Hungarian Foreign Minister Agrees To Long-Term Russian Gas Deal

Last Tuesday, Péter Szijjártó, Hungarian Minister of Foreign Affairs and Trade, met with the CEO of Gazprom, a Russian majority-owned energy corporation, in Saint Petersburg to discuss a long-term gas deal. Szijjártó stated that the deal aimed to “guarantee the energy security” of Hungary following the long-term gas contract signed between Russia and Hungary in 1995, which expires this year. Later that day he took to Facebook to announce that a new 15-year-long gas contract has been agreed upon and will be implemented starting October 1st. The new agreement outlines that Gazprom will ship gas to Hungary annually through two different routes: 1 billion cubic meters via Austria and 3.5 billion cubic meters of gas via Serbia.

This new deal is much more favorable than the price which has been enshrined in the agreement that expires now, Szijjártó said. “[It] makes it possible for us, Hungarians, to keep the lowest level of utility costs for the people in Hungary in the entire European Union.”

Under the current, expiring agreement, Hungary receives gas through Ukrainian pipelines directly connected to Russian refineries. However, the reliance on Ukraine has caused some transportation disputes. In 2014, relations between Russia and Ukraine became tense, and heightened after Russia annexed the Crimea region. Gazprom and Russian president Vladimir Putin warned EU states against re-exporting gas to Ukraine, which consequently put a strain on the flow of gas from Russia to Hungary. Hungary had found itself caught in the crossfire, with an unsecured transportation of gas as a result. “Hungary cannot get into a situation in which, due to the Russian-Ukrainian conflict, it cannot access its required supply of energy,” Hungarian prime minister Viktor Orbán stated at the time. The conflict between Russia and Ukraine is still currently escalating, with a recent report from Reuters stating that the volume of natural gas from Russia transiting Ukraine during January-June of 2021 fell by 12.7%. Therefore, diversifying transportation routes for Hungary’s gas supply is essential.

Under the new deal, expanding transportation routes to Hungary has made gas accessible through a western and southern supply, independent of Ukraine. According to the Russian News Agency, Szijjártó mentioned that the parties “have agreed to buy this new gas in two directions, so diversification of routes is also being enshrined in the agreement. From the western direction through Austria and from the southern direction through Serbia. This is a new transit route.” The new methods of transportation will work not only to ensure the safety of energy supply to Hungary, but also to avoid the repetition of relying on a single route for transportation, in case another conflict of security arises in the future.

While the deal certainly opens new entries of gas for Hungary, officials must also take into consideration the relationship between Russia and Ukraine during future deals. The countries’ conflict has resulted in the current military mobilization of their shared border, as well as the occupation of Crimea. With more than 100,000 Russian troops on Ukraine’s border and speculations that Ukraine may retaliate through a military offensive on the Donbas region, Hungary is in a difficult position. Dealing with either Russia or Ukraine may send unintentional messages to the other. For example, while the new gas deal with Gazprom may only be intended to secure safe access to energy for Hungary, Ukrainian officials speculating on the rising conflict may understand the energy deal as expressing Hungarian support for Russia.

Prime Minister Orbán has called for an end to the sanctions the E.U. has imposed on Russia in response to the illegal annexation of Crimea; many speculate this may have played a role in the new gas deal. However, Foreign Minister Szijjártó has also stated that he is dedicated to repairing and improving Hungarian-Ukrainian relations through increased communication.

While there is no direct intent proving that the gas deal was decided upon in Hungarian opposition to Ukraine, the deal’s position in regional politics calls for unintentional political implications to be carefully considered in future negotiations. In addition, further communication between Hungary and its neighbouring countries will certainly make Hungarian political intentions more clear. This may avoid some friction in relations, and, consequentially, future disputes.