Hungary to Block EU Funds For Member States Until Ukraine Allows Lukoil Transit

Hungary will block European Union refunds for member states that gave munitions to Ukraine until Kyiv allows the transit of oil from Russia’s Lukoil through a pipeline over its territory, the Hungarian foreign minister said on Tuesday (23 July).

Slovakia and Hungary said earlier this month that they had stopped receiving oil from Lukoil through the Druzhba pipeline after Ukraine imposed a ban last month on the transit of resources from Lukoil on its territory.

Also in response to the situation on Tuesday, Hungary’s energy ministry convened a working group concerning the security of supply, which “reviewed the steps taken so far and possible next steps,” a statement by the ministry read.

“As long as this issue is not resolved by Ukraine, everyone should forget about the payment of the 6.5 billion euros of the European Peace Facility (EPF) compensation for arms transfers,” Foreign Minister Péter Szijjártó was quoted as saying by broadcaster ATV.

Ukraine’s foreign ministry did not immediately respond to a request for comment. Kyiv says it has blocked oil from Lukoil but overall flows have not been reduced through the pipeline, which also serves other suppliers.

The Druzhba, or “friendship”, oil pipeline linking Russia to former socialist bloc states in eastern Europe has remained functioning through more than two years of war, even as the EU weaned itself off most other sources of Russian energy supplies. Hungary in particular has remained notably dependent on Russian oil and says it cannot supply its refineries without it.

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This development appears to end hopes that gas transiting via Ukraine could continue to flow after Dec. 31, when a long-term gas transit contract between Moscow and Kyiv ends.

Hungary and Slovakia asked the European Commission on Monday to mediate a consultation procedure with Ukraine. The procedure would allow for the issue to go to court unless the EU executive body acts within three days.

The EPF, created in 2021, operates as a cashback scheme that gives EU members refunds for sending munitions to other countries.

Since Russia’s invasion of Ukraine in 2022, member states that gave weapons to Ukraine can ask for compensation from this fund. But Hungary has been blocking the disbursement of the next tranche of EPF money for more than a year, citing various issues.