Hungary to pay Russian pipeline bill

Hungary to pay Russian pipeline bill

BERLIN -- Hungary's main oil conglomerate said on Wednesday it would pay an outstanding bill owed by Russia's oil pipeline operator to the Ukrainian authorities, clearing the way for Russian oil deliveries to resume to three Central European countries. The financial arrangement was an unexpected boomerang effect of sanctions imposed on Moscow, according to analysts. The MOL Group, an administrator of the Hungarian arm of the Druzhba, or Friendship, said on Wednesday it had transferred the fee due to the use of the Ukrainian section of the pipeline. The authorities in those three countries said on Tuesday Russian oil deliveries from the pipeline had stopped last week due to technical banking issues linked to the sanctions Europe had imposed on Russia to punish it for invading Ukraine in February. In an email, Vitaly Yermakov, a senior research fellow at Oxford Energy, said that this seems to be another example of the friendly fire from the sanctions that are going to hurt some European countries. Sanctioning economic activity can have unintended consequences, as a blunt weapon. Viktor Orban, Hungary's prime minister, lobbied for oil delivered by pipeline, as opposed to by tankers, to be exempted from a European Union decision to ban imports of Russian oil later this year. All three rely heavily on Russian oil to fuel their economies, but none more so than Hungary. MOL, one of the country's biggest and most profitable companies, announced in April that it would pay $652 million to shareholders.

In April elections, Orban s Fidesz party won a landslide victory because of the promise that, thanks to cheap energy from Russia, gas and utility prices wouldn't skyrocket as they had elsewhere in Europe. The price cap on power for higher-use households was forced to be scrapped this month because of the price of energy.

Hungary, along with Slovakia and Czech Republic, sits at the end of the southern arm of the Druzhba pipeline. Yermakov said they had no viable alternatives to Russian oil in the short term. Germany and Poland stopped purchasing Russian crude, and instead began buying it from other providers and having it shipped to ports on their northern coasts. A tanker carrying U.S. crude that is similar in grade to Russian oil delivered through the Druzhba pipeline arrived at the German port of Rostock last week, according to analyst and vessel tracking data. A pipeline connects Rostock's oil terminal on the Baltic Sea to the two main refineries in eastern Germany, PCK refinery in Schwedt and Leuna, both of which depended on Russia for deliveries until the start of the war.