Hungary’s Response to US Sanctions on Russia’s Oil Sector

BUDAPEST (Reuters) – Hungary plans to hold talks with regional allies to counter the impact of higher oil prices resulting from a new round of US sanctions on Russia’s oil and gas sector, Hungarian Foreign Minister Peter Szijjarto said on Sunday.

U.S. President Joe Biden’s administration imposed its broadest package of sanctions yet targeting Russia’s oil and gas revenues on Friday to give Kyiv and Donald Trump’s incoming team leverage to reach a peace deal in Ukraine.

Oil prices hit a three-month high after the sanctions news broke.

The U.S. Treasury imposed sanctions on Russian companies Gazprom Neft and Surgutneftegas, which explore, produce and sell oil, along with 183 vessels that have shipped Russian oil.

Szijjarto commented, “This package of sanctions again raises severe challenges for central Europe,” during a Facebook video. He noted that lower crude oil supplies would boost demand for refined fuels such as petrol and diesel, posing the risk of “very serious” price increases in the region.

Hungary imports most of its crude oil via the Druzhba pipeline, transporting Russian crude through Belarus and Ukraine to Hungary and Slovakia. Hungarian energy group MOL did not immediately respond to emailed inquiries.

Szijjarto mentioned that Hungary would start discussions with regional allies to mitigate the impact on prices and the broader economy, but did not specify whom they might engage.

Higher energy costs and declines in the forint, amid the threat of U.S. tariffs on Europe following Trump’s re-election, have lifted Hungary’s industrial producer price index to its highest in 19 months this November.

The forint is trading near two-year lows against the euro, which raises the risk of increased inflation after sharp declines from the European Union’s highest levels of over 25% in the first quarter of 2023.

Economists polled by Reuters expect December inflation to rise to 4.4%, which is outside the National Bank of Hungary’s target band, after the bank was forced to abandon its rate easing cycle last year due to currency declines and rising prices.