Budapest says it will not approve any EU support for Ukraine that requires unanimity, including sanctions against Russia, until Kyiv removes a Hungarian bank from its list of "international war sponsors".
Hungary confirmed on Wednesday that it is blocking the disbursement of €500 million to reimburse member states that provide Ukraine with weapons because the war-torn country put a Hungarian bank on its list of "international sponsors of war".
Ukrainian authorities put the OTP Bank on its list of "international sponsors of war" on 5 May, arguing the financial institution has continued to operate in Russia despite sanctions and because of its "de-facto recognition of the so-called 'people's republics' of Donetsk and Luhansk".
Péter Szijjártó, Hungary's Foreign Minister, said on Wednesday from Vienna following a meeting with his Austrian counterpart that the move is "scandalous and unacceptable" and the latest example of the Ukrainian government's "increasingly hostile" stance toward Hungary.
He once more cited Ukraine's threat to close Hungarian-minority schools in the Zakarpattia Oblast and an alleged threat by President Volodymyr Zelenskyy to bomb the Druzhba pipeline that links Russia to Hungary via Ukraine as other examples.
"Hungary cannot agree to decisions that would require the European Union and its member states to make further economic and financial sacrifices" as long as the bank is listed as such by Ukrainian authorities, he added. He also reiterated that Budapest will veto the EU's 11th package of sanctions against Russia currently being negotiated by ambassadors in Brussels over the issue.
EU foreign and defence ministers were expected to approve the disbursement of the next tranche of the European Peace Facility (EPF), worth €500 million, when they convene in Brussels for meetings on Monday and Tuesday.
The EPF, set up in 2021, is an off-budget fund through which the EU provides its partners' armed forces with equipment and infrastructure in a bid to prevent conflicts, build peace and strengthen international security. It has also been used to partly reimburse member states for the weapons they provide Ukraine.
Seven tranches have so far been approved for a total amount of roughly €3.6 billion.
A senior EU official said the bloc will be dealing with this latest Hungarian veto "as we always deal with any question, which is through dialogue and trying to listen to different parties and trying to talk to our member states and of course trying to talk to Ukraine, which is our key partner, a key friend of the European Union."
The source added that OTP Bank is not the only European company listed by Ukraine as a sponsor of the war but that Hungary is the only member state so far to have complained.
A senior diplomat from an EU member state described Hungary's move as disingenuous, and its timing as unfortunate as Kyiv prepares to launch its much-anticipated counteroffensive.
Hungary, they added, should be trying to resolve the issue bilaterally with Kyiv instead of taking this up at the EU level and holding hostage some of its decision-making ability.
It is not the first time Hungary has held up negotiations on sanctions against Russia or the disbursement of an EPF tranche. It demanded for instance to remove certain names from the EU sanctions list, including Patriarch Kirill, a close ally of President Vladimir Putin, and secured an exception to the oil embargo o continue to receive Russian fossil fuel via pipeline.
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