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- [00:04]
A
No migrants more in no Europe without Christianity. An alliance also with Russia.
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Welcome to EU Scream, the podcast that guides you through stories coming from the eu. We talk about the news a bit differently and with people who really know what they're talking about. I'm James Cantor.
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This is.
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This is episode 120. Hungary's deepening dependency on Russian oil with Attila Steiner Vladimir Putin faces huge losses on the battlefield in Ukraine, but he faces little financial pressure to stop the fighting so long as he can continue making significant revenues from from energy exports. Three years ago, as part of efforts to weaken Putin's war chest, the EU banned imports of Russian crude oil. But there are derogations. Those countries that have a high dependency on Russia for their crude have been allowed to continue importing it. The idea being they needed more time to learn to live without it. Poland, Germany and the Czech Republic have since stopped the imports of, but not Slovakia and not Hungary. Both still take deliveries of Russian crude through Soviet era infrastructure, the Druzhba, or Brotherhood pipeline network. In this episode, Attila Steiner, the Hungarian State Secretary for Energy. He is allied with the Fidesz party of Prime Minister Viktor Orban and he acknowledges that Hungary is increasing, not decreasing, dependency on Russia for crude oil and that Hungary is expanding links with the Druzhban network, increasing the reach of infrastructure delivering Russian crude to Europe. This is not how the EU sanctions were supposed to work. It's also fundamentally at odds with the REpower EU plan to stop all Russian oil imports by the end of 2027. In fact, how Hungary already has access to non Russian sources. Another pipeline, the Adria, that links Hungary with Croatia. The Adria carries oil from countries like Kazakhstan. Unlike the Druzhba, which runs through Ukraine, the Adria is far less exposed to conflict and the Adria should be able to deliver the volumes required by both Hungary and Slovakia. That's according to the company that operates the Adria and according to a widely cited report from the center for Research on Energy and Clean Air and the center for the Study of Democracy. But Hungary disputes the Adria pipeline's capacity and Steiner cites that, as well as transit fees, as reasons why Hungary isn't really using it. Steiner also confirmed plans for a new interconnector to carry Russian oil to Hungary and then onto Serbia. That project effectively extends the Drzhba pipeline system. The behavior of Hungary, which is facilitating Russian oil exports amid Putin's continued assault on Ukraine, shows contempt for Brussels and Kyiv. But Steiner says adopting the EU sanctions on Russian crude is not advantageous for Hungary, nor for its giant energy conglomerate Mall. And the signs are the pressure is coming off Hungary for now. Here, Steiner credits a recent diplomatic campaign by Viktor Orban. First with Donald Trump, who no longer is calling on Hungary to quit Russian oil, and second with the former German Chancellor Angela Merkel, who's still an influential figure among European conservatives. Merkel held a recent meeting with Orban in Budapest where according to Steiner, she effectively gave her blessing to Hungary for for continued Russian crude oil imports. Of course, that's far from the end of the story. There's also Hungarian domestic politics and economics. Orban's Hungary imposes a tax on the profits that are partly generated from importing the relatively low priced Russian crude. And yet prices at the petrol pump in Hungary remain above the EU average. That contributes to an already delicate political situation in Hungary, where Orban's ruling Fidesz party is trailing in the polls ahead of elections next year. It's also a delicate situation for Steiner himself. He seems set to go head to head with Peter Magyar, the main opposition figure in Hungary, in a forthcoming contest for a parliamentary seat in Budapest that Steiner says will be an interesting fight.
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C
President Trump said in September that all NATO countries, including Hungary, must cease purchasing Russian oil. And then President Trump said that Prime Minister Orban might stop imports if President Trump told him to do so. What were your feelings about that? And do you think Trump will keep on pursuing this idea that it should stop?
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A
Actually, there was a phone call between Orban and Trump discussing exactly that issue. And I think Mr. Trump very quickly understood what is the situation. And I think, you know, it's not a discussion about feelings and taste. It's a discussion if you talk about energy or on physical realities and geographical conditions. And you know, Hungary is a landlocked country and if we import then we have to use the neighboring countries infrastructure. And if there are bottlenecks there, then we cannot use more or cannot import more. So I think this is the challenge.
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C
As well as the American dimension, there's also the EU dimension. And I'm based in Brussels, so I get briefed by European officials and EU officials say that the status that's still enjoyed by Slovakia and Hungary, the status that allows them to keep importing Russian crude via the Druzhba pipeline, despite the general ban on EU imports since Russia's full invasion of Ukraine, that that was granted to allow time for Hungary to diversify sources away from Russian crude. So I mean, where does that diversification effort really stand?
