US 500% tariff on Russian gas, oil may kill Hungarian MOL’s exceptional profit: brutal price rise on the horizon?

We wrote before about a bipartisan US sanctions package proposal including 500% tariffs on products from countries that import Russian gas, oil and uranium. According to a Hungarian energy expert, the primary targets are India and China, but Hungary can be collateral damage if the package is accepted. Hungarian MOL realised exceptionally high profits thanks to processing cheaper Russian oil and selling products in Western markets, even in the USA. The main question is whether that would mean a drastic price increase in Hungary concerning fuel, energy, etc.

500% tariff does not target Hungary

Szeretlek Magyarország asked Attila Holoda, a well-known Hungarian energy expert, about the possible 500% US tariff. Mr Holoda clarified that the bipartisan proposal signed by 25 Republican and 25 Democrat Senators does not target Hungary but India and China. Furthermore, the main aim of the package is to force Russia to end the war in Ukraine. Therefore, they would make it hard for India and China to sell products in the USA since a 500% tariff would apply to them because both countries have become big buyers of Russian gas, oil and uranium. Holoda said that the two countries entered the place of the EU in that regard after the Russian invasion of Ukraine.

However, the package’s acceptance would harm Hungary’s oil and gas giant MOL significantly. That is because MOL buys only Russian crude oil which they process in Százhalombatta and Bratislava (Pozsony, Slovakia). Meanwhile, MOL sells a large portfolio of products in the Western markets, including the United States.

Hungarian MOL can lose much of its profit

MOL regularly says that the technological switch to process Western crude oil instead of Russian in their refineries would cost approximately EUR 5-600 million. However, that is the amount of money they paid to their shareholders as dividends. If a technological change is inevitable, there will be no dividend, but that money will be invested in that process.

Holoda cleared that the possible 500% tariff would not apply to every Hungarian product. He also added that MOL did not do much to become independent from Russian oil in the last three years. Instead, the company increased the imported quantity even though everybody knew that the scheme would not last forever.

Holoda suggested that there might be multiple (covert) companies between buying cheap Russian oil and selling the higher-added-value products of MOL. Furthermore, even Hungarian politics may have a say in how the oil and gas giant decides on such a sensitive issue.

Natural gas dependence

Concerning natural gas, Hungary’s dependence on Moscow is much lower since we built interconnectors in almost every direction and can buy gas from almost everywhere. The business is in the hands of the state-owned MVM, which is not present in the e.g. American market (unlike MOL), so a 500% tariff would not affect it.

Paks NPP expansion by Americans?

About the American Westinghouse’s taking over the Paks 2 nuclear power plant expansion project from the Russian Rosatom, Holoda said that such a scenario was highly unlikely because the new power plant is designed and developed by the Russians even though there are German and French subcontractors. However, the Americans may sell SMRs, small modular reactors in Hungary, which Holoda finds a good idea.

Finally, Holoda highlighted that a 500% tariff on Russian gas, oil, and uranium would not mean that fuel or energy would become extremely expensive in Hungary overnight.

Read also:

• MOL announces oil discovery in Hungary – read more HERE
• Druzhba pipeline oil deliveries suspended due to drone strike – details in THIS article