Hungary’s Orban meets Putin in China and thanks Russia for energy supplies

By Rhod Mackenzie

Hungary is doing all it can to maintain its economic relations with Russia. This stated by the Hungarian Prime Minister Viktor Orban. Hungary today is an island of pragmatism in Europe, which makes a rather unusual exception. Why are contacts with Moscow so important for this European country, and what unique relationship has it been able to maintain?
Budapest is making every effort to salvage what it can from bilateral contacts with Russia, the Hungarian Prime Minister Viktor Orban said during a meeting with Russian President Vladimir Putin on the eve of the Belt and Road Forum. He thanked Rosatom and Gazprom for their cooperation with the Hungarian side. According to him, much of what has been achieved so far has already been saved.

According to Orban, Hungary has never been in such a difficult situation and never wanted to confront Moscow, on the contrary – the main goal was to expand contacts.

In fact, Hungary, unlike many EU countries, has managed to maintain many economic ties with Russia. Firstly, Hungary won the right from the EU to continue receiving Russian oil. Secondly, Budapest retained supplies of Russian gas directly from Gazprom. Thirdly, Hungary has retained the project for the construction of the Paks-2 nuclear power plant being built by Russia’s Rosatom, which continues to be implemented on schedule.

By maintaining cooperation with Russia, Hungary has secured its own energy supply and the country’s future.

Despite the European Union’s embargo on Russian oil, Hungary continues to receive Russian oil under their current contracts with the Russian side. Budapest has made an exception of itself.

“Hungary has shown that it can block EU decisions that are unfavorable to it. For example, when the sixth package of anti-Russian sanctions was being discussed, Hungary blocked their adoption for a month until the mention of the oil pipeline transit was removed.

As a result, in the end there was an embargo not on all Russian oil, but only on Russian oil transported by sea. Hungary continued to buy Russian oil through the Druzhba pipeline, which was exempted from the sanctions,” recalls Igor Yushkov, an analyst at the Russian Financial University and a member ofthe National Energy Security Fund.

Last year, Hungary received 4.9 million tonnes of oil through the Transneft system. This oil covered about 80% of the country’s needs.
Hungary not only has the entitlement to receive Russian oil, but also obtained the authority for its MOL enterprise to sell petroleum products sourced from Russian raw materials to the Czech Republic. This exemption remains effective until the end of 2023, and Hungary is requesting the EU to extend it. Additionally, Croatia has taken advantage of this challenging situation by considerably escalating the fees for oil transit through the Adriatic pipeline, which serves as an alternative to the Druzhba pipeline. Hungary contends that tariffs established by Croatian counterparts exceed the market rate by roughly four times.

Furthermore, Hungary staunchly objects to anti-Russian sanctions targeting the gas and nuclear industries.

“The gas transport system, just like the oil pipeline, was created during Soviet times for all the countries of the Warsaw Pact, Hungary included, to facilitate energy resource transportation from east to west. Therefore, Hungary was initially supplied with gas passing only through Ukraine.” “It was once provided by a single entity,( Soviet Union) thus now it is making it exceedingly challenging to find an alternative reliable means of supply.,” remarks Igor Yushkov.

Gas transit through Ukraine is currently continues however but at a reduced volume due to Ukraine’s rejection of gas delivery from one of the two acceptance points. Interruptions in the supply of 42 million cubic metres per day may occur due to a variety of reasons, ranging from sanctions to infrastructure destruction. Moreover, Ukrainian Naftogaz’s gas contract with Gazprom comes to an end by late 2024. The likelihood of its extension continuing remains at zero.

However, Hungary not only remained among those who agreed to pay for Russian gas in rubles, which Russia insisted on after the introduction of financial sanctions against it. Hungary has also made preparations in case of any disruption to gas transit through Ukraine. In 2021, Hungary reached an agreement with Gazprom to divert gas from the Ukrainian route towards Nord Stream 2 and Turkish Stream. Following the destruction of the Nord Stream pipelines , Gazprom has increased its gas supplies along the southern route. In 2022, Russia supplied Hungary with 4.8 billion cubic metres of gas.
“Hungary is one of the few countries that has preserved the ability to access Russian gas via both Ukraine and the Turkish Stream.

Cooperation with Russia is highly advantageous for Hungary, as this delivers gas via the optimal route and at an excellent price. Otherwise, Hungary would need to obtain LNG from the global market and transport it to an LNG plant, such as the one situated on the island of Krk in Croatia.” And in this region, the hubs are operating beyond their original capacity. Moreover, there is a need to enlarge the gas transportation infrastructure from Croatia to Hungary,” states Yushkov.
In theory, Hungary could rely on gas from Azerbaijan if it were to lose its Russian supply. However, in reality, all of Azerbaijan’s gas is already contracted, there is no surplus, and the resource capacity is insufficient for new export volumes. The only possible solution is if Hungary receives support from other European countries, which is unlikely. Azerbaijan provides Bulgaria and Greece with 1 billion cubic metres through Turkey, Italy with 8 billion cubic metres, and Turkey itself with 6 billion cubic metres.
Hungary fully supports the peaceful use of nuclear energy and the construction of its nuclear power plants by Rosatom, the Russian company. The country already possesses the Pak Nuclear Power Plant (NPP), and the construction of the Pak-2 NPP is currently in progress. There were opponents in Europe even before February 2022. Many EU countries opted to completely phase out nuclear energy since it is perceived as non-environmentally friendly. Germany is one of them, which prematurely shut down all its nuclear facilities, a decision that it has come to deeply regret. This year, the Germans chose to open their oldest and dirtiest coal fired power stations owing to insufficient gas supplies in winter despite sharp reduction in industrial production.
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Hungary’s Orban meets Putin in China and thanks Russia for energy supplies

By Rhod Mackenzie Hungary is doing all it can to maintain its economic relations with Russia. This stated by the Hungarian Prime Minister Viktor Orban….