IN FOCUS: Ukraine & Moldova Brief

Review of July 2024

Petra Bošková, Chiara Mihalčatinová, Lýdia Chobotová

UKRAINE

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Hungary´s and Slovakia´s tensions with Ukraine grew after Lukoil was put on the sanctions list

In June, Ukraine decided to put Russia´s Lukoil oil company on a sanctions list, thus banning the transit of pipeline oil by this company through Ukraine. Both Hungary and Slovakia claim oil shortages, leading to growing tensions between the two countries and Ukraine.

Ukraine´s ban was aimed at cutting off the financial flow from Lukoil´s oil sales used for Russia´s military. Lukoil is Russia’s second-largest oil producer. Other Russian refineries were not sanctioned, they are still able to supply other countries in Central Europe. In July, the supply of pipeline oil by Lukoil through the Druzhba Pipeline stopped to both Hungary and Slovakia, who are still heavily reliant on Russian oil in their refineries. Experts claim around 900,000 metric tons per month of Russian oil have been exported and equally split between Slovakia and Hungary through Druzhba.

Hungary claims Ukraine´s decision will threaten Hungarian long-term energy security as 70 per cent of their oil supply comes from Russia, whereas Lukoil supplies half of that volume. Hungarian Foreign Minister Pétér Szijjártó expressed that “Ukrainian authorities showed a willingness to find a solution to the situation, but these attempts have faded since,” and now Hungary has turned to Moscow to find a solution, as confirmed by Szijjártó. The solution will most likely be that Russian oil will be supplied by oil tankers and then via oil terminal on the Croatian coast and delivered further through the Adria Pipeline.

According to the Government of Slovakia, it will now receive 40 per cent less oil needed for its refinery Slovnaft than needed. Slovak PM Fico said, “The inclusion of Lukoil on the sanctions list is just another example of senseless sanctions that do not hurt the Russian Federation but mainly some (European Union) member states, which is unacceptable,” and added that “Slovakia does not intend to be a hostage of Ukrainian-Russian relations”.

The already cold relations of Orbán´s and Fico´s governments with Ukraine are thus now even colder due to Ukraine´s decision to ban the transit of Lukoil oil.

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Ukraine on the brink of defaulting on its debts

On July 18, Ukraine’s Parliament passed a law allowing the Government to suspend foreign debt payments just as it resumed formal talks with bondholders to restructure some 20 billion dollars in debt.

Before the war, Ukraine maintained a relatively healthy debt position, with government debt at 48.9 % of GDP at the end of 2021. However, the war drastically changed this. The Ukrainian economy’s decline, coupled with a surge in public spending from 40 % to 75 % of GDP between 2021 and 2023, caused a significant increase in both domestic and foreign debt, reaching 84.4 % of GDP by the end of 2023.

In 2022, Ukraine secured an agreement with creditors to defer Eurobond payments for two years. Now, in 2024, Ukraine must pay three years’ worth of interest on these bonds, amounting to nearly 12 billion dollars and pushing public debt service costs to 6.3 % of GDP. The public debt is forecasted to reach 97.6 % of GDP by the end of the year. Ukraine also faces substantial payments on its 2015 GDP-linked securities, which require payments if economic growth exceeds 3 % of GDP.

To alleviate this burden, Ukraine’s Parliament recently passed a law allowing the Government to suspend foreign debt payments, providing crucial flexibility in ongoing restructuring talks. Successful negotiations could save over 10 billion dollars in debt servicing costs by 2027. However, if an agreement is not reached, a payment moratorium might be invoked, highlighting the urgent need for a resolution to avoid default.

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EU Moves Meeting from Hungary Due to Ukraine Stance

The European Union has relocated its upcoming foreign and defence ministers meeting from Hungary to Brussels, following Hungary’s contentious position on the Ukraine war. EU foreign policy chief Josep Borrell announced the decision, criticizing Hungary’s recent actions.

This move comes just weeks after Hungary assumed the rotating Presidency of the Council of the European Union. Traditionally, the presiding country hosts such meetings. However, Prime Minister Viktor Orban’s meeting with Russian President Vladimir Putin in Moscow earlier this month triggered a significant backlash.

Borrell emphasized the need for consequences, stating, “We have to send a signal, even if it is symbolic.” In response, Hungary dismissed the decision as “completely childish.”

Under each new council presidency, EU foreign and defence ministers gather every six months to discuss major global issues. The next meetings, initially scheduled for August 28-30 in Budapest, will now take place in Brussels. Borrell cited Orban’s post-meeting comments with Putin, where he accused the EU of having a “pro-war policy,” as a key factor in the decision.

Borrell remarked, “If you want to talk about the war party, talk about Putin,” adding that all member states, except one, were critical of Hungary’s behaviour. Luxembourg’s Foreign Minister Xavier Bettel expressed his willingness to go to Budapest, arguing that boycotting would be “nonsense” and that dialogue was essential.

Polish Foreign Minister Radoslaw Sikorski proposed holding the August meeting in western Ukraine, but this idea was vetoed by Hungary.

