Hungary and Slovakia in Standoff With Ukraine Over Broken Russian Oil Pipe (February ’26 in CEE)
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Week 9
Hungary and Slovakia in Standoff With Ukraine Over Broken Russian Oil Pipe
Tensions between Slovakia, Hungary, and Ukraine reached new heights over the past week, as it became clear that Russian oil hasn’t been flowing to the two EU countries through the Druzhba pipeline for weeks.
The pipeline delivers oil from Russia all the way to western Europe via Ukraine.
The flow of fossil fuel, crucial for the MOL company’s refineries in both EU member states, has in fact been halted since 27 January, when, according to Ukrainian officials, the pipeline was struck during a Russian air attack.
The oil crisis appeared to have reached a tipping point last Wednesday (18 February), when the Slovak government declared a state of oil emergency and decided to lend Slovnaft 250,000 tonnes of crude oil from state reserves.
But both Hungarian and Slovak governments refuse to acknowledge the Russian role in the crisis, and instead opt to blame Ukraine for it.
“Our intelligence information says that the damaged section [of the pipeline] the Ukrainian government is referring to has been repaired, and Russian oil can continue to flow to Slovakia and beyond through that section without any problems,” Slovak Prime Minister Robert Fico said at a press conference last Wednesday.
He added that Ukraine is simply blackmailing Slovakia with the oil halt.
“I have seen with my own eyes the impact of attacks, for example, on hydroelectric power plants and also on the electricity transmission network. I definitely do not think the Ukrainians are exaggerating,” said Kristina Mikulova, head of the regional hub for Eastern Europe at the European Investment Bank.
The situation escalated in tit-for-tat fashion to such a degree that the European Commission called an Oil Coordination Group to meet on Wednesday (25 February) to assess the situation in Slovakia and Hungary, and possibly help resolve the conflict.
According to the commission, there is no immediate risk to the EU’s security of supply. Both Hungary and Slovakia hold oil stocks in reserve.
Both countries can access an alternative supply route: the Adria pipeline from Croatia, which has the capacity to cover sufficient volumes to meet Hungarian and Slovak requirements.
The commission also said Croatia had helped secure increased oil flows to Slovakia and Hungary through the Adria pipeline. However, it could not confirm whether Slovakia and Hungary had ordered additional volumes of non-Russian oil.
At the same time, Croatia is assessing whether it can legally accept Russian crude under both EU and US sanctions.
Both Hungary and Slovakia had already asked Croatia to deliver non-Russian oil to them in mid January, while the Balkan country refused to transport Russian oil, arguing it can legally transport just non-Russian crude, which the affected countries deemed too expensive
Although imports of Russian oil and gas have been banned in the EU, Hungary and Slovakia have received an exemption, as their refineries are not yet adapted to process non-Russian crude oil.
While the Czech Republic and Poland cut themselves off from Russian oil after Moscow’s full-scale invasion of Ukraine, Slovakia and Hungary continue to import it. Over the past three years, roughly nine million tonnes of Russian oil have flowed annually to MOL refineries in Hungary and Slovakia.
As a result, the two countries send around €4bn to the Kremlin each year.
Left without a way to procure Russian oil, Robert Fico, together with Viktor Orbán, halted diesel exports to Ukraine last Wednesday, continuing to place the blame on the country defending itself against Russia.
The conflict persisted, and on Monday, Hungary even maintained its veto against a new EU package of sanctions on Russia and a €90bn loan to Ukraine.
“We have not reached an agreement on the 20th sanctions package,” EU foreign policy chief Kaja Kallas told reporters. “This is a setback and a message we didn’t want to send today, but the work continues.”
Slovakia, meanwhile, said it would refuse to provide emergency electricity supplies to Ukraine if requested. The flow of electricity to Ukraine slowed to some of its lowest levels in 2026 on Tuesday, but nevertheless continued, as the volumes of emergency power halted by Fico’s decision are relatively small compared to overall electricity exports to Ukraine.
Although the standoff may play well with some of Fico’s voters at home, it has exerted little pressure on Ukraine. Other partners, including Poland and Romania, stepped in to supply the missing electricity imports.
“Slovakia is not a key source of electricity imports for Ukraine, and I can’t see any serious problem even if the Slovak government tries to stop electricity supply,” said Ukrainian energy expert Oleksandr Kharchenko of the Energy Industry Research Center.
While Slovakia and Hungary kept up their pressure, Ukraine did not back down. Instead, overnight from Sunday to Monday, it said its drones struck the key Kaleykino station in Russia’s Volga region of Tatarstan. The facility is critical for transporting oil via the Druzhba pipeline towards central and eastern Europe.
