Hungary settles Russia's bill with Ukraine to restore oil flows

BERLIN — Hungary's leading oil conglomerate said on Wednesday it would pay a bill owed by the Russian pipeline operator to Ukrainian authorities, paving the way for oil deliveries to resume Russia to the three central European countries.

Analysts described the financial arrangement as an unexpected boomerang effect of the sanctions imposed on Moscow.

The conglomerate MOL Group, administrator of the Hungarian branch of the Druzhba pipeline, or Friendship, said on Wednesday that it had "transferred fees due for the use of the Ukrainian section of the pipeline".

Ukraine has pledged to resume deliveries of Russian crude to the three countries, Hungary, Slovakia and the Czech Republic, "within a few days", said the MOL.

Authorities in these three countries said on Tuesday that the books Russian oil companies in the pipeline had halted last week over "technical" banking issues related to sanctions that Europe imposed on Russia to punish it for invading Ukraine in February.

"This seems to be just another example of sanctions 'friendly fire' that is going to hit some European countries, in this case Hungary," said Oxford senior researcher Vitaly Yermakov Energy, in an email. “Sanctioning economic activity is a blunt weapon that can have unintended consequences. as opposed to tankers, to be exempt from a European Union decision to begin banning Russian oil imports later this year.

All three heavily dependent on Russian oil to fuel their economies, but no more so than Hungary. MOL, which is one of the largest and most profitable companies in the country, announced in April that it would pay dividends of $652 million to its shareholders.

Mr. Orban's Fidesz party won a landslide victory in April's elections on the promise that, thanks to cheap energy from Russia, gas and utility prices would not skyrocket the way they do. had done elsewhere in Europe. But this month Mr Orban's government was forced to remove the cap on electricity prices for the highest-consuming households, as energy prices continued to climb.

Hungary, together with Slovakia and the Czech Republic, lies at the end of the southern arm of the Druzhba gas pipeline. Mr. Yermakov said they had no viable alternative to Russian oil in the short term.

Germany and Poland, at the northern end of the pipeline, stopped buying Russian crude and instead started buying it from other suppliers and shipping it to ports on their northern coasts.

An oil tanker carrying a cargo of sour U.S. crude, similar in quality to Russian oil delivered through the Druzhba pipeline, arrived at the German port of Rostock last week, Reuters reported, citing data from analysts and ship tracking.

An oil pipeline connects the Rostock oil terminal on the Baltic Sea to the two main refineries in eastern Germany, the PCK Refinery to Schwedt and Leuna, both of which depended on Russia for deliveries until the start of the war.

Benja min Novak contributed reporting from Budapest.