assessment of Hungary’s SAFE loan request to avoid perceptions that the process is being delayed for political reasons. Even after the review is finalised, however, national governments would still need to grant final approval before any defence funding is disbursed.

Separately, the European Commission has already frozen €17 billion in regional development and post-pandemic recovery funds allocated to Hungary, citing ongoing rule-of-law concerns.

By Tamilla Hasanova