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A
It's quite in an advanced phase. Just this week we signed gas contract with Engie, which is a Western company, two weeks ago we signed a contract with Shell.
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C
Those are gas or oil?
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A
Yes, this is gas.
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C
That's gas. But here on the diversification front, another question on that. Hungary and Serbia are collaborating on energy infrastructure, including an extension of the Jushpa pipeline, an extension that would be a new vector for bringing Russian crude into Europe, to Hungary and then onto Serbia. Doesn't this undermine EU efforts to reduce the reliance on Russian energy? And moreover, if Hungary does ever intend to phase out Russian crude, why this extension to Druzhba, which is after all Soviet era infrastructure?
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A
It's not an exact extension of Druzhba, it's an interconnector. And I think the better, the more interconnector we have because that makes the region more stable, more options on the table. And if there is any new source of crude oil, then we can disseminate in more infrastructure, not only one or two pipelines. So I do not see here the connection. It's for Serbia, clear diversification because they have now one pipe and there will be another pipe. So I think it's good if we have more pipe than only one or no pipe at all. So on the crude oil, it's also quite a challenging question because we have the Druzhba, that's the main supplier and we have the Adriatic pipe through Croatia, that's a supplementary backup pipe that was built for that purpose.
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C
We call that one the Adria Adria pipe.
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A
That's the Janaf Yanaf Janaf, owned by Janaf. This is the company, the Croatian company who owns and actually Yanav also supplies Serbia with crude oil. Not only Hungary, but here we have a challenge that in 2022, when the energy crisis emerged, the Croatian company Yanav increased the Transit fees by 2 and a half times. So it means that purely on business terms, there is no company who would use that pipeline because Durjiba is much more cheaper. And actually currently oil import is belonging to a private company called mol. So it's not a state entity who decides that I use that or that, but it's a private company on the stock exchange. So I think this is a real challenge that actually on business terms the alternative pipe is not competitive because of the extra high tariffs. This is one of the most expensive pipeline in Europe. So here we have a question and in the meantime, what we have as a challenge that if we would use not Russian originated crude but others, then we have to adjust the refinery's technology because the refinery was Built for Russian crude. So now we have to adjust the technology in 20, more than 20 facilities within the refinery. Of course it has an investment cost around 4,500 million US dollars.
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C
And you would like to see that come from the European Commission.
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A
That I think if there is an expectation then that there would be, there should be a help. But there is no help, no help at all.
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C
Can I just quickly go back to, I mean, does this pipeline, the new pipeline plan, Hungary, Serbia, does that have a name yet?
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A
It's an interconnector, It's a pipeline.
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C
Yes, it would have. Just so I can be sure it would have a capacity of up to 5 million tons of crude, Russian crude. And it would partner with Serbia's state run Trans Nafta and it would work with the Hungarian conglomerate Mall. Do we know when construction will start and when oil might be flowing?
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A
You know, I don't know whether the final investment decision has been done. So the negotiations are in quite an advanced phase. So the preparation is ongoing. But I don't have for you the exact date for completing the project. It's actually not our ministry, it's the Foreign affairs ministry who is coordinating that project.
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C
Right, that's interesting too.
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A
Yeah, yeah, yeah. But we have a non binding discussion, an MoU basically to build that.
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C
Now there is data to show that the reliance of Hungary on Russian crude actually has been going up, going up since the start of the war in Ukraine. So these figures which are crunched from Eurostat, I didn't do the crunching, but I know people who did show a 61% reliance before the war, rising to 86% in 2024 and then upwards of 92.5% in the first half of this year of 2025. How can that trend, greater rather than lesser reliance on Russian crude be reconciled with the idea that Hungary again is supposed to be diversifying away from Russia?
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A
It's very simple answer. I already referred to that. This is the super expensive tariffs for transit on the alternative pipe. On business terms you don't use that pipeline because it's so expensive. The Yanav pipeline, the Adria pipeline. So that's why the utilization of Druzhba is higher. Because actually Yanav has a monopolic position and increased unilaterally the price and on business terms it doesn't make any profit. And more, as a listed company on the stock exchange cannot afford not to earn profit. So simple.
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C
Right, so you might have been using more Kazakh crude through Yanof if the price was better.
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A
We used more already in the Past when it was cheaper, but now there is no business intention to use more because it's super expensive. Actually we made some efforts with European Commission to start an investigation on that, but the commission was not so much positive on that request.
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B
Right.
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C
Why do you think that was?
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A
I would like to comment it if.
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C
I have this right. There is a bit of an economic incentive for Hungary to buy the Russian crude oil from through Druzhba because the Russian crude as we've been discussing is kind of the best deal you can get. It's cheaper certainly than the main pipeline alternative that we've been discussing. That alternative being mainly Kazakh crude via Adria. Do we know what the price differential is at the moment? Just to give some idea, this is.
