Without Russian oil, Hungarians will go hungry. At least, that was the message from Budapest’s foreign minister, Péter Szijjártó, when he landed in St. Petersburg earlier this week.
“We will not be able to feed the country” if these supplies are interrupted, he proclaimed.
By all accounts, however, that’s not happening. There is no oil shortage, according to the EU, and Budapest’s neighbors are even offering more.
Here’s what is happening: Viktor Orbán is gradually losing his Russian discount.
For the last two years, Hungary has enjoyed special EU exemptions giving it access to Russian oil at well below market rates. In June, Ukraine put that arrangement in doubt when it blocked Russian energy giant Lukoil from sending products through the country to the EU.
Hungary and Slovakia, another lingering Russian oil importer, swiftly warned that energy shortages loomed for both. They demanded the EU intervene.
But in the weeks since, the crude oil has kept flowing. Data from energy intelligence service Argus Media shows that Hungary and Slovakia received a combined 720,000 tons of crude in August, compared to 792,000 in July and 610,000 in June. The European Commission gave a similar assessment this week.
There could be several reasons for the broadly unaltered flows. While Lukoil is blocked, other Russian oil producers aren’t — and are free to keep sending crude across Ukraine. Additionally, Lukoil can sell its oil at the Ukrainian border to a trader that sells it to the EU. If that fails, Croatia is eagerly offering its own pipeline as an alternative supply route.
Here’s the catch: These solutions are all pricier for Hungary. That spells trouble for Orbán, who has used the discount to boost profits and suppress domestic fuel prices.
The current arrangement “is highly profitable for Hungary,” said Ilona Gizińska, a research fellow and Hungary expert at the Centre for Eastern Studies. “Russian oil is sold cheaper than non-Russian oil — the price difference per barrel has varied between $5 and $30 since the imposition of sanctions.”
Buy low, sell high
Hungary’s Russian relationship has benefited both its population and the country’s budget.
The oil discount has helped Hungarians enjoy some of the lowest fuel prices on the continent while energy costs spiked. The country also sells its excess supplies at a healthy markup — a critical fact as Orbán struggles to balance the budget amid sluggish economic growth that has fueled an opposition movement.
Gizińska also noted that Hungary’s MOL energy giant recorded record profits in 2022.
“The Hungarian budget also benefits from this, supported by the tax on the company’s excessive profits,” she said.
Mykhailo Gonchar, president of Kyiv’s CGS Strategy XXI think tank, estimated that the crude Hungary got from Lukoil came with a 20 percent discount compared to market rates.
“Ukraine’s sanctions against Lukoil [are] a strike against the shadow revenues of Orbán’s business circle,” Gonchar said. “These revenues are very important for Orbán because it means maximum possible profit, which is generated on the margin between [the] cheapest oil price and market prices for petroleum products.”
The unfolding changes will inevitably raise Hungary’s costs. Buying through intermediaries — or paying Ukraine additional transit fees — is more expensive. And turning to the Croatian pipeline would certainly prove more costly.
Yet Hungary has found few sympathetic ears in the EU. The country was granted an exemption to the EU’s bloc-wide embargo on Russian pipeline oil following Moscow’s invasion of Ukraine. The carveout was only intended to be temporary, however, to allow the landlocked countries to secure alternative supplies.
Instead, Budapest has ramped up its imports of Russian gas via Druzhba by 50 percent compared to 2021 and has signed new natural gas deals with Moscow’s state firm Gazprom. One EU diplomat, granted anonymity to speak freely, bemoaned that “they have had enough time to adapt” and said “it’s a question of will.”
The diplomat added: “It’s Hungary First.”
Olena Lapenko, a security and resilience expert at Kyiv-based energy think tank DiXi Group, believes Ukraine has run out of patience.
“Hungary and Slovakia have commitments to diversify their oil supply, but we have yet to see concrete steps,” she said. “Ukraine did not see a real prospect of ending the purchase of Russian oil by these EU countries. Obviously, this explains the introduction of sanctions against one of the largest Russian oil exporters.”
Hungarian headache
The Ukraine spat comes at a potentially perilous moment for Orbán, who has long defended his cozy relations with the Kremlin as an economic necessity.
Energy subsidies, affordable fuel and reduced power bills have been a key part of the populist leader’s appeal at home — but a high inflation rate that hit 17.5 percent last year has caused some voters to reassess.
Earlier this week, Budapest also missed its deadline to pay a €200 million fine imposed by the European Court of Justice for breaking the bloc’s refugee asylum rules, paving the way for the EU to take the money out of much-needed future payments to the country.
Now, the 61-year-old Orbán, who has held power for well over a decade, is facing one of the toughest challenges of his political career — the rise of an opponent from inside his own camp.
Former European Parliament member Péter Magyar, once a member of Orbán’s right-wing Fidesz party, in March launched a new movement vowing to end the country’s “mafia state,” and even to pivot Hungary’s traditionally pro-Russian foreign policy toward closer relations with Ukraine.
According to POLITICO’s Poll of Polls, Magyar’s Tisza faction is now polling at 32 percent of the vote, within spitting distance of Fidesz’s 43 percent and the PM’s closest challenger since the collapse of the previous opposition coalition in 2022.
For now, Hungary will likely keep getting its Russian oil, even if it comes at a slightly higher price. The stats bear that out.
“We think what’s happening is that it’s oil from other Russian producers that’s flowing through Ukraine,” said John Gawthrop, editor at Argus Media. “Lukoil is not the only company that supplies volumes to Hungary and Slovakia, there are other Russian firms that ship along that route, and we think they’ve stepped in to fill the gap.”
By Hungary’s next parliamentary election in 2026, the situation will inevitably have changed again. Ukraine may impose further sanctions on Russian oil, while EU countries may lean harder on Hungary to quit Moscow’s crude.
Vladimir Putin may not be able to help Orbán forever.
Viktor Orbán is losing his Putin discount
Source: Viral Showbiz Pinay
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