A blow to Moscow's influence in Central Europe? US sanctions on Russian oil sector

The sanctions imposed by the US on the 2 largest Russian oil companies on 22 October have crucial consequences for those countries of Central Europe which are inactive energetically linked to Russia. Although the EU has importantly reduced imports of its oil since 2022, Slovakia and Hungary – thanks to the exclusions from EU restrictions to give them more time to diversify – proceed to get the vast majority of natural material from Russia. The country's Łukoil has crucial assets in the region, including refineries in Bulgaria and Romania.

American sanctions, together with the EU's forthcoming government for further departure from energy cooperation with Russia, make an impulse to take long-term steps to increase non-Russian oil supply and ownership changes. They can translate into a marginalisation of energy – and so political – of Moscow in Central Europe, although individual states' determination to be active in this area remains uneven. In particular, Viktor Orbán's government is trying to retreat from Russian supplies at the time of his resignation and will only retreat from them if he has no another choice. The United States' determination to implement sanctions will so be a key factor^[1]. Washington, among others, has already ensured the exclusion of Bulgaria (until April 2026) and Hungary (although it is not known in what dimension).

The future of Russian oil assets in Bulgaria and Romania

In the region Russian capital has the strongest position on the oil processing marketplace in Bulgaria.Its main asset in that country is the Burgas refinery – the largest plant of its kind in the Balkans (the processing capacity is around 7 million tonnes of oil per year) and the only 1 in the country liable for the production of around 80% of the fuels consumed there. The facility is managed by Łukoil Neftochim Burgas, whose shareholders are the subsidiaries of Łukoil – registered in Switzerland Litasco SA (89.97%) and Nieftianaja company Łukoil (9.88%). Łukoil Neftochim Burgas leads Bulgarian companies in terms of revenue. The tycoon besides controls more than 220 gas stations and 9 oil warehouses on the marketplace there.

Traditionally, the strong position of Russian energy operators in Bulgaria has been importantly reduced after a full-scale invasion of Ukraine. Since Moscow stopped supplying gas in 2022, Sofia has been acquiring natural material under long-term contracts from another sources (mainly Azerbaijan, Greece and Turkey). Efforts were besides made to reduce the monopoly of Łukoil. The operator of the refinery has withdrawn the concession to usage the offshore oil terminal Rosenec^[2] (it may proceed to administer for the price of the charges to the State) and has been charged 60 % profit tax.

Under force from the authorities and EU sanctions (a derogation for Bulgaria expired in 2024) the plant besides discontinued the Russian imports of oil, but it is possible that it reaches the country by means of "shadow float" units^[3]and indirectly besides Kazakhstan. Restrictions against the company provoked opposition to part of the political class oriented to maintaining energy cooperation with Moscow, including president Rumen Radev. In 2024, Łukoil Neftochim Burgas recorded a failure of EUR 107 million for the first time in 3 years.

In 2023, information began to appear about, to date, unsuccessful attempts by Łukoil to sale assets in Bulgaria under force from Sofia and the EU. The Hungarian MOL, Kazakh KazMunayGas, and most late Azerbaijani-Turkish SOCAR and Cengiz Holding, were to be curious in acquiring the property. In the face of US sanctions, the authorities have set up a state trusteeship of the refinery to take operational control of it and (after fresh legislative changes) will be able to negociate its sale. Washington responded positively to Sofia's actions, granting 4 Bulgarian subsidiaries of Łukoil an exemption from sanctions until 29 April 2026.

W Romania Łukoil does not play an crucial function as in Bulgaria, although its position in the oil marketplace there is crucial – the assets of the company consist of: a refinery in Ploeszti (ca. 99.8% of the shares through Litasco SA) and a network of 320 petrol stations (the property of Lukoil Romania SRL, owned 100% by Litasco SA). This refinery, 1 of 4 in the country, processes around 2.4 million tonnes of natural material annually, representing about 20% of the marketplace share. Of the another three, Rompetrol (controlled by Kazakh and Romanian capital) is owned by Rompetrol and 1 is Romanian-Austrian OMV Petrom. At the same time, the number of petrol stations owned by Łukoil makes it the vice-leader of the marketplace for the retail of fuels (more – about 500 – has only OMV Petrom).

After 2022, the Russian giant found himself under force from the authorities in Bucharest to limit its function (or even to remove it from the market). The company began to ignore in public tenders, and the vast majority of institutions that had previously obtained fuel from it (including police or military) decided not to extend contracts. As a result, already at the turn of 2022 and 2023, the holding began to signal its willingness to sale its Romanian assets. The interest in buying them was reported by MOL respective times, but yet the transaction was not finalized (it seems that the government's reluctance to transfer strategical facilities to a company affiliated with the Hungarian government was mainly an obstacle). The manufacture press has besides repeatedly suggested that the possible buyer could be KazMunayGas, Azerbaijani SOCAR or Orlen, but no of these entities confirmed these reports.

