Hungary’s foot-dragging on Russian oil crashes into reality

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BRUSSELS — A U.S. clampdown on Russian oil that threatens to strangle Hungary’s supplies is leaving Budapest no choice but to turn somewhere it’s long shunned: Croatia.

For three years, Hungarian Prime Minister Viktor Orbán has moaned the country cannot quit Russian oil without jeopardizing its energy security and risking exploding prices at the pump.

But now — as U.S. sanctions threaten to cut off one of Hungary’s key Russian suppliers and Brussels plans to propose new tariffs on Moscow’s oil — Budapest will be forced to hunt elsewhere for imports.

“Orbán has done everything he could to avoid giving up Russian oil,” said Péter Krekó, director of the independent Budapest-based Political Capital think tank. “If the sanctions go ahead, Hungary will have to start taking alternatives seriously.”

Shifting away from Russia will require Budapest to bury the hatchet with Zagreb. Hungary has persistently accused Croatia of imposing extortionate transit fees on its exports, arguing that prevents it from switching suppliers. The country also claims Croatia’s pipeline system is not physically able to meet its oil needs — claims its neighbor vigorously disputes.

“These accusations are long-standing and … 100 percent not true,” Croatian Economy Minister Ante Šušnjar told POLITICO. “This is just an excuse for buying Russian oil.”

“We have no obstacles to providing the oil,” he said. “We [can be] ready in a matter of minutes.”

Hungary’s conundrum comes as U.S. President Donald Trump grows increasingly frustrated with Russia over stalling efforts to secure a ceasefire in Ukraine. The EU, too, has doubled down in recent months on its campaign to phase out Russian energy imports to the bloc.

For now, Hungary is scrambling to secure an exemption to Trump’s sanctions. But if the measures go forward as planned, Budapest will have no choice but to turn to Croatia.

Profits or prices

Ever since Vladimir Putin first ordered his troops into Kyiv over three years ago, Hungary has fought hard against efforts to end the EU’s historic energy ties to Russia.

When Brussels imposed sanctions on Russian oil in 2022, Hungary leveraged its veto power over the bill until it won a carve-out for supplies coming via the Druzhba pipeline, which transports oil from Russia through Ukraine to Central Europe. Since then, it has also repeatedly obstructed attempts to target Moscow’s nuclear and gas sectors.

As the share of Russian crude in the EU’s energy imports shriveled from 26 percent in 2021 to 3 percent last year, Hungary instead deepened its dependency, moving from a prewar share of 61 percent to 86 percent in 2024.

During that time, Budapest has consistently claimed its hands are tied.

As a landlocked country, Hungary’s main alternative is the Adria pipeline that picks up imported oil at Croatian ports and snakes its way through the country and into Hungary. But Budapest alleges that Zagreb’s raising of transit fees in recent years — supposedly to five times the European benchmark — would cause prices to soar back home.

Brussels’ effort to quit Russian energy would “destroy the security of our energy supply,” Hungarian Foreign Minister Péter Szijjártó warned this month. And Croatia, he said, is “trying to profit from the war in Ukraine.”

But experts aren’t convinced. That’s “complete nonsense,” said Tamás Pletser, an oil and gas analyst at Erste bank, since the final cost of fuel in Hungary is set not by crude, but rather more expensive fuels like diesel by the regional Mediterranean benchmark price.

As a result, when crude prices rise, that “doesn’t have a major impact on the end product prices,” he said. What it would mean, though, is “declining profit margins” for Hungary’s main oil importer MOL, Pletser said, and fewer tax revenues for Budapest.

In reality, “the most problematic financial aspect of rejecting Russian oil is related to … the Hungarian budget,” said Ilona Gizińska, a Hungary expert at the Centre for Eastern Studies think tank, which currently faces a yawning deficit. There’s no “political will” to quit Russian oil, she said, precisely because it is up to $30 per barrel cheaper than alternative supplies.

Hungary’s foreign ministry declined to comment. A spokesperson for MOL said its “main concern was security of supply” while adding that Croatia had “nearly doubled” its transit fees at the end of 2022.

This information is a commercial secret and is therefore unverifiable; Croatia denies the allegations. “The transit fees are the same before and now,” said Šušnjar. They represent just “2 percent” of the final price of oil, he added, and apply “equally to all partners.”

Others in the bloc agree. “We often don’t get an objective representation of the facts from Hungary,” said a diplomat from an EU country, who was granted anonymity to speak freely.

Capacity crunch

In recent weeks, the feud between Hungary and Croatia has somewhat cooled.

“Hungary will always give Croatia the historic respect it deserves,” Orbán said after meeting his counterpart Andrej Plenković this month. “We are committed to de-escalating tensions.”

But the two countries continue to squabble over a more technical issue: whether the Adria pipeline can feed enough oil to Hungary.

During a pipeline test last month, oil importer MOL claimed the link was only capable of ramping up its oil flows to sufficient levels for one-to-two hours due to “technical issues.” JANAF, Croatia’s partly state-owned pipeline operator, hit back, accusing MOL of demanding that flows be decreased.

Since then, the firms have held several rounds of talks on extending their transit deal for the pipeline, which expires at the end of the year.

But “we still have no reliable information about its condition and capacity,” a MOL spokesperson said, adding that while the firm is “open to reaffirming” its relationship with JANAF, it still needed “a detailed maintenance plan” relating to the pipeline.

Stjepan Adanić, board chairman at JANAF, dismissed the allegations. “JANAF is fully prepared — in terms of technical, organizational and all other conditions — to meet MOL Group’s … total annual requirements for crude oil” equalling “14.5 million tonnes,” he said.

“The fact is that MOL Group has a certain discount when buying Russian oil,” he told POLITICO. “It is in their business interest for the exceptions to European sanctions … to continue for as long as possible.”

Now, Zagreb wants Brussels to help mediate.

At the next technical test, “we are requesting the presence of the European Commission” to monitor the results, Šušnjar said.

The EU executive didn’t respond to a request for comment. But Brussels’ top energy official, Dan Jørgensen, this month told POLITICO he was willing to act as a “mediator” for “the countries who will be affected the most” by the bloc’s phaseout of Russian energy.

Pincer attack

Despite its protests, Budapest will now have to act fast as it increasingly looks cornered.

Orbán will head to the U.S. next week in a bid to secure an exemption from Trump’s sanctions, which kick in on Nov. 21.

But Washington’s Russia hawks are keeping the pressure high. “Hungary,” warned U.S. Senator Lindsey Graham this week, “if you think we’re not watching your efforts to undercut U.S. sanctions on Russian oil, you are mistaken.”

At the same time, Commission President Ursula von der Leyen last month announced the EU executive would present new tariffs on Russian oil as it seeks to speed up its phaseout before 2027.

“The sanction[s] … would be enough to push Hungary to decouple from Russian crude oil,” said Pletser, the analyst. And the tariffs “would make Russian hydrocarbons uncompetitive [relative] to other sources,” he added, if they are enforced.

As a result, Budapest will have to reconcile with Zagreb, which for now remains open to cooperation. “Croatia is capable and willing to support Hungary,” Šušnjar said.

But Hungarian politicians now “need to decide,” he added, “either we are members of the EU … or we are supporting the Russian aggression.”

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