Szijjártó on the oil embargo: it’s either 15-18 billion euros or a green light for piped oil, otherwise our veto remains

Almost two weeks ago, the EU proposed its sixth package of sanctions against Russia. While Hungary had voted in favor of the first five, the Orbán government immediately protested against the sixth package. The reason given was that the proposed embargo on Russian oil and gas imports would have a devastating effect (“tantamount to a nuclear bomb”) on the Hungarian economy – even if the country were given exemption with the extended deadline.

We have previously written about the options available to the EC and Hungary at this point, especially following Ursula von der Leyen’s surprise visit to Budapest last week.

Péter Szijjártó, Hungarian Minister of Foreign Affairs made his stance clear in a Facebook post yesterday. Before we take a look at what he said, let us consider Hungary’s current situation and what options the country has available.

• Should Hungary name a high price: money, political concessions (rule of law), and a green light to the RRF funds in exchange for supporting the EU’s sanction on Russian oil imports?
• Or should it give in hoping that this will pay off later?

Both options might be good, but both carry some risk.

If Hungary were to stick to the veto and play tough, thus making everyone upset with us, and the Russian oil delivery were to still fall through, we would be left with nothing: no oil, no EU support, no money, but would become very much disliked by all.

On the other hand, what would happen if we were to support something about which we have already said that we don’t like it, that it is where we draw the line, that we consider it pointless and see it as useless for ending the war? This would discredit the government, and Hungary would still have “loser” written all over its forehead.

Szijjártó clarified things

The Foreign Minister’s Facebook post (link) makes it clear what he sees as Hungary’s interest.

As he said:

"At the time of the fifth sanctions package, because of the specific request of the Poles, we voted in favor of the coal embargo. But we made it perfectly clear where we draw the line by stating that crude oil and gas are indispensable for us. In contrast, the EC came up with a proposal which presents a huge problem for us. They did so in spite of being aware of what’s in our interest, but they disregarded it and proposed this “nuclear bomb” anyways. If this were to go into effect, providing for the needs of the country would become physically impossible, and this is not just a problem of time, but it would also have a severe effect on the economy and on environmental protection. "

What does this have to do with the environment?

According to Szijjártó's argument, the EU would expect us to invest hundreds of millions of euros in fossil fuel, i.e. crude oil infrastructure. And then the switch from piped Russian oil would also require development at home (the Danube Refinery) and in Croatia (a pipeline), this would be an investment of 280 billion forints in total. After that, fuel prices in the country would rise by 55-60% and then all products would become more expensive.

“It was the European Commission who caused a problem with this proposal. Thus, it is the rightful expectation of the Hungarian people that the EC then recommend a solution for financing the above-mentioned investments and the compensation of the increased prices (or the prevention of the increase). This would require the complete modernization of the Hungarian energy systems at the cost between 15-18 billion Euros.”

- the Foreign Minister said. He added that Hungary is now waiting for the EU's suggestion. If this is what they would like, then they should give Hungary exemption for piped oil.

He also said that it is hypocritical to say that measures which would be introduced six months from now would have any effect on the war.

In other words, Szijjártó has made it clear that if the oil imported via pipelines were to be exempted from the sanctions, then the country could support the package. Later on, after the meeting, the Hungarian Foreign Minister confirmed his stance and mentioned that the majority of European oil transports arrives on tankers anyways.

This is true, as only about a third of Europe’ supply comes via pipelines (primarily to the V4 countries and Germany), while two-thirds of the Russian oil is brought on tankers via sea.

It’s been postponed

In our analysis of the situation, Telex has previously laid out (Brücki cikk linkje) three possible options:

• the whole EU package may be put to a vote on May 16th, risking a Hungarian veto (this did not happen),
• the member states may pass the majority of the sixth package, but leave the oil sanctions part to be discussed at the end of May. However, given that this sixth round of sanctions was basically about oil in the press, that would have been quite unpleasant.
• In case of Hungary’s veto, the whole decision might be postponed until the end of May, which would also be a sign of weakness and dissension.

Now it seems that the last option is the only one still available.

This is definitely bad for the EU:

• it will be bad for the economy if there is no Russian oil coming
• if there are no sanctions, and the oil continues to arrive, then the EUs reputation will be harmed.

How bad will it be for Hungary?

Everyone on the Western side of the EU agrees that Russians must be stopped, that we should decrease their chance for continuing to arm themselves, and that we must show solidarity with Ukraine.

On the other hand, there is also truth to the opinion that sanctions on Russian oil will not further any of the above points, especially not if we only decrease Russia’s income from oil by bits and pieces. Meanwhile, Russia’s situation is getting worse, they are becoming more isolated, will most likely have technological problems, and is increasingly backed into a corner.

Tamás Pletser, oil analyst at Erste Bank said that in his opinion it would have made more sense for the 10 biggest oil companies to form a “cartel” and agree to stop buying Russian oil altogether. This would have also weakened Russia’s budget, and we wouldn’t have unnecessarily stretched the cohesion of the EU.

It is too late though, as the sixth sanctions package is already on the table. Then there is the societal pressure in Germany and Poland, the very committed Baltic countries, the Portuguese, the French and the Spanish – none of whom would be hurt by the lack of Russian oil, and then there’s Hungary.

The country which is already stuck on issues of corruption, rule of law, sexual minorities and NGOs. When the Hungarian interest could truly be accepted, the EU would apparently prefer to go on like a steamroller. By the end of May we might find out just how badly we will fare.