European Commission president Ursula von der Leyen urged Ukraine to repair the Druzhba pipeline during a visit to Kyiv on Tuesday.
Ukrainian President Volodymyr Zelensky said at a joint press conference with EU representatives that repairing the oil pipeline is dangerous, as Russia is attacking Ukrainian workers.
“So why? Why repair it? So that we lose people? I think that is a very high price,” he said.
Ukraine, Romania, Moldova Form Cyber Alliance
While some of Ukraine’s neighbours are picking diplomatic fights, others are forging new partnerships.
Ukraine, Romania, and Moldova on Friday (20 February) signed a trilateral Memorandum of Understanding establishing a Cyber Alliance for Regional Resilience, Agepres reports. The initiative aims to strengthen resilience against cyber threats and hybrid threats with a cyber component, Romania’s National Cyber Security Directorate said in a statement.
Over the past several months, Romania has faced a series of large-scale ransomware incidents affecting key sectors, including the national water agency and energy providers, according to The Record.
Some of the attacks were claimed by or attributed to Russian-speaking ransomware groups, including Qilin and Gentlemen, which said they targeted Romania’s national oil pipeline operator and the country’s largest coal-based power producer.
Estonia Seeks to Procure Hundreds of Bunkers to Fortify the Baltics
While Slovak and Hungarian governments may struggle to see the true aggressor in Europe, the Baltic states have no confusion about it and are moving to further fortify themselves.
Estonia aims to install up to 600 concrete bunkers along its eastern land border as part of the joint Baltic Defence Line with Latvia and Lithuania, according to ERR.
The Estonian Centre for Defence Investments (ECDI) and Latvia’s Ministry of Defence have launched a public procurement process for the bunkers. The initiative is designed to halt a potential military attack at the eastern borders of Estonia, Latvia and Lithuania.
The defence ministers of the three countries approved the Baltic Defence Line initiative back in January 2024.
The project, however, has been struggling with delays. For example, Estonia’s section of the Baltic Defence Line has been delayed by nearly a year and will now be completed by late 2027.
In the meantime, the Baltic countries have already laid the first line of defence against possible invaders by lining their borders with Russia, Belarus with dragon’s teeth — lines of concrete, pyramidal obstacles.
Week 8
Should Poland Become a Nuclear Power? President Defense Minister Think Yes
Poland should develop its own nuclear defence to face the threats posed by Russia, the Polish president, Karol Nawrocki, floated on Sunday in an interview with private broadcaster Polsat News.
He described himself as a “great supporter of Poland joining the nuclear project” and pursuing the path of developing its own nuclear potential with respect for all international regulations.
Following on the president’s remarks, Defence Minister Władysław Kosiniak-Kamysz then told reporters on Monday that he was “in favour of developing our own research and development capabilities,” within nuclear defence, according to the Polish news agency PAP.
The debate fits into a broader trend of nuclear talks in Europe, triggered by increasingly unstable security guarantees from the United States.
Germany and Sweden, too, are discussing nuclear options.
Warsaw signed a treaty with France already last year that Prime Minister Donald Tusk said would open the way for Poland to potentially share protection under French nuclear missiles.
While some voices argue that the nuclear path is the right one for Poland, experts warn that it would conflict with established international and institutional frameworks.
Poland is a signatory to the Nuclear Non-Proliferation Treaty, under which only five states, the U.S., Russia, France, China, and the U.K., are legally permitted to possess nuclear weapons. For Poland to develop its own arsenal, it would have to either formally withdraw from the treaty or break its rules, both of which would carry severe consequences, Artur Kacprzyk from the Polish Institute of International Affairs said in an interview with the Polish website Defence24.
Support for the non-proliferation framework is a fundamental policy of both NATO and the European Union. Breaking these international norms would place Poland under immense pressure from its allies and further escalate tensions with Russia, which could seek to stop the nuclear program, Kacprzyk added.
Poland Gets a Giant SAFE Budget Approved. Nawrocki May Nerf It
The Council of the European Union has approved the second batch of national SAFE programs for Estonia, Greece, Italy, Latvia, Lithuania, Slovakia, Finland, and Poland on Tuesday.
Belgium, Bulgaria, Cyprus, Denmark, Spain, Croatia, Portugal, and Romania had their programs approved already in the previous Council meeting.
The European Union last year introduced the Security Action for Europe (SAFE) program, designed to provide financial support to member states to accelerate defence readiness by enabling urgent and major investments.
