On 23 August – one day before Ukraine’s Independence Day -, European Commission Vice President Valdis Dombrovskis announced that following the European Commission launched an investigation into the impact of Ukraine’s sanctions on Russian oil giant Lukoil and gathered information from all parties (Ukraine, Slovakia, Hungary, and Croatia) it has determined that Slovakia and Hungary’s energy security is not at risk after Ukraine’s halt of oil transit from Lukoil. ’We are continuing to closely monitor the situation and are actively working with interested member states on alternative solutions, including through the JANAF Adriatic Pipeline’, Dombrovsis said. (JANAF Adriatic Pipeline is a transit route via Croatia, Serbia and Hungary.) He also noted that the European Commission has once again urged Member States to reduce their dependence on Russian fossil fuels as soon as possible.
What is the current oil despute about?
Ukraine imposed sanctions on Lukoil in 2018. According to these restrictive measures, Lukoil was withdrawn from Kyiv, and sanctions were imposed on trade. In addition, Ukraine introduced a ban on Lukoil’s participation in the privatisation or lease of state property in Ukraine. This summer, these sanctions were expanded to the ban on transit of Lukoil oil via Ukraine which resulted in an oil crisis in two CEE countries: Slovakia and Hungary announced that they had stopped receiving oil from Lukoil after Ukraine strengthened sanctions against the Russian corporation. As is well known, Hungary and Slovakia have been granted an exception from EU sanctions on Russian oil imports following Russia’s full-scale invasion of Ukraine. Hungary and Slovakia buy respectively 33 % and 40-45 % of crude oil from Russia’s Lukoil in transit through Ukraine.
Concerning Slovakia, experts say that a long-term shortfall in supplies might negatively affect the Bratislava-based Slovnaft refinery. Despite a gradual transition to alternative suppliers, two-thirds of the oil that it processes still comes from Russia. After the sanctions, Slovak Prime Minister Robert Fico threatened consequences if Kyiv did not resume the transit of Russian Lukoil oil. ‘If the transit of Russian oil through Ukraine is not restored soon, Slovnaft will not continue to supply diesel to Ukraine, which covers a tenth of Ukrainian consumption’, Fico said.
Russian supplies currently account for two-thirds of all crude oil supplied to the Hungarian company Mol, but it may be able to completely replace them from 2025. After the incident with the sanctions, Hungary said it was seeking to resolve the problem with Lukoil’s transit through Ukraine to prevent stock-outs and fuel shortages. Later, Budapest has threatened to block €6.5 billion in payments from the European Peace Facility to compensate for arms supplies to Ukraine until the problem with Lukoil’s oil transit via Druzhba pipeline is resolved.
On 1 August, the European Commission spokesperson said that the Commission was investigating the situation concerning oil supplies to Hungary and Slovakia following Ukraine’s halt of oil transit from Russian oil giant Lukoil. He also noted that the EU rejected the request of Hungary and Slovakia for urgent consultations in connection with the sanctions on Lukoil, adding that, the Commission is still awaiting more detailed explanations from Budapest and Bratislava to confirm its findings.
What it means if the EU prefers to support Ukraine’s politically motivated decision rather than the Member States’ energy security?
Despite some member states’ claim that Ukraine violated the Association Agreement, Brussels does not see it a violation. Similarly, Brussels also found no evidence that the suspension of Lukoil’s oil transit threatened the energy security of Hungary and Slovakia.
The fact the EU finds no threats to Member States from Ukraine’s suspension of Lukoil oil transit indicates that the Commission has not conducted a thorough investigation, otherwise it would definitely have found such threats or problems.
This is not only about the fact that, for political reasons, the European Commission has put the interests of some EU members second to those of a country that has only just been granted candidate status, but also about Brussels’ decision to jeopardise the energy security of its Member States, not to mention the damage to the prestige of the Member States concerned caused by this decision.
Brussels has failed to provide am effective mechanism for action that Member States can count on, such as protection of the bloc members, representation of the interests of the member states, granting – and not underming – their energy security and reputation. Ukraine’s decision has put two Member States in a difficult position, which cannot be an acceptable attitude by a would-be member. Moreover, the problem is that Kyiv has probably even received compliments from Brussels for this step, not to mention the assessment by Robert Fico that, while Kyiv’s actions endanger the energy security of a few Member States, the impact of Ukrainian sanctions on Lukoil is unlikely to be noticable by Russia.
The oil dispute has created serious tensions at the regional level and, most importantly, some of these tensions have been between Member States and Brussels, which has favoured a candidate country against Member States which are heavily dependent on oil supplies.
Some developments in the oil dispute are reminiscent of a heavyweight boxing match, when in the ring, a boxer is actually facing not one but two other boxers who have decided together to knock out the opponent so that he will no longer interfere with their joint plans.
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