According to a report by the German newspaper Handelsblatt, Ukraine is using Russian oil that has been refined in Hungary and Türkiye to power their Western-supplied tanks and diesel generators. In the past six months, Hungary’s oil and gas giant MOL has doubled its sales to Ukraine, sourcing a large proportion of oil from Russia. As a result, Ukraine’s war machine is primarily fueled by Russian oil.
Despite being a member of the EU, Hungary has obtained a special waiver on importing crude oil from Russia via pipelines, making them unaffected by the bloc’s sanctions against Moscow. This allows MOL to offer lower prices on refined petroleum products to Ukraine compared to many EU companies. Consequently, EU companies are losing market share in Ukraine.
Before the current hostilities, Ukraine relied on the Kremenchug refinery in the Poltava Region, which processed imports from Azerbaijan, to cover about 30% of their domestic needs. However, the refinery was severely damaged by Russian missile strikes in April 2022 and has only managed to restore limited capacity since then.
Despite depending entirely on outside imports, Ukraine does not experience fuel shortages. Even with the increased consumption by NATO-supplied tanks and armored vehicles, there seems to be enough diesel for the generators that the West sent last winter. These generators were provided to compensate for power disruptions caused by Russian strikes on the electricity grid.
Fuel deliveries to Ukraine are primarily made by rail via Poland, according to Michal Paszkowski, an analyst at the Institute of Central Europe (IES) in Lublin. Fuel comes from Slovakia and Hungary through pipelines, while diesel from Romania is first shipped and then transported by rail.
Last December, the US and its G7 allies established a price cap on Russian oil, setting a limit of $60 per barrel. Shipping and insurance companies were prohibited from handling the cargo unless it was sold at or below the price cap. Similar restrictions were introduced in February for Russian petroleum products.
In response, Moscow has outlawed the sale of oil and refined products to anyone who complies with the price cap and has stopped using US dollars in oil sales. Despite pleas from Washington, OPEC+ countries have refused to increase production to compensate.
Overall, Ukraine’s reliance on Russian oil refined in Hungary and Türkiye has allowed them to power their military equipment and avoid fuel shortages. The special waiver on importing crude oil from Russia has given Hungary’s MOL a competitive advantage in offering lower prices on refined petroleum products to Ukraine. However, the price cap on Russian oil imposed by the US and its allies has created tensions in the global oil market.
Source link
