BRUSSELS — A U.S. clampdown on Russian oil that threatens to strangle Hungary’s provides is leaving Budapest no alternative however to show someplace it’s lengthy shunned: Croatia.
For 3 years, Hungarian Prime Minister Viktor Orbán has moaned the nation can not give up Russian oil with out jeopardizing its vitality safety and risking exploding costs on the pump.
However now — as U.S. sanctions threaten to chop off considered one of Hungary’s key Russian suppliers and Brussels plans to suggest new tariffs on Moscow’s oil — Budapest might be compelled to hunt elsewhere for imports.
“Orbán has executed every little thing he may to keep away from giving up Russian oil,” stated Péter Krekó, director of the impartial Budapest-based Political Capital suppose tank. “If the sanctions go forward, Hungary should begin taking alternate options critically.”
Shifting away from Russia would require Budapest to bury the hatchet with Zagreb. Hungary has persistently accused Croatia of imposing extortionate transit charges on its exports, arguing that stops it from switching suppliers. The nation additionally claims Croatia’s pipeline system will not be bodily in a position to meet its oil wants — claims its neighbor vigorously disputes.
“These accusations are long-standing and … 100% not true,” Croatian Financial system Minister Ante Šušnjar informed POLITICO. “That is simply an excuse for getting Russian oil.”
“We’ve got no obstacles to offering the oil,” he stated. “We [can be] prepared in a matter of minutes.”
Hungary’s conundrum comes as U.S. President Donald Trump grows more and more pissed off with Russia over stalling efforts to safe a ceasefire in Ukraine. The EU, too, has doubled down in latest months on its marketing campaign to section out Russian vitality imports to the bloc.
For now, Hungary is scrambling to safe an exemption to Trump’s sanctions. But when the measures go ahead as deliberate, Budapest can have no alternative however to show to Croatia.
Income or costs
Ever since Vladimir Putin first ordered his troops into Kyiv over three years in the past, Hungary has fought arduous towards efforts to finish the EU’s historic vitality ties to Russia.
When Brussels imposed sanctions on Russian oil in 2022, Hungary leveraged its veto energy over the invoice till it gained a carve-out for provides coming through the Druzhba pipeline, which transports oil from Russia by Ukraine to Central Europe. Since then, it has additionally repeatedly obstructed makes an attempt to focus on Moscow’s nuclear and fuel sectors.
Because the share of Russian crude within the EU’s vitality imports shriveled from 26 p.c in 2021 to three p.c final 12 months, Hungary as a substitute deepened its dependency, shifting from a prewar share of 61 p.c to 86 p.c in 2024.
Throughout that point, Budapest has constantly claimed its arms are tied.
As a landlocked nation, Hungary’s major various is the Adria pipeline that picks up imported oil at Croatian ports and snakes its method by the nation and into Hungary. However Budapest alleges that Zagreb’s elevating of transit charges in recent times — supposedly to 5 instances the European benchmark — would trigger costs to soar again residence.
Brussels’ effort to give up Russian vitality would “destroy the safety of our vitality provide,” Hungarian Overseas Minister Péter Szijjártó warned this month. And Croatia, he stated, is “making an attempt to revenue from the struggle in Ukraine.”
However specialists aren’t satisfied. That’s “full nonsense,” stated Tamás Pletser, an oil and fuel analyst at Erste financial institution, because the remaining value of gasoline in Hungary is ready not by crude, however relatively dearer fuels like diesel by the regional Mediterranean benchmark value.
Consequently, when crude costs rise, that “doesn’t have a serious affect on the tip product costs,” he stated. What it could imply, although, is “declining revenue margins” for Hungary’s major oil importer MOL, Pletser stated, and fewer tax revenues for Budapest.
