Hungary is set to make about £500m in yearly profits through a tax on Russian oil “at the expense of everyone else in the EU”, a research agency has suggested.
The Hungarian government, which gained an opt-out from an EU embargo on Russian oil, recently introduced a windfall tax of 25% on the difference between Russian crude prices and world prices. A note by the research service Eurointelligence estimated this could net Budapest roughly $600m (£495m, €575m) in “hidden profit” a year, observing it was “not a bad money spinner for an economy that size”.
Hungary was one of three landlocked countries, including Slovakia and the Czech Republic, to be granted an indefinite exemption from the EU ban on Russian oil imports. After a month of wrangling over its latest Russia sanctions, EU leaders agreed an oil embargo that will cover 90% of Russian imports by the end of the year. They promised to reach a deal to complete the embargo “as soon as possible” without setting any dates.
The Eurointelligence analysis suggests Hungary’s prime minister, Viktor Orbán, has little incentive to join the EU ban on Russian oil imports. “For Orbán, keeping pipeline imports but embargoing everything else is the best of both worlds,” the agency wrote. “His government can benefit from both higher oil prices and continued shipments of Russian crude by pocketing some of the proceeds, at the expense of everyone else in the EU. What reason could he have to back down on this?”
Jack Smith, a Eurointelligence analyst, said that based on an “admittedly high-end assumption” about the global benchmark price of Brent crude, Hungary could make $600m a year, which he said would go some of the way to covering its growing budget deficit.
Hungary introduced windfall taxes on energy companies and airlines this month, after government finances went into the red following a pre-election spending spree. The government reported a $7.2bn budget deficit for January-April, according to Reuters, after tax cuts and pension increases before elections in which Orbán was returned to office for a fourth straight term.
EU officials have expressed optimism that an agreement on completing the EU oil embargo can be reached soon. Orbán, however, has struck a different note, telling Hungarian radio last week that ending the exemption “won’t happen quickly, and it will cost a huge amount of money”.
In a typically inflammatory statement, Orbán blamed the EU and the international philanthropist George Soros for “prolonging” Russia’s war with Ukraine. The Hungarian-born billionaire Soros is the longstanding target of a state-sponsored campaign riddled with antisemitic conspiracy theories. Orbán’s latest remarks were in line with this evidence-free rhetoric: “Now it’s completely obvious that there are business circles that have an interest in war, and they’re symbolised by George Soros.”
The Hungarian government’s international communications office did not immediately respond to a question about whether the government agreed with the $600m estimated revenues. It has said petroleum product producers would pay a 25% windfall tax for the tax years 2022 and 2023. “This windfall tax is based on the product of a specified world market price difference for crude oil originating from the Russian Federation, multiplied by the quantity per barrel of crude oil originating from the Russian Federation purchased during the month in question.”