Slovakia offers solution to restore Russian oil flows through Ukraine

By Gergely Szakacs, Boldizsar Gyori and Jason Hovet

(Reuters) -Slovakia said on Friday it had offered a technical solution to Ukraine to restore stopped Russian oil supplies to Slovak and Hungarian refineries, after warnings that a partial halt could lead to fuel shortages as early as September.

Eastern European Union members Slovakia and Hungary have been hit by a stop in flows from Russian group Lukoil via Ukraine after Kyiv imposed sanctions on the company, pressuring Hungarian and Slovak refineries that are owned by Hungary's oil and gas group MOL.

The dispute has shown how some EU countries still depend on Russian energy more than two years after a decision in the bloc to stop oil imports following Moscow's invasion of Ukraine.

Governments in Bratislava and Budapest, which oppose sanctions against Moscow and sending military aid to Kyiv, have blasted Ukraine for the halt to Lukoil supplies and are seeking EU mediation in the dispute.

Gergely Gulyas, chief of staff for Hungarian Prime Minister Viktor Orban, said on Friday Ukraine's decision was blackmail for Hungary's and Slovakia's positions on Russia's war in Ukraine.

Slovakia's government office said Prime Minister Robert Fico had spoken to his Ukrainian counterpart Denys Shmyhal on Friday.

"(Fico) proposed to Ukrainian partners a technical solution in which several states including Slovakia would have to participate," the office said, without giving more details.

The office said alternative supplies are more expensive and may not be technologically suitable for Slovakia's Slovnaft refinery.

Intensive negotiations would happen at the highest levels in the coming hours and days, it added.

Oil deliveries from other Russian suppliers have not been interrupted. In the Lukoil dispute, the two countries want the European Commission to use an association agreement with Ukraine, based on which they said Kyiv could not block oil transit.

Slovakia, which says it is hostage to Ukraine and the EU in the dispute, called on the Commission on Thursday not to delay.

Hungarian officials also urged action on Friday.

"If the situation is not resolved, there will be a fuel shortage ... a solution must be found by September," Gulyas told a news conference. "Ukraine is blackmailing the two countries that are standing for peace and ceasefire."

Ukrainian presidential aide Mykhailo Podolyak rejected Budapest's accusations, saying that Ukraine's decision to suspend Russian oil transit to Hungary and Slovakia had nothing to do with blackmail.

Gulyas said Budapest was also looking for solutions.

"One is that the Ukrainians admit that they cannot do this to two EU countries," he said. "Another is that the European Commission helps us, and the third is that we find a legal loophole that allows the oil to be transferred by someone not affected by the sanctions."

Tamas Pletser, an oil and gas analyst at Erste Group Bank in Budapest, said big fuel shortages were not likely after summer but said for MOL, Lukoil supplies were "not irreplaceable but still painful to lose."

The EU imposed sanctions on Russian oil in 2022 although Slovakia, Hungary and the Czech Republic gained exemptions due to their reliance on it. Czech refineries, owned by Poland's Orlen, do not have Lukoil as a supplier, so have not been directly impacted by the dispute.

(Reporting by Gergely Szakacs and Boldizsar Gyori in Budapest, Jason Hovet in Prague, Pavel Polityuk in Kyiv, Writing by Alan Charlish and Jason Hovet, Editing by Angus MacSwan and David Evans)