Hungarian Foreign Minister Péter Szijjártó responded on Facebook, likening the decision to a kindergarten dispute. Orban’s meeting with Putin was part of a “peace mission” that also included visits to Ukraine, China, and the US to meet Donald Trump. This trip faced condemnation from EU leaders, with European Commission President Ursula von der Leyen calling it an “appeasement mission.” Finnish Prime Minister Petteri Orpo and Swedish Prime Minister Ulf Kristersson also criticized the visit, stating it sent the wrong message and insulted Ukraine’s fight for freedom.

This incident is just one of many where Hungary has clashed with the EU over its response to the Ukraine conflict. Since Russia’s full-scale invasion, Hungary has often been at odds with its EU partners, including using its veto power to delay a significant financial aid package for Ukraine last year.

Sources:
  •   Cristy Cooney, BBC News, „Hungary stripped of EU meeting over Ukraine stance“, https://www.bbc.com/news/articles/cgr542l753po

MOLDOVA

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EU to start membership negotiations with Moldova

The European Union started membership negotiations with Moldova at its first intergovernmental conference which took place on June 25 in Luxembourg.

Moldova submitted its application to join the 27-nation EU in the wake of Russia’s 2022 invasion of Ukraine. Moldovan authorities have since then accused Russia of waging a “hybrid war” against them, citing examples of alleged election meddling and disinformation campaigns aimed at destabilizing the Government and undermining its EU aspirations. For instance, in 2023, Moldova’s Government claimed that Russian operatives were behind a series of protests against rising energy prices. These protests were portrayed as civic movements but were allegedly funded and organized by pro-Russian elements to create unrest and weaken the pro-European Government.

During the intergovernmental conference, Moldovan president Maia Sandu emphasized the importance of EU membership for her nation, stating, “Becoming an EU member is our path to peace, prosperity, and a better life for all citizens.” However, the start of negotiation talks is no guarantee of EU membership, as was shown in the case of Turkey and several Western Balkan states. It is rather a mere beginning of the long process of screening how far laws in the countries already comply with EU standards and how much more work lies ahead. The EU then has to begin laying out conditions for negotiations on 35 subjects – from taxation to environmental policy. Given that Hungary holds the presidency over the Council of the EU, it appears unlikely that there will be progress towards the next step in the coming six months.

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Moldova´s Pro-Russian Socialist Party Back Controversial Ex-Prosecutor and Call for “United Opposition” Ahead Presidential Elections

Ahead of the October presidential elections, where current pro-EU President Maia Sandu is seeking re-election, the opposition Pro-Russian Socialist Party decided to support former prosecutor general Alexandr Stoianoglo, accused of corruption. The party calls for a “united opposition” behind Stoianoglo, which they believe can beat Sandu in the elections.

Alexandr Stoianoglo was appointed Moldova´s prosecutor general in 2019 by Dodon, the Socialist party leader, however, he was suspended by Sandu two years later on grounds of alleged violations of the criminal code for exceeding his authority and a failure to tackle entrenched corruption. Stoianoglo denies the allegations and was cleared in court in a preliminary ruling this year on the accusations of exceeding his authority but remains under investigation in two other cases.

Stoianoglo, in a press conference where he announced his candidacy, expressed his intention to run “to end injustices under Sandu’s administration”. Both the Socialists and their presidential candidate also said they do not oppose European integration but accuse President Sandu of using the referendum campaign as a vehicle to win the election.

Dodon, the Socialist party leader, also expressed his wishes for a united opposition to defeat Sandu, hinting at Ilan Shor and his opposition party to also support Stoianoglo.

Sources:
  • Euractiv, “Moldova’s pro-Russia Socialists field ‘unified opposition’ candidate in presidential poll”, https://www.euractiv.com/section/enlargement/news/moldovas-pro-russia-socialists-field-unified-opposition-candidate-in-presidential-poll/
  • Lina Grau, Bloomberg, “Moldova’s Pro-Russia Socialists Back Ex-Prosecutor for President”, https://www.bloomberg.com/news/articles/2024-07-08/moldova-s-pro-russia-socialists-back-ex-prosecutor-for-president
Moldova Refuses to Extradite Ukrainians Fleeing Conscription

Moldova is resisting Ukraine’s requests to extradite men of fighting age fleeing mandatory military conscription. Chișinău argues that it must adhere to European norms concerning the rights of refugees.

According to Moldova’s General Inspectorate for Migration, from March 1, 2023, to July 22, 2024, nearly 67,300 Ukrainians requested temporary protection in Moldova, and over 2,000 applied for asylum. The Ministry of Internal Affairs of Moldova emphasized that temporary protection provides refugees with immediate legal status.

Ukraine’s ambassador in Chișinău, Marko Shevchenko, described the situation of Ukrainians denied asylum as a significant problem. He suggested addressing it gradually, focusing on what to do with those who were refused asylum.

In recent months, the number of illegal border crossings from Ukraine into Moldova has increased, with some Ukrainians dying during the journey. Recently, the body of a 27-year-old Ukrainian was found near the border, showing no signs of violent death.

Moldovan authorities do not have precise data on how many Ukrainians are fleeing conscription, as the reasons stated in asylum applications are confidential.

On April 11, the Ukrainian parliament passed a law extending mobilization and toughening penalties for those avoiding military service. The law caused controversy by removing a clause allowing the release of soldiers after 36 months of service.

Since the beginning of the war in Ukraine, nearly 2,600 Ukrainians have applied for Moldovan citizenship, and almost 1,700 have acquired it.

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