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Hungary Says Complying With Russia Oil Ban Would Cost It $811 Million

The biggest holdout to an EU embargo on Russian oil imports, Hungary, continues to dig its heels in, and has told the other European Union members it would need at least $811 million (770 million euro) to prepare its refineries and pipelines for ditching Russian oil, Bloomberg reported on Tuesday, citing documents it has reviewed and sources with knowledge of the discussions. 

In early May, the European Commission officially proposed a full ban on Russian crude and oil product imports, to come into effect by the end of the year. But the EU is still scrambling to find a common position, trying to persuade Hungary and some other central and eastern European countries to drop their opposition to an embargo.

Hungary—whose Prime Minister Viktor Orban held close ties with Putin before the Russian invasion of Ukraine—is the biggest opponent to an EU embargo on Russian oil imports, and has said it would need hundreds of millions of dollars to adapt its refining and pipeline industry in order to accommodate a stop to Russian oil imports.

Orban has said that an oil ban would be like “dropping a nuclear bomb on the Hungarian economy”, while Hungarian Foreign Minister Peter Szijjarto said last week that it would not drop its opposition to a Russian embargo unless it receives hundreds of millions of dollars, necessary to replace Russian oil.

Hungary also wants pipeline oil imports to be exempted from the ban.

The Hungarian opposition to an embargo continued this week. At a meeting on Monday, the foreign ministers of the EU failed to persuade Hungary to drop its veto on an embargo.

Lithuania said that the EU is being “held hostage by one member state,” commenting on the failed talks.

Diplomats now hope that an EU summit on May 30 and 31 could reach a unanimous decision on a ban on Russian oil, to be phased out over six months and with exemptions for central European countries, including Hungary, Slovakia, and the Czech Republic.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on May 17 2022 said:
    The truth of the matter is that Hungary opposes an EU ban on Russian oil imports and it might end up sinking it.

    Hungary is demanding hundreds of millions of dollars to prepare its refineries and pipelines for replacing Russian oil. It needs to retool its refineries to enable them to refine non-Russian oil and also increase the capacity of the Croatian pipeline. These projects take more than 1-2 years to complete.

    Those in the EU calling for a ban are letting their hatred of Russia cloud their judgement. Moreover, If they think that banning Russian oil will deprive Russia of funds to finance its military operations in Ukraine, then they are deluding themselves.

    A more sensible proposal is for the EU to forgo altogether its proposed ban for the sake of its economy whose prospects are getting bleaker by the day.

    The EU has today downgraded its growth forecasts for its economy from 4% a few months ago to 2.7% this year. A ban on Russian energy imports could cost the EU economy an estimated €114bn and €286bn amounting to 3%-8% of GDP. Moreover, inflation could hit 6.9% in the second quarter of this year.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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