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A
A little bit simplified. Your summary. The alternative is whatever crude through Adrio pipeline because you can reach the globe basically global supply. But if you use that, then you have to adjust your refinery, which is ongoing. So nobody can claim us that we are not doing because we have started mall has started not doing the green projects but making the adjustment of the refinery because there is no financial support from anyone to do this job. So that's why of course they started to do that. But it takes the funds away from other maybe renewable projects. So you have to see that trade off. And what I was talking about, this is the transit fees. It's not the crude itself, this is the transit fees. The transit fees are super expensive on the Adriatic pipe, which is super weird.
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C
When you think about how long the Druzhba pipeline is and by comparison how short Adria is. So you would think that everyone would want a bit of transparency over what exactly these fees are.
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A
You know, the oil sector is regulated quite differently than gas and electricity and I think the commission may struggle because of that reason with that topic. However, it's quite clear there should be a single market. There is a monopolistic position and the prices are super high. So we don't see why the commission cannot start any investigation on that issue.
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C
Okay, so another question. Are Hungarian motorists seeing the benefit of this discounted crude from Russia and is the government a little bit concerned at all that Hungarian motorists and households have been paying rather more for their petrol than the EU average? I mean, in common sense terms you would think, okay, you're getting the cheaper crude from Russia and one would think that that could feed through to really attractive prices at the pump. But apparently the prices are not that attractive.
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A
It's not selection, it's. It's physical reality that on that amount with that refinery, we have to use that kind of crude. If we will readjust the refinery and if the transit fees will be lower, then of course we can have more and more non Russian originated crude. But this is not like I would like to have this or that. These are physics. These are physics. It's not like I have preferences.
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C
You know, the election that's upcoming is going to be an important one. That's my main point. And I would have thought that the government, the current government, can ill afford any pain for consumers ahead of the elections next year. I mean, it is the case right now that your party, which is that of Prime Minister Orban Fidesz, is trailing the insurgent party Tisha, of Peter Magyar, who's currently a member of the European Parliament. And I just read that a majority of Tisha supporters are in favor banning imports of Russian crude. So all of this is very delicate politically at the moment.
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A
Definitely it's very delicate. And I think this election will be crucial for the future of Hungary because actually the citizens have to choose whether we will represent politics, which is for Hungary and taking Hungarian interest for the first point, or we will compromise and we will see. And yes, we will, you know, give up some sovereignty. That was a quotation from Peter Moyar, actually. So I think this is the real choice. And it's of course the Hungarian government and Fidesz party would like to protect competitiveness. It's no question why we should pay more for the energy if we don't have higher volumes. So of course we would like to have an affordable price. We would like to have secure supply. And currently the responsibility of providing supply security, that's with the Hungarian government. So that's why on one side we have promises, we have some opinions, but now we have to provide supply security. So that's why we have a very firm position on this Ripa Ryu question that for us we have to ensure, not opposition parties shall ensure supply security.
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B
Right.
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C
Because what you seem to be saying there is that Magyar, Peter Magyar, would be to some degree compromising the sovereign right to determine your energy security.
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So you mentioned that they prefer to cut Russian crude immediately.
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C
Yes, they do.
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A
And we think that that compromises supply security also, but mostly competitiveness because it will be more expensive, it will be more complicated, much more complicated. Because now in terms of gas and oil, we are the entry point for Europe, for Russian gas. So we are in the front of the pipeline. But if we have to arrange it in a different manner, then it will be much more complex and we will be at the end of the pipelines and basically we can access the rest.
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C
So when it comes to repower EU and to the exemptions, I mean, is there ever going to be a kind of breakaway from Russian crude oil, do you think, by Hungary?
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A
As I said, if there are the infrastructure preconditions which are not there, if the alternative is also competitive, then why not. But these are not there. These are not there in one, two months, I don't know in how many years, maybe some projects will be completed, some will be delayed, some will be not completed. So we have to always see the reality and physical reality and physical opportunities and we cannot decide it ideologically.
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C
Just to quickly come back to the kind of Trump dimension. The Russian companies that Hungary and are actually buying from are Lukoil and something called Normiston Trading. To what degree does Hungary fear that it is exposing itself through these relationships to further secondary sanctions from the US or any other jurisdiction? Wouldn't that kind of leave Hungary more exposed?
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A
In a way it's theoretical because if you heard President Trump, he clearly understood what is the situation. So he is not intending to push forward any such measures against Hungary because he understood from that call with Prime Minister Orban that we are in a difficult situation since we are landlocked, period. And the also now Chancellor Merkel was in Budapest, made a visit, he also understood this. But the only place where they don't understand it, this is actually Brussels.
