Tensions Brew Between Ukraine and Hungary, Slovakia Over Disabled Oil Pipeline

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Written by Eric Funderburk for IIR News Intelligence (Sugar Land Texas)

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Summary

Hungary has moved ahead with its threat to veto an EU loan to Ukraine over a disabled oil pipeline, while Slovakia is withholding emergency power supplies to the war-torn country for the same reason.

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Ukraine, Hungary, Slovakia Tensions

There's a bit of tension brewing in Eastern Europe. There is, of course, a war underway between Ukraine and Russia, but now two European Union (EU) countries, Hungary and Slovakia, are withholding funding and power resources over Ukraine's failure to deliver oil to the two countries via Russia's Druzhba pipeline, which runs through Ukraine. Hungary and Slovakia are the two remaining EU countries accepting Russian oil, and their supplies from the pipeline have been cut off since January 27.

What Happened January 27?

That's when Kyiv said a Russian bombing attack in western Ukraine hit a portion of the Druzhba Pipeline, stopping flows of Russian oil through Ukraine and on to Slovakia and Hungary. The stoppage wasn't announced until February 12, and at the time Slovakia suggested that oil would begin flowing on the line again in a matter of days.

Those days are up, the pipeline is still not delivering oil through Ukraine, and Slovakia and Hungary have taken retaliatory measures against Ukraine in return for the latter's failure to repair the pipeline in a timely manner in order to keep the oil flowing.

Slovakia & Hungary's Actions

Within the last few days, starting Sunday, Hungary and Slovakia both made and followed through on threats designed to prod Ukraine to get the oil flowing again. Hungary has vetoed EU passage of a new sanctions package against Russian interests, and blocked a 90 billion-euro (US$105 billion) EU loan to Ukraine to help support its military efforts.

Slovakia has cut off emergency power supplies to Ukraine until the oil begins flowing again.

Loan & Sanctions Packages

Both moves have had little immediate effect, although an end to the stoppage is expected this week. The EU loan was primarily to help Ukraine maintain its military strength. EU funding to the country has been critical in its war efforts against Russia; The Washington Post reports that, to date, the EU as a bloc and individual member states have provided Kyiv with more than US$220 billion in support during the war. All 27 EU member states arrived at a consensus on the aid package in December, so Hungary's backtracking on the funding reportedly took some members by surprise.

The sanctions package was designed to impose an outright ban on all maritime services needed to ship Russian oil, including transport, insurance and more, in an effort to further curb shipments made on Russia's "shadow fleet." Now, that sanctions package, along with the loan, are in limbo due to Hungary.

Slovakia's Withholding of Power Presents Little Threat

Slovakia is now officially withholding emergency power supplies from Ukraine--to little effect, according to Ukraine grid operator Ukrenergo, which said imports have continued from other neighboring countries. Reuters reported that on Monday, Ukrenergo said any refusal by Slovakia to supply power would have little practical effect on Ukraine's power grid, and that Ukraine had last sought emergency power supplies from Slovakia more than a month ago in small volumes.

Standoff End in Sight

According to Ukraine, oil should begin flowing again on the Druzhba later this week, presumably allowing the resumption of both the EU legislation and Slovakian emergency power supplies. Ukraine had originally targeted today, February 25, to restart the pipeline, but earlier this week, Slovakia's oil pipeline system operator, Transpetrol, stated it was informed the resumption of flows would be delayed by a day until February 26.

Pending Oil Pinch for Slovakia & Hungary

To further add to the EU drama, on Tuesday EU officials announced that in April, they would propose a permanent ban on Russian oil, instituting a phase-out that would last even if the Ukraine and Russia make peace.

The European Commission plans to propose the phase-out April 15, but votes, negotiations and implementation remain further in the future, although EU Energy Commissioner Dan Jorgensen said the phase-out is intended to be completed by the end of next year, meaning Hungary and Slovakia could be pressed for resources.

The April 15 date is key as it deliberately comes three days after Hungary's national elections, and the EU did not want the potential oil ban to be a major factor in the election, which includes that for Prime Minister Viktor Orban, whose party has been in power for 16 years but now faces significant challenges from the opposing Tisza party, which held a 10-point lead over Orban's Fidesz party earlier this month.

Ukraine Inflicts Further Damage to Druzhba

While Ukraine is expected to complete the repairs necessary to restart flows on the Druzhba Pipeline this week, it continues targeted attacks on the pipeline within Russia. Following reports of a December attack on the Druzhba by Ukraine within Russia, Reuters calculated Ukraine had attacked the pipeline five times, including attacks in March, two in August and another in September last year.

The country reportedly struck the Druzhba again in January with no noteworthy results, but earlier this week again made a significant hit to the line. Just as Hungary and Slovakia were following through on their threats to hinder Ukraine's war progress, Ukraine bombed a key Druzhba pumping station in Russia's Tatarstan region early Monday morning. The Kyiv Post described the maneuver as a 35-plus unmanned aircraft strike that flew through roughly 930 miles of Russian airspace to achieve multiple hits on the pumping station--a critical transit node--as well as storage facilities.

Presumably, state-owned operator Transneft can divert flows to allow oil to reach primary destinations, as the strike came prior to Ukraine's announcement that oil would resume flowing Thursday.

Outside of the EU, the U.K. implemented additional sanctions against Transneft on Tuesday.

Key Takeaways

• Oil flows on Russia's Druzhba Pipeline through Ukraine have been stopped since January 27, following a Russian air strike.
• The pipeline is a key supplier of oil to Hungary and Slovakia, which have accused Kyiv of not performing repairs to the pipeline in a timely manner.
• In retaliation for the disruption, Slovakia has cut emergency power supplies to Ukraine, while Hungary has blocked EU legislation regarding Russian sanctions and 90 billion-euro loan package.
• Oil is expected to begin flowing through Ukraine again on Thursday.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).