Hungary to Veto €90 Billion EU Loan to Ukraine amid Druzhba Pipeline Dispute

Oil Transit Dispute and EU Financing Standoff

BUDAPEST/WARSAW, Feb 20 (Reuters) - Hungary will block a 90-billion-euro ($106 billion) EU loan for Ukraine until it resumes oil shipments to the country via the Druzhba pipeline, its foreign minister said on Friday after Budapest said it would tap strategic reserves to tackle a shortage.

Pipeline Halt and Political Accusations

Hungary and Slovakia, which have the only remaining refineries in the European Union using Russian oil through Druzhba, have been trying to secure supply since flows were halted on January 27 following what Ukraine said was a Russian drone attack that damaged pipeline infrastructure.

Both countries have blamed Ukraine for the delay in restarting the flows for political reasons. Reuters requested comments from the Ukrainian foreign ministry and the state oil and gas company on Thursday.

"By blocking oil transit to Hungary through the Druzhba pipeline, Ukraine violates the EU-Ukraine Association Agreement, breaching its commitments to the European Union. We will not give in to this blackmail," Foreign Minister Peter Szijjarto said on X.

Reserve Release and Alternate Routes

DIPPING INTO OIL RESERVES

The Hungarian government said in a decree late on Thursday that it would release about 1.8 million barrels of crude oil from its strategic reserves to make up for shortfalls.

JANAF Pipeline Flows and Capacity

Croatia's JANAF pipeline operator, however, said on Friday there was no need for Budapest to do so after Hungary's oil company MOL said JANAF must allow transit of the Russian seaborne oil during the Druzhba outage.

"At this moment, a significant quantity of non-Russian crude oil is being transported via JANAF's pipeline for MOL Group, while three additional tankers carrying non-Russian oil, also for MOL Group, are on their way to the Omisalj Terminal," JANAF said in a statement.

"There was no need to tap into (their) reserves since oil transport via the JANAF pipeline towards MOL's refineries is being carried out continuously and without delays."

Scramble for Crude Supplies

SCRAMBLE FOR CRUDE SUPPLIES

MOL Priority Access Window

MOL is entitled to priority access to released crude oil reserves, and it will have access to the freed reserves until April 15 and has to return them by August 24, the Hungarian government decree said.

Reserve Coverage Days

At the end of January, Hungary had enough crude oil and petroleum product reserves to cover 96 days, according to data on the Hungarian Hydrocarbon Stockpiling Association's website.

Tanker Arrivals and Refinery Timing

As the two countries scramble to ensure supplies, MOL ordered tankers delivering Saudi, Norwegian, Kazakh, Libyan and Russian oil to supply its Hungarian and Slovak refineries and halted diesel deliveries to Ukraine earlier this week.

MOL said that first shipments were expected to arrive at the port of Omisalj in Croatia in early March. After that, it will take a further 5-12 days for the crude oil to reach its refineries.

Slovakia’s Emergency Measures

The Slovak government has also declared an oil emergency situation and has pledged to release 1.825 million barrels of oil following a request from Slovakia's Slovnaft refinery, which is owned by MOL.

($1 = 0.8484 euros)

(Reporting by Anita Komuves, Anna Wlodarczak-Semczuk and Gergely Szakacs; Editing by Anil D'Silva and Emelia Sithole-Matarise)