Hungary Stalls E.U.’s Russian Oil Embargo

Hungary’s Prime Minister Viktor Orban has single-handedly stalled the European Union’s plan to implement an aggressive oil embargo against Russia. The prime minister cited devastating energy costs to explain why he blocked the embargo. “It was not the Hungarian people who caused this war,” Foreign Minister Péter Szijjártó announced on May 16th. “[The] Hungarian people cannot be blamed for this war, so no one can expect the Hungarian people to pay the price for this war.” A day later, Szijjártó explained, “It is physically impossible to operate Hungary and the Hungarian economy without crude oil from Russia.”

These comments from Budapest reveal the weak points economic pressures and energy dependence strain in the armour of European unity. The proposed embargo could potentially end the European Union’s energy dependence on Russian oil. Geography has significant effects on oil’s properties. As a result, implementing the embargo would force Europe to adjust their refineries to accommodate non-Russian oil. This shift would create the lasting infrastructure to end Europe’s energy dependence on Russia and defuse Putin’s energy weapon. An embargo could also damage Russian oil assets. A significant plunge in demand for Russian oil would force Russia to close its oil wells, which would then face enormous difficulties reopening without Western technology or support.

However, unlike the countries of western Europe, Hungary relies on Russia for over 75% of its oil, meaning that supplying Hungary with crude during the proposed embargo presents a unique challenge. Zsolt Herandi, the head of large Hungarian oil group M.O.L., recently claimed that it would require up to four years and $700 million for Hungary to adjust to a Russian oil embargo.

However, the M.O.L. Group has also been gradually transitioning away from Russian oil dependence. According to the M.O.L. Group, Hungary’s largest oil refinery could be phased onto non-Russian oil within two years.

To assuage Hungarian leaders’ concerns, the European Union offered a $2.1 billion program to redirect needed oil to Hungary. Orban has not yet responded to the offer. If Prime Minister Orban does not offer his support for the proposal, the European Union will likely implement the oil embargo on a state by state basis beginning this month. Although this method would maintain the embargo’s significant effects on the oil markets, the embargo would have more political strength as a show of European unity and solidarity.

Orban’s hesitations also reveal the discordant reactions to Russia’s invasion of Ukraine. Lukewarm reactions from Germany and Hungary highlighted their dependence upon Russian energy. Saudi Arabia’s refusal to increase oil production after U.S. urgings hinted at limited U.S. influence among former staunch allies. As the economic ramifications of aggressive sanctions begin appearing on domestic shopping lists, the realistic limits of Ukraine’s supporters may begin to appear in sharp relief.

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