Hungary to Pay Extra for Russian Oil Amid Ukrainian Pipeline Ban

Hungarian state oil company MOL is nearing the conclusion of negotiations to establish a new arrangement for securing Russian crude oil after Ukraine banned its main partner, Lukoil, from using Ukrainian pipelines. The revised scheme will be costlier for MOL, as the company will purchase Russian oil at the Russian-Ukrainian border and assume the financial risk of transporting it through Ukraine, according to the Hungarian Prime Minister's chief of staff.

Earlier, Budapest warned of potential supply issues expected in September and sought assistance from the European Commission. However, the request was denied, as the Commission's analysis suggested that sanctions against Lukoil would not lead to a market shortage.

Under the new agreement, MOL will become the legal owner of the oil at the Ukrainian-Russian border, taking on the risk of its transit through Ukraine. Due to ongoing military actions, this risk translates into an additional insurance cost of 1.5 dollars per barrel for MOL, as reported by Reuters. The ban on Lukoil using the Druzhba pipeline, which partially supplies refineries in Hungary and Slovakia, was imposed by Ukraine at the end of June. While Hungary and Slovakia, both landlocked, have exemptions from European sanctions on Russian crude imports, the EU lacks the legal authority to influence Ukraine's decisions.