The sale of assets by Łukoil is hampered by the fact that they make tiny and unstable profits and that the refinery is obsolete and requires investment. In fresh years, it has frequently recorded crucial losses (in 2022 – EUR 95 million). The gas station network belonging to Lukoil Romania in 2024 recorded a net failure of around €28,5 million.

Last bastions of Russian oil in the EU: Slovakia and Hungary

Hungary and Slovakia are the last associate States to bring oil from Russia by land (by excluding EU sanctions in force since 2023). Both, despite Brussels' policy of abandoning natural materials from the country and the repeated supply problems of the Druzba pipeline, approached the diversification slow and tried to sustain imports from Russia at all costs. From a full-scale invasion of Ukraine until the end of 2024, it delivered oil worth a full of EUR 12.4 billion to Hungary and Slovakia. Both countries of Central Europe are capital-related in this area, the largest Slovak oil company, Slovnaphth, owned by the Hungarian MOL.

Hungary as the only EU country since the outbreak of the war in Ukraine not only did not limit its dependence on Russia for oil imports, but even increased it – from 61% in 2021 to 86% 3 years later (it besides maintained its dependence on natural gas supplies). MOL – utilizing the temporary exemption from EU restrictions – brings natural material from Russia to the confederate strand of the Druzba pipeline for the needs of 2 of its own refineries in Hungary and Slovakia, with an yearly request of 8.1 million and 6.1 million tonnes respectively. The US sanctioned Russian giant is presently liable for supplying MOL with about 200–300 1000 tonnes of natural material per period (supply to the refinery in Százhalombatt and Bratislava in the 4th fourth of 2025. Argus estimates 177 1000 barrels per day).

By mid-2024, Łukoil was the largest supplier of Russian oil to Hungary and Slovakia – it provided about 40% of this natural material and met about 30% of local demand. His function fell due to Kiev's sanctions of June 2024, prohibiting a company from transit through Ukraine^[4]As a consequence of which the company stopped the transmission of the best man to Hungary and Slovakia. MOL then managed to overcome the problem of continuity of supply of natural material, expanding the participation of another Russian suppliers (Tatniefté, Rosniefté) and buying oil from Łukoil on the Ukrainian-Belarusian border and taking work for transport through Ukraine. Several-day problems with supplying natural material from Russia to Hungary and Slovakia besides arose in August 2025.^[5], erstwhile Ukrainian unmanned aircraft hit Druzba's infrastructure 3 times a month, resulting in a temporary interruption of transmission.

Until now, the government in Budapest has not made clear efforts to get non-Russian oil. This was explained by the deficiency of access to the sea (although Hungary has a connection to the Croatian oil terminal) or the inability to rapidly adapt the MOL refinery to the processing of another natural material species (although many European facilities have done so in a fewer months). In 2022, MOL estimated that the full adaptation of the refinery under the Hungarian capital to the processing of non-Urals oil species would take 2 to 4 years, and according to fresh declarations this process will proceed until the end of 2026. The determination to keep Russian supplies besides involves the price of natural material. On Bringing cheaper fuel from this direction is gaining the company (due to sanctions Russia has to sale it at a discount on Brent oil; in October it amounted to nearly $12 per barrel) – it enjoys higher revenue from and advantage over regional competitors. This besides benefited the budget of the country to which the taxation on the company's surplus profits goes (windfall tax).

One symptom of the evolution of the Hungarian approach is the draft National Energy and Climate Plan published in October, which clearly defines dependence on Russia on oil imports as a hazard to be reduced. The change in narratives stimulates ongoing EU government to lead to a complete departure from oil and gas imports. MOL besides signals that it is essential to defend itself from the anticipation of interruption of the best man supply. At the same time, the authorities proceed to declare their full willingness to cooperate with Moscow and search ways to sustain the transmission of oil from Russia. Prime Minister Orbán openly criticised Donald Trump's administration's imposition of sanctions on Russian oil companies, and on 7 November went to Washington, where he sought exclusion for Hungary. Budapest claims that talks with the president have resulted in unlimited time-exempt derogations, while both from information provided by Western media, based on a origin in the White home and from the statements of US Secretary of State Marc Rubi, it is clear that derogations were granted for a year (the Treasury Department has not yet published any decision on the matter). Assuming the veracity of the second script – more likely in the context of US practice in akin cases – and given the force from the EU, it should be considered that the visit to the United States has not provided a lasting solution and Hungary will gotta take steps to decision distant from Russian natural material.