The second largest share of the €150 billion of loans from SAFE is designated for Poland, which is set to receive approximately €43.7 billion under the program. Under SAFE, Poland has applied for funding for 139 projects ranging from air defence and cyber operations to supporting the production of heavy equipment. A key pillar of EU funding will also be the domestic ammunition production.
But it is not all good news. The financial instrument has been mired in domestic political controversy, and the president is weighing a veto against the bill enabling the loans.
President Karol Nawrocki, together with the opposition parties Law and Justice (PiS) and Confederation, argue that the loans under the SAFE program are linked to a loss of sovereignty. They claim the mechanism could become a tool of pressure by the European Commission on Poland.
Nawrocki and the Polish political right have also criticised the SAFE program for primarily benefiting Western European arms makers — Germany and France.
Assurances that more than 80% of the funds included in the program will be transferred to Polish companies have failed to convince the opposition.
The bill supporting the program’s financing was passed by the Sejm last week and will now be debated in the Senate before heading to the president’s desk for signature.
Signals from the President’s Office, though, are preparing Prime Minister Donald Tusk’s government for a potential veto.
Germany, France Reach for Polish Anti-Air Aystems
While Poland is considering whether to build an atomic bomb, its allies are interested in the weapons it has already developed.
Germany expressed a preliminary interest in purchasing the Piorun anti-aircraft weapons on Friday, followed three days later by France, which is also interested in the systems, potentially procuring them under the European SAFE program.
Part of the systems provided to France and Germany will be sent to Ukraine to support its armed forces.
The same launchers were delivered to the Belgian army last December, and current export customers also include Estonia, Latvia, Lithuania, Norway, Sweden, the United States, and Ukraine.
Week 7
Ukraine Seeks Share of Europe’s Arms Rally With New Export Push
Ukraine will set up 10 export hubs across Europe to sell surplus military equipment produced by domestic firms.
The move could allow Ukrainian manufacturers to scale production and capture a share of the sky-high profits enjoyed by European arms makers, potentially creating a new source of revenue for Ukraine’s wartime economy.
According to President Volodymyr Zelensky, the centers will be located in Northern Europe as well as the Baltic states.
Ukraine’s defense sector has also expanded rapidly since the start of the full-scale invasion by Russia. It reached a production value of $10 billion in 2024 and is projected to grow to $15 billion in 2025, according to a report published in July by the Kyiv School of Economics Institute. Military production is now on par with agriculture, one of the country’s traditional economic pillars, accounting for 7% of Ukraine’s GDP.
Around 450 companies are currently producing drones in Ukraine, 40 to 50 of which are considered industry leaders.
Yet compared with their European counterparts, that output is modest. Domestic producers in Ukraine have been constrained by export controls, leaving many manufacturers almost entirely dependent on state orders during wartime.
In addition, the government introduced profit caps of 25% in an effort to procure sufficient quantities of affordable weapons. These constraints have long been accompanied by complaints from the arms industry that it could produce far more equipment than the government can afford to buy.
Allowing Ukrainian firms to expand abroad should help them secure long-term projects, provide greater financial stability, and protect them from downtime and drying cash flow, as they cannot afford to lose their engineering teams. Serial production would lower unit costs, weapons could be updated more quickly, and the country would receive more tax revenue and technology inflows.
Europe, for its part, would gain access to high-tech, battle-tested technologies that Ukraine has developed over four grueling years of war. However, this benefit comes with the risk that Ukrainian innovations and technologies could leak to the enemy.
Die Welt: Russia Would Take Suwałki in Three Days. Or Would It?
The German newspaper Die Welt, together with Helmut Schmidt University, organized a war simulation exercise. The game involved 16 participants, including security experts and former senior German and NATO officials.
The outcome? Russian troops moved unchallenged through NATO territory for three days, capturing the Lithuanian city of Marijampolė in the Suwałki corridor — the strategic stretch on the Polish-Lithuanian border between Kaliningrad and Belarus.
Once the results were published, the academics who organized the game watched its media interpretation spiral out of control. Each headline delivered increasingly extreme takeaways, sometimes straying far from the actual findings. Some claimed the game proved NATO would break apart in such a situation and that Russia would seize control of the entire Suwałki corridor within three days.
“Claims about the takeover of the Suwałki corridor and about NATO collapsing were largely taken out of context. They were bombastic headlines and clickbait designed to attract attention, but the foundation of the game or scenario did not fully correspond to those interpretations,” Matej Kandrík, a security and defence expert at the Adapt Institute who is in touch with the organizers, told me.
