Key information
- The Hungarian group MOL aims to stop relying on Moscow by securing EU funding to move to other importers.
- Hungarian refineries could operate independently of Russian crude by the end of 2026, but EU financial assistance is needed to adapt refineries to process different types of crude.
- Adapting MOL’s refineries costs $500 million and the company is proposing to receive “a few hundred million” in EU aid.
The MOL group, Hungary’s only refiner of Russian crude, wants to stop depending on Moscow by obtaining EU financing to move to other importers. György Bacsa, MOL’s executive vice president for strategic operations, highlighted the company’s desire to diversify its oil sources ahead of the EU’s 2027 deadline to end purchases of Russian oil. This is reported by Politico.
Mr Bacsa predicted that Hungarian refineries could operate independently of Russian crude by the end of 2026. He stressed, however, the need for financial aid from the EU, citing the $500 million price tag associated with the adaptation of MOL refineries to process different types of crude oil. Mr Bacsa offered to receive “a few hundred million” in EU aid to facilitate this transition.
The challenges of transition
MOL also has refineries processing Russian crude in Slovakia. Currently, these operations are not eligible for EU aid despite their importance in decoupling Russian supplies and ensuring security of supply. Mr Bacsa lamented the lack of financial support, saying MOL is moving at its own pace and within its budgetary constraints.
Hungary is one of the few EU countries allowed to import Russian oil. While the bloc has implemented a ban on maritime imports in 2022, it has granted exemptions for oil transported by pipeline to countries like Hungary that rely heavily on supplies from Moscow. This temporary exception has attracted criticism, as Hungary has been reluctant to reduce its dependence on Russian oil, and has even increased it.
EU pressure and regional disparities
Mr Bacsa expressed concern that the EU could impose a definitive expiry date or take stricter measures in the meantime. He highlighted the risk that the temporary waiver would expire without a viable long-term solution being found for the supply of crude oil at competitive prices.
The next energy chief’s pledge to lay out a road map for ending the European Union’s remaining purchases of Russian fossil fuels only adds to these concerns. Mr Bacsa stressed that this plan must take into account regional disparities in the EU’s dependence on imports, emphasizing the unique challenges faced by countries like Slovakia and Hungary. He criticized the apparent ease with which Western European countries, such as Denmark, perceive this transition.
Imports and current contracts
In the current context, Budapest remains heavily dependent on Moscow for its energy needs. While Central European countries such as the Czech Republic have significantly reduced their imports of Russian crude, Hungary has significantly increased its fuel purchases from Russia. In addition, Hungary has reached new agreements with Gazprom, Russia’s main gas export company, for time-limited supplies.
MOL has an ongoing contract with Lukoil, one of Russia’s largest private oil companies, for the supply of crude oil. This contract expires in June 2025. According to Bacsa, the company is willing to extend this contract, provided that the legislation allows it.
Uncertainty and future implications
The continued imports are partly attributed to the reduced prices Hungary gets on Russian crude, experts say. Fitch Ratings reports that the Hungarian government indirectly owns nearly a third of MOL’s shares and has imposed windfall taxes on the company, generating billions to support the country’s budget.
In July, this arrangement may have been complicated by sanctions taken by Ukraine against Lukoil. These prevented the company from using Ukrainian territory to transport supplies, which put pressure on the execution of MOL’s contracts. However, MOL resolved this issue by entering into an agreement with Ukraine’s approval to take over ownership of Russian oil when it enters Ukraine.
However, this strategy could prove insufficient for the EU. A briefing paper prepared for new Energy Commissioner Dan Jørgensen says he could classify MOL imports via Ukraine as Russian oil. The European Commission has not yet responded to a request for comment on this matter.
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