Russia July oil flow to Hungary, Slovakia normal amid Lukoil ban

Russia’s crude oil exports to Hungary and Slovakia via Ukraine remained within normal levels in July despite Kyiv’s sanctions on Lukoil PJSC, as Tatneft PJSC stepped in to replace the bulk of the missing barrels.

Ukraine hardened restrictions against Russia’s second-largest oil producer over the Kremlin’s military aggression, effectively prohibiting the company from transiting crude through its territory from late June. The sanctions against Lukoil affected Hungary and Slovakia, landlocked nations that have continued to import Russian barrels via the Druzhba pipeline through Ukraine after obtaining temporary exemptions from European Union energy sanctions.

Russia exported some 436,000 tons of crude to Hungary and about 356,000 tons to Slovakia last month via Ukraine, according to a person with knowledge of industry data, who spoke on condition of anonymity because the information isn’t public. That was an increase in total flows from June and in line with levels seen earlier in the year, the data show.

Lukoil did halt its shipments in July, but Russian producer Tatneft replaced most of those barrels by boosting its exports to Hungary and Slovakia, the person said. 

The July figures confirm earlier statements by the Hungarian and Slovakian officials that they found temporary solutions to the sanctions against Lukoil, which historically accounted for a half of the Russian deliveries via the Druzhba link. Ukrainian officials also said oil transit toward the two EU countries remained stable in July.

Tatneft and Lukoil didn’t immediately respond to Bloomberg requests for a comment.

A drop in Russian crude flows to Hungary and Slovakia before July could be linked to annual maintenance at Mol Nyrt’s refineries in the two countries. 

The Budapest-based energy company has been in talks to find a longer-term solution to secure Russian crude supplies. The company has “a good chance to sign the necessary deals,” Hungarian Cabinet Minister Gergely Gulyas told a government briefing last week, without specifying who the talks have been with. 

The new technical solution, which Ukraine seems ready to accept, will mean that transit will cost more and “Mol will have to carry the risk from the Russian-Ukrainian border,” he said, without providing further details.

Under the current oil-supply deal with Lukoil that has been blocked by the Ukrainian sanctions, the Russian side is responsible for bringing the crude to Fenyeslitke, a small Hungarian settlement, and to Budkovce in Slovakia, both on the border with Ukraine.