As he further explains, the aim of the war simulation was to examine how the German government would react to a possible escalation in the event of a conflict with Russia. The game was not designed to assess the preparedness of the Baltic states and Poland to defend themselves.
“The conclusion was that the Russians would be able to operate in the corridor to a certain extent, because at that specific moment, no one would physically prevent their advance. What was less emphasized, however, was that the simulation did not take into account what Lithuania’s direct response would be. And Lithuanian officials have publicly and in the media indicated that their response would be unequivocal — they would shoot,” Kandrík adds.
CEE Emerges as Europe’s Fastest-Growing Hub for Defence Startup Deals
Central and Eastern Europe may not host the continent’s largest defence transactions, but it is recording the fastest growth in the number of defence and security startup deals in Europe, according to Dealroom and the NATO Innovation Fund.
Overall, venture capital funding in European deep-tech Defence, Security and Resilience (DSR) has reached an all-time high, climbing to $8.7 billion in 2025.
The UK and Germany continue to lead in DSR investment, with Finland, Spain, Norway, and Bulgaria on the rise. The deal that put Bulgaria on the defence investment map was primarily last year’s EnduroSat funding round, totaling €152 million.
Central and Eastern Europe has posted the fastest growth in deal velocity, with a 2.7x increase since 2020.
Eight drone-related startups received public tenders last year, two of them from the region: Estonia’s Milrem Robotics, which focuses on unmanned equipment, and Lithuania’s Brolis Defense, which specializes in optical, thermal, and laser surveillance and defence systems.
Week 6
CEE’s Defense Sector Gets an Image Makeover
The defense sector is undergoing a profound shift in perception. Long viewed as a morally fraught and financially risky corner of the market, it is now increasingly framed as an investment in the defense of democracy and the free world.
Russia’s war against Ukraine, combined with geopolitical instability amplified by Donald Trump’s return to the political stage, has driven a surge in investment into European militaries.
Take Poland. The Polish Armaments Group (PGZ) recently received a capital injection of more than €1.6B from the state and is likely to receive at least as much again in the near future. “The development of the defense industry is in a completely different place than it was a year ago. We are making up for decades of neglect,” Konrad Gołota, Deputy Minister at the Ministry of State Assets, told Rzeczpospolita, summing up his first year in office.
Not to mention that the Czech arms producer Michal Strnad just recently became the richest arms magnate in the world, after a stratospheric IPO of his Czechoslovak Group.
The change in mood is even more visible in innovation. Just a few years ago, defense was a hard no for most European venture capital funds. Today, it is one of the most dynamic corners of the startup ecosystem. European defense and security tech funding reached record levels in 2024 and remained elevated in 2025, making it one of the fastest-growing sectors in the VC market.
Even figures like Ragnar Sass, the Estonian tech icon who co-founded unicorn Pipedrive, have been forced to rethink long-held principles. Once unwilling to invest in defense, Sass changed his stance in response to Russia’s war against Ukraine.
“The only way Ukraine can win, and the only way the free world can help stop this brutal war, is to give Ukraine a technological advantage,” he told me.
In Estonia, the rearmament wave has led to the emergence of around 100 defense startups over the past couple of years.
Startups may ultimately be the only way for European militaries to keep pace with the rapid technological change unfolding on Ukraine’s battlefields. A modern army increasingly needs drones in every conceivable shape, form, and domain — and they must be updated almost constantly to remain effective.
Lithuania, the Fastest-Growing Tech Ecosystem in CEE
Lithuania has confirmed its position as Europe’s fastest-growing innovation ecosystem in 2025, with tech enterprise value expanding nearly sixfold, according to a report published by Dealroom.
The country’s tech ecosystem reached a net worth of almost €16.5 billion last year, with roughly half of that valuation concentrated in e-commerce platforms Vinted, BCG, and cybersecurity firm Nord Security.
Despite this rapid growth, Lithuania remains the sixth-largest ecosystem in the CEE region. Still, it has climbed three places since the start of the decade.
After a decline in capital raised since 2022, investment is growing again, reaching €221 million in 2025. Enterprise software remains the most funded sector.
Romanian IPO Tests Retail Appetite, and Passes
The first day of Electroalfa International’s initial public offering on the Bucharest Stock Exchange on Monday ended with demand more than two and a half times higher than the tranche reserved for retail investors. The strong debut exceeded the intensity of recent entrepreneurial listings and points to a high appetite among small investors for financing local companies.
Electroalfa, a major player in Romania’s electrical equipment sector, plans to carry out the IPO between February 2 and February 11. The company aims to raise between €108 million and €115 million by issuing new shares.
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