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C
I didn't know that Angela Merkel had spoken with Viktor Orban about the energy.
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Also about this issue.
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C
Yes, about this issue, yes.
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And she also acknowledged that, yes, it's much more difficult for Hungary since it's a landlocked country. This is also clear for Donald Trump. This is not clear for European Union leaders. I don't know why. Since five years we are explaining continuously.
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C
To go back to Janaf, to go back to the Croatian operator of the Adria pipeline. There have been tests done there and the test seemed to show that Adria would deliver more than enough non Russian crude for both Hungary and slovakia each year. 14 million tons of crude. And that could all be done at a kind of lower throughput. If I have the language correctly, I.
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A
Have very different results from the test. What you are mentioning, this was true for one hour, that full capacity was possible for one hour, not for one year, one hour.
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C
But what about using a lower capacity and delivering the 14 million?
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A
It's not enough? No. If you have lower capacity, then you cannot deliver the 40 million for a year. So if you have full capacity for the full year, then maybe 14 million, it's feasible. There was one test, after one and a half error, the pressure went down and they couldn't keep the maximum capacity. They had to shut down. There was an emergency stop. So to say that this will be a safeguard for Hungary, that 40 million can be delivered, honestly, this is very far from the reality.
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C
The difference of data there, the different view, is that actually with a lower throughput, with a lower capacity use, you could still deliver enough. Your view, your data shows that that's not possible.
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A
There is a discrepancy. So they said they can provide 40 million, which is quite on the edge, whether for the two refineries it's enough or not. But they even couldn't show us that this pipeline is capable to provide this 40 million because after one and a half hours it stopped. So to say that we should base our supply security, the whole country's diesel and gasoline supply security, on that pipeline, which can run on maximum capacity for one hour, I don't have to answer.
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C
I think then we have Ukraine taking credit for bombing parts of the DRZHP pipeline. So we have security of supply issues on that side that are really quite serious. There's a war going on over there. What happens if Jujba gets shut down?
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A
You know, we have Yanaf, of course, but that will mean some supply security issues in Hungary. So that's why, of course, if there is any attack against Druzhba, we consider it as a direct attack against Hungary, because that's our supply security. Supply security is based on that pipeline.
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C
What can you invoke if it's regarded as a direct attack?
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A
Ask our foreign minister on that. I think he has better ideas.
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C
But has he said publicly what the recourse might be under such circumstances?
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A
We think that it's an open attack against one member state of the European Union. And there are some clear expectations from candidate countries who would like to join the European Union not to do something like that.
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C
On the issue of the refineries, I know that Hungary also says that Mull, the Hungarian conglomerate, has asked for really big funding from the EU to optimize these refineries, and we've discussed that for non Russian crude. On the other hand, I think these refineries already have been used to refine non Russian crude and they still can be used for that purpose. The yield might not be quite as big, but isn't it worth taking a small loss there, perhaps on petroleum yield from the crude oil? Wouldn't that be a small price to pay for ending this highly contested situation of not only importing the Russian crude but then also refining it. And Hungary?
- [26:15]
A
Hungary has one refinery, MOL has several refineries and one other refinery is in Bratislava, the Slovnot refinery. And these two are supplied by Druzhba and both refineries already used in the past and currently non Russian originated crude for a certain extent. But actually the refineries have been never tested for 100% non Russian crude. What we expect that in such a situation the yield would be much lower, the output would be much lower, but not like 5 or 10% or even disruption because those facilities will be not able to process the different type of crude and then the refinery could stop for one to three months, which can pose serious supply security concerns. On the adverse side, Moore is a company listed on the stock exchange. So how Moore should explain that yes, the profit is negative because we have an ideological decision not to buy this, but that so I see here several challenges. If the preconditions are there, then of course diversification is a real option. But currently the preconditions are not there.
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C
And what are your expectations with the 19th package of sanctions and the idea of the exemption for importing Russian crude either being maintained or withdrawn?
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A
Yes, it will be maintained, I hope. Otherwise we cannot support and it's a unanimity vote in case of sanctions.
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B
And can I just ask you lastly.
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C
Will you be running head to head with Peter Maggiar?
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A
It's a constituency. It's a constituency question basically in Budapest.
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C
So you would be running for parliament.
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A
In the I prepare myself that I.
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C
Will run and you could end up running against Peter Magyar. We don't know if that will happen yet, but it could. Yes, we'll be in touch. That sounds really very consequential.
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A
Yes, it will be an interesting fight.
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C
That's it for this episode.
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B
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C
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B
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C
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B
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B
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C
Thanks for listening.