(Bloomberg) -- Hungary and Russia are working to resume oil deliveries by Lukoil PJSC after tougher sanctions by Ukraine kicked in against the company.
Ukraine last month hardened sanctions against Lukoil that effectively prohibit the firm from using Ukraine as a transit country for its product. Mol Nyrt., the Hungarian energy company, and the Russian oil firm are working on a solution, Foreign Minister Peter Szijjarto said late Tuesday following a meeting with Russian Foreign Minister Sergei Lavrov on the sidelines of a UN meeting in New York.
“There’s now a legal situation in Ukraine based on which Lukoil is not currently delivering to Hungary,” Szijjarto said, without going into detail about what led to a stoppage. “Now we’re working on a legal solution.”
Hungary’s foreign ministry, Mol, Lukoil and Ukraine’s state-run energy company Naftogaz JSC didn’t reply to Bloomberg requests for comment. Russia’s Energy Ministry declined to comment.
Lukoil is one of several Russian firms supplying crude to Hungary via the southern leg of the Druzhba pipeline in Ukraine, according to industry data. Mol currently relies on Russian supplies for two-thirds of its crude oil, but estimates that it will be able to fully substitute them from 2025, Fitch Ratings said earlier this year.
Hungary has intensified energy ties with Russia even after Moscow’s invasion of Ukraine, signing several deals to boost natural gas deliveries after Prime Minister Viktor Orban secured an exemption from European Union energy sanctions.
The government in Budapest has clawed back almost the entire resulting windfall for Mol with a special tax aimed at plugging its budget shortfall.
Szijjarto’s meeting with Lavrov followed Orban’s visit to Moscow earlier this month, where the Hungarian leader sought to engage Russian President Vladimir Putin on how to end the war in Ukraine.
EU partners rebuked Orban for using Hungary’s rotating presidency of the bloc for diplomatic freelancing that didn’t have the backing of the other 26 member states.
--With assistance from Kateryna Chursina and Marton Kasnyik.
(Updates with Ukrainian sanctions on Lukoil in first and second paragraphs.)
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