Hungary's enduring Russian ties: Energy deals defy sanctions

Hungary's Minister of Foreign Affairs and Trade, Peter Szijjarto – known for his pro-Russian views – stated in the spring of this year that large Hungarian companies should set an example for smaller ones and demonstrate how to conduct business in Russia, in areas not subject to sanctions. He stressed that his interlocutors from the pharmaceutical, food, medical, construction, energy, and agricultural sectors have no intention of leaving the Russian market.

Szijjarto highlighted that in 2023, Hungarian exports to Russia exceeded a billion dollars (960 million euros), and the presence of giants like MOL should encourage others to be more active in that country.

As Bloomberg reported, citing its sources, Viktor Orban also informed EU leaders that he would not agree to extend sanctions against Russia before Donald Trump is sworn in as President of the United States. It is speculated that this might be a tactic to block further Western restrictions against Russia.

Despite the ongoing war in Ukraine, the government in Budapest continues the Paks II nuclear power plant construction project, with Russian Rosatom as the main contractor. The Hungarian-Russian agreement signed in 2014 in the presence of Prime Minister Viktor Orbán and President Vladimir Putin provided for a loan of approximately €8 billion to €9.5 billion over thirty years to build two new nuclear power plant blocks.

The expansion of the Hungarian nuclear power plant is the largest economic undertaking of Orban's government and