Sanctions Cannot Bring Russia to Its Knees, Says Oil Company CEO

MTI-Hungary Today 2023.07.31.

It has been proved that sanctions cannot bring Russia to its knees, the CEO of Hungarian oil and gas company MOL Group, underlined. Speaking at the MCC Feszt panel discussion organized by the Mathias Corvinus Collegium, Zsolt Hernádi said that everyone thought that the Russian economy would shut down because of the sanctions, but the Russians have redirected the entire supply route. Today, 80 percent of Russian oil exports have shifted to India and China.

On the energy situation in Europe, Zsolt Hernádi stressed that the center of gravity has shifted, but the risk of the security of supply remains more or less the same. He pointed out that

a chaos around the security of supply” has not emerged, because on the one hand there has been a warm winter across Europe and on the other hand gas consumption has fallen “staggeringly”, by 22% in Europe, because of prices.

Regarding utility cost reduction, the CEO said it was important that the beneficiaries of the cuts should be those who really need them, and that some of the population really needed support. “There is a justification for the population to receive support, but it cannot be for everyone,” he emphasized.

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Speaking about MOL’s financial situation and economic environment, he said that this year the company’s macroeconomic and oil environment is much worse than last year. He added that last year, the amount of industrial investments in companies had already started to decline markedly, and that the Hungarian macroeconomy would be missing in three years if MOL reduced its investments.

On the windfall tax, he said, “it is like a drug: you can get used to it.”

He added that “you can use it once in a while, but then you have to phase it out quickly, because you will lose investment.”

Fact

The Hungarian government has introduced windfall taxes for certain groups of companies in 2022, due to extra profits. Extra profit is also referred to as the supernormal rate of return, meaning that the rate of return is above the average profit level for sectors in recent years. Until now, the extra profit tax rate has been 2.8 percent in Hungary and will remain so in 2023. However, from 2024, this figure will be significantly reduced to just one percent. The change will be particularly welcomed by MOL, since the company has been paying very high taxes.

He also pointed out that at MOL they believe what is good for the company is good for the country, and vice versa: what is bad for the country is bad for MOL. He emphasized that a Hungarian-based company can only be strong if the Hungarian government is strong.

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Via MTI, Featured photo via Facebook/MCC Feszt