Bloomberg: MOL Could Gain Advantage With Cheaper Russian Oil

According to Bloomberg, EU sanctions on Russian energy resources are championed by Poland not only due to political and security considerations, but also from a business competitiveness perspective. If Hungary or other states receive an exemption from the ban, they could gain a significant advantage in the production and sale of hydrocarbon products.

According to the article, Poland is lobbying Brussels for both a ban on imports from the northern pipeline, as well as punitive tariffs on Russian produced oil arriving from the south via Turkey. The Polish government knows that the key player in achieving their goal, that is, closing the taps on the northern leg of Druzhba pipeline, is Germany, therefore Warsaw’s climate ministry is negotiating the deal with Berlin.

The northern pipeline had a capacity of 720,000 barrels a day of crude in the past, most of which went to Poland and Germany. However, if Hungary can continue to buy its oil from Russia because of its lack of viable alternatives from other sources, Poland’s top refiner, PKN Orlen, could loose its competitiveness against its Hungarian rival MOL. The Polish climate ministry is therefore lobbying in Brussels and Berlin for what they call a “level playing field mechanism” on Russian oil.

This would mean that even those getting their oil through Norther or Southern routes from Russia cheaper with the blessing of the EU, could see their purchase price topped up by special EU tariffs to the level of Saudi or Norwegian oil prices that Poland is currently transitioning to.

This would inevitably mean not only smaller profits for the Hungarian oil company MOL, but also much higher prices for industry and private consumers.

As Bloomberg had pointed out, although sanctions on pipeline based oil would require EU unanimity and would almost certainly be opposed by Hungary, a decision on tariffs would only require a qualified majority support from national governments.

Featured Photo: Facebook PKN Orlen