In actuality, “essentially the most problematic monetary facet of rejecting Russian oil is said to … the Hungarian finances,” stated Ilona Gizińska, a Hungary knowledgeable on the Centre for Jap Research suppose tank, which at present faces a yawning deficit. There’s no “political will” to give up Russian oil, she stated, exactly as a result of it’s as much as $30 per barrel cheaper than various provides.
Hungary’s overseas ministry declined to remark. A spokesperson for MOL stated its “major concern was safety of provide” whereas including that Croatia had “almost doubled” its transit charges on the finish of 2022.
This info is a industrial secret and is due to this fact unverifiable; Croatia denies the allegations. “The transit charges are the identical earlier than and now,” stated Šušnjar. They symbolize simply “2 p.c” of the ultimate value of oil, he added, and apply “equally to all companions.”
Others within the bloc agree. “We frequently don’t get an goal illustration of the details from Hungary,” stated a diplomat from an EU nation, who was granted anonymity to talk freely.
Capability crunch
In latest weeks, the feud between Hungary and Croatia has considerably cooled.
“Hungary will at all times give Croatia the historic respect it deserves,” Orbán stated after assembly his counterpart Andrej Plenković this month. “We’re dedicated to de-escalating tensions.”
However the two nations proceed to squabble over a extra technical problem: whether or not the Adria pipeline can feed sufficient oil to Hungary.
Throughout a pipeline check final month, oil importer MOL claimed the hyperlink was solely able to ramping up its oil flows to adequate ranges for one-to-two hours on account of “technical points.” JANAF, Croatia’s partly state-owned pipeline operator, hit again, accusing MOL of demanding that flows be decreased.
Since then, the corporations have held a number of rounds of talks on extending their transit deal for the pipeline, which expires on the finish of the 12 months.
However “we nonetheless don’t have any dependable details about its situation and capability,” a MOL spokesperson stated, including that whereas the agency is “open to reaffirming” its relationship with JANAF, it nonetheless wanted “an in depth upkeep plan” regarding the pipeline.
Stjepan Adanić, board chairman at JANAF, dismissed the allegations. “JANAF is totally ready — by way of technical, organizational and all different situations — to fulfill MOL Group’s … complete annual necessities for crude oil” equalling “14.5 million tonnes,” he stated.
“The very fact is that MOL Group has a sure low cost when shopping for Russian oil,” he informed POLITICO. “It’s of their enterprise curiosity for the exceptions to European sanctions … to proceed for so long as attainable.”
Now, Zagreb needs Brussels to assist mediate.
On the subsequent technical check, “we’re requesting the presence of the European Fee” to observe the outcomes, Šušnjar stated.
The EU government didn’t reply to a request for remark. However Brussels’ prime vitality official, Dan Jørgensen, this month informed POLITICO he was prepared to behave as a “mediator” for “the nations who might be affected essentially the most” by the bloc’s phaseout of Russian vitality.
Pincer assault
Regardless of its protests, Budapest will now need to act quick because it more and more seems to be cornered.
Orbán will head to the U.S. subsequent week in a bid to safe an exemption from Trump’s sanctions, which kick in on Nov. 21.
However Washington’s Russia hawks are protecting the stress excessive. “Hungary,” warned U.S. Senator Lindsey Graham this week, “when you suppose we’re not watching your efforts to undercut U.S. sanctions on Russian oil, you’re mistaken.”
On the similar time, Fee President Ursula von der Leyen final month introduced the EU government would current new tariffs on Russian oil because it seeks to hurry up its phaseout earlier than 2027.
“The sanction[s] … can be sufficient to push Hungary to decouple from Russian crude oil,” stated Pletser, the analyst. And the tariffs “would make Russian hydrocarbons uncompetitive [relative] to different sources,” he added, if they’re enforced.
Consequently, Budapest should reconcile with Zagreb, which for now stays open to cooperation. “Croatia is succesful and prepared to help Hungary,” Šušnjar stated.
However Hungarian politicians now “must resolve,” he added, “both we’re members of the EU … or we’re supporting the Russian aggression.”