EU reassures Hungary, Slovakia that oil transportation is fine - Bloomberg

The European Union has ignored the concerns of Hungary and Slovakia over Ukraine's sanctions against a major Russian oil company and has so far refused their request for urgent consultations on the security of oil supplies. Writes UNN with reference to Bloomberg.

Details

On Thursday, Vice President of the European Commission Valdis Dombrovskis told representatives of Hungary and Slovakia that, according to a preliminary analysis, Ukraine's sanctions against the Russian company Lukoil, imposed in June, do not affect transit processes through the Druzhba pipeline. This applies to cases where Lukoil is not the official owner of the oil.

According to two Bloomberg sources with knowledge of the situation, traders involved in oil transactions in Ukraine are viewed as the official owners of the oil.

These companies include Litasco SA, owned by Lukoil, as well as Tatneft-Europe AG, Blackford Corporation Ltd. and Normeston Trading SA.

Ukraine's Deputy Economy Minister Taras Kachka tells Bloomberg that Litasco is not subject to Ukrainian sanctions.

In July, the Russian side canceled the planned oil supplies to Hungary and Slovakia, where Litasco was listed as the consignee. This became known from people familiar with the situation. These developments were discussed between European Commission Vice President Valdis Dombrovskis and Ukrainian Prime Minister Denys Shmyhal during a telephone conversation on Thursday.

The discussion took place against the backdrop of concerns expressed by Hungary and Slovakia over sanctions imposed by Kyiv on Lukoil, which, in their view, could threaten the security of their oil supplies.

The governments of Hungary and Slovakia expressed concern and called on the European Commission to help resolve the problem. A representative of the European Commission said that according to the results of the initial analysis, there is no direct risk to the security of oil supplies to these countries, but the EU expects additional information from the governments of Hungary and Slovakia for a deeper assessment of the situation. Andriy Yermak, head of the Office of President of Ukraine Volodymyr Zelenskyy, said that Ukraine has not taken any measures to block oil transit.

"Our partners should know that every dollar that Russia receives for gas and oil is put into the military machine, and of course, this is important for us," Yermak said.

One of the issues the European Commission wants to clarify is the status of oil imported through the Hungarian company MOL. According to the rules, trading companies that sell oil are treated as the official owners of the cargo.

"The Commission's services have been informed that MOL has stated in official letters that Lukoil is indeed not the owner of the oil transported through Ukraine for the MOL Group. We would appreciate confirmation from you that this is indeed the case," Dombrovskis said in a letter to Budapest and Bratislava, seen by Bloomberg.

He also noted that several EU member states have asked about the availability of alternative routes for oil imports and expressed surprise that Hungary and Slovakia have not yet considered possible alternatives. Hungary has been reluctant to consider diversifying its oil sources, arguing, without proper evidence, that the cost of imports from alternative countries such as Croatia would be significantly higher.

According to Eurostat, Budapest's dependence on Russian crude oil increased last year compared to 2021.

Recall

On July 18, Slovakia and Hungary announced that they had stopped receiving oil from their key supplier Lukoilafter Ukraine's sanctions against it were tightened.

Later, Hungarian Foreign Minister Péter Szijjártó said that he would block 6.5 billion euros in payments from the European Peace Fund to compensate for arms supplies to Ukraine, due to Ukraine's tightening of sanctions against Lukoil, which has halted the transit of Russian oil.