Abstract: Recently, Ukraine's sanctions against Russia's Lukoil have further escalated, suspending the transit transportation of the company's oil from Ukraine's territory. The move had a direct impact on Hungary and Slovakia in Eastern Europe, preventing them from continuing to receive oil from Lukoil. To alleviate the energy woes of Hungary and Slovakia, the European Commission proposed an alternative on August 1. The plan proposes that the two countries use Croatia's Adriatic pipeline to import crude oil to make up for the shortfall in crude oil caused by Ukraine sanctions. However, both Hungary and Slovakia rejected the EU's proposal. Why did Eastern Europe reject EU crude oil import substitution? See the internal cause analysis.
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Eastern European countries rejected the EU crude oil import substitution plan
August 3, 2024
Recently, Ukraine's sanctions against Russia's Lukoil Company have further escalated, suspending transit shipments of the company's oil from Ukraine's territory. The move had a direct impact on Hungary and Slovakia in Eastern Europe, preventing them from continuing to receive oil from Lukoil. Faced with this dilemma, the two countries quickly engaged with relevant parties such as Ukraine and the European Union to find a solution.
The EU proposes an alternative
To alleviate the energy woes of Hungary and Slovakia, the European Commission proposed an alternative on August 1. The plan proposes that the two countries use Croatia's Adriatic pipeline to import crude oil to make up for the shortfall in crude oil caused by Ukraine sanctions. The EU believes that the Croatia pipeline has sufficient redundant capacity to provide the two countries with crude oil produced in other countries, while ensuring that their oil supply security is not immediately threatened.
The reaction of Hungary and Slovakia
However, both Hungary and Slovakia rejected the EU's proposal. Hungary Foreign Minister Szijjártó pointed out that since the outbreak of the Russian-Ukrainian conflict, Croatia has significantly increased the transit price of crude oil, up to five times, so Croatia is not a "reliable" crude transit country. Slovakia Foreign Minister Branal also expressed distrust of the EU plan in a statement, arguing that there is great uncertainty about the price and volume of crude oil in the future, which makes it difficult to accept.
Background and impact
Before Ukraine tightened sanctions, the southern branch of the Friendship pipeline could deliver more than 1.1 million tons of Russia crude oil per month to Hungary and Slovakia, of which 900,000 tons were directly supplied to the two countries. Thus, Ukraine's sanctions have had a serious impact on energy supplies in both countries. At present, the two countries are facing a huge challenge in finding alternative sources of oil supply.
"Friendship" oil pipeline
conclusion
Hungary and Slovakia's rejection of the EU's proposed crude oil import substitution package further highlights their energy supply woes. This situation not only tests the energy security strategies of the two countries, but also puts forward new requirements for the EU's energy supply strategy. The EU needs to reassess its support measures for energy supply to member states to ensure the stability and reliability of energy supply. At the same time, Hungary and Slovakia need to continue to seek other solutions to the current energy crisis.
With the complex and volatile international situation, energy security has become the focus of attention of all countries. For Hungary and Slovakia, how to reduce dependence on external markets while ensuring energy supply will be a key issue to be solved in the coming period.
Analysis of the internal reasons for the rejection of EU crude oil import substitution in Eastern European countries
First, the security level
- Transit country reliability concerns: Hungary Foreign Minister Szijjártó made it clear that since the outbreak of the Russia-Ukraine conflict, Croatia has significantly increased the transit price of crude oil by up to five times. This act raises serious questions about Hungary's credibility of Croatia as a transit country for crude oil. In such a critical area of energy supply, large fluctuations and uncertainties in transit prices undoubtedly increase the security risks of Hungary's energy supply.
- Geopolitical risks: Given the complexity of the current international situation, especially the ongoing impact of the Russia-Ukraine conflict, Hungary and Slovakia are concerned that crude oil imports through Croatia may further become involved in geopolitical disputes, threatening the stability and security of their energy supplies.
Second, the cost level
- High transit costs: As mentioned earlier, the increased transit price of crude oil in Croatia directly increases the cost of crude oil imports from Hungary and Slovakia. Against the backdrop of stable energy demand and volatile international oil prices, high transit fees will undoubtedly squeeze the profit margins of the two countries and increase the economic burden.
- Economic considerations of alternatives: When evaluating alternatives proposed by the EU, both countries will consider their economics and feasibility. If the cost of importing crude oil through Croatia is much higher than other alternatives or the cost of importing through the Friendship pipeline in the past, then rejecting the option becomes a reasonable option.
Third, the efficiency level
- Transportation efficiency issues: Hungary and Slovakia have established relatively stable transportation systems and supply chains in the process of importing crude oil through the "friendship" pipeline for a long time. The switch to Croatia's Adriatic pipeline will require a re-engineering of the transportation network and adjustment of the supply chain, which may reduce transportation efficiency and increase additional operating costs.
- Future Uncertainty: Slovakia's Foreign Minister Branal's statement that "the future price and volume of crude oil is unknown" reflects the country's concerns about the stability of future energy supplies. In terms of efficiency, both countries prefer to choose energy supply options that provide stable supply and predictability, and the alternatives proposed by the EU are clearly lacking in this regard.
In summary, Hungary and Slovakia's rejection of the EU's crude oil import substitution plan is based on a combination of safety, cost and efficiency. Faced with the current energy dilemma, the two countries need to continue to seek other, more reliable, cost-effective, and more efficient solutions to ensure the stability and security of their energy supplies. At the same time, the EU also needs to reassess its support measures for the energy supply of member states to better cope with the complex and volatile international situation and changes in the energy market.
Netizens hotly discussed:
- Croatia's transit fees have risen like this, no wonder the two countries are not doing it, the cost is too high.
- The EU's approach seems feasible, but it is full of loopholes and does not take into account cost and security issues.
- This wave of operations in Croatia is really incomprehensible, the price has increased so much, who will dare to cooperate with you in the future?
- Hungary and Slovakia's rejection of the EU plan is also a reminder to the EU not to always think of dumping the pot on member states.
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Disclaimer: Personal opinion, for reference only.