The only refinery operating on Slovakia – controlled by MOL group company Slovnaphth – only oil from Russia was supplied for years. Following her full-scale invasion of Ukraine, this share fell to about 75% in 2024. The completion of the adaptation work in 2026 should considerably increase the anticipation of processing oil from alternate sources (currently a capital refinery is able to allocate about half its processing capacity to it). Supplies from Russia are mainly made by 2 entities: those covered by the fresh restrictions of Łukoil and inactive not covered by Tatnieftʹ. Last year's transitional problems with the transportation of natural material by the first in connection with Kiev sanctions^[6] they increased Tatniefti's share from 53% in the first half of 2024 to 92% in July of that year (according to reports from the paper "Kommeersant"). The Slovak authorities are trying to postpone the resignation of oil from Russia while preparing for specified a eventuality. Robert Ficy's government made it clear that efforts in the USA for possible derogations (according to the head of the Slovak Ministry of Economy, the exemptions negotiated by Budapest besides concern the MOL group's Bratislava refinery) may affect parallel discussions on the expansion of national atomic power. At the same time, it is seeking a package of guarantees and compensation for the cost of departing from Russian hydrocarbons in the EU (Slovakia is inactive bringing gas from Russia).

Alternative deliveries by Croatia

Slovakia and Hungary have access to an alternate origin of oil supply – it is simply a connection via the Adria pipeline to the Omišalj oil terminal in Croatia. However, this direction has been utilized to a tiny degree so far. MOL concluded respective contracts for the supply of Adria natural material – 2.2 million tonnes in 2023, 2.2 million tonnes in 2024 and 2.1 million tonnes in 2025 – with actual volumes being smaller (in 2023 being below half of the contracted quantity). The Croatian-Hungarian talks on expanding supply were negatively affected by long-term disputes about MOL's activity in Croatia (the main shareholder in INA) and Budapest criticized the Croatian bid to increase transmission to Hungary as ‘unreliable’, pointing out advanced prices and insufficient infrastructure capacity^[7].

Croatian operator JANAF declares that thanks to the usage of DRA polymers that reduce opposition during oil flow, and depending on the number of active pumps on both sides Adria can supply 13–16.4 million tonnes of natural material per year in the Hungarian direction (total processing in MOL refineries is 14.2 million tonnes). On the another hand, Prime Minister Fico has tried to diminish the importance of this way in fresh days, saying that there has not yet been a regular usage of full oil capacity (only test shipments were available) and that it is not known whether it will actually meet the needs of countries at the end of the supply route. Slovakia and Hungary's regular distrust towards the Croatian side is besides confirmed by a public complaint made on 28 October by Slovakia to JANAF concerning the cessation of supplies of 90 000 tonnes of oil for method reasons, which was intended to “threatfully endanger” the diversification processes in Central Europe (the operator rejected the accusations).

Due to the uncertain future of Russian supplies, however, Budapest is starting to show a somewhat stronger tendency to talk to the Croats. JANAF's determination to send larger volumes of oil to Hungary has besides increased. U.S. sanctions on Serbian NIS made JANAF gotta halt supplying natural material to a refinery in Pančev^[8]. The suspension of transit to Serbia is simply a major failure for the Croatian pipeline operator, which benefited about 30-40% of the revenue. expanding supply to Hungary is so an chance to compensate. The government in Zagreb maintains that the Hungarian allegations of insufficient capacity are false and calls for another Adria test to be carried out in the presence of MOL and EU representatives. The current agreement expires on 31 December 2025 and talks are underway about another. Press speculation besides arose that MOL could get a number stake in JANAF.

Perspectives

The departure of individual countries from oil cooperation with Russia will depend primarily on the consequences of the US in enforcing sanctions in this part of Europe. In any situations – vide The deficiency of approval to sale certain assets to Gunvor, Washington, takes decisive action. In others, however, he is ready to make concessions – Budapest has already obtained a promise to be excluded from American restrictions. The success of the Hungarian-Croatian negotiations to increase supply with the Adria pipeline to the Budapest and Bratislava refinery will be an crucial origin in the departure by Hungary and Slovakia from Russian oil.

American sanctions on Łukoil will most likely accelerate the sale of Russian assets in Bulgaria and Romania, although at this phase it is not known how the process will proceed. In addition to Sofia, Bucharest may besides receive a temporary derogation from the restrictions, as was the case with Russian shares in refineries in Germany.^[9].

At the same time, Serbia's example shows that the repeal of restrictions by the United States is not unlimited, and negligence on this issue can have drastic consequences for the market. At the same time, the determination of the Central European countries to retreat from energy cooperation with Moscow will be affected by the success of legislative work in the EU on the full cessation of imports of hydrocarbons from Russia.

Map. Selected pipelines and refineries in Central European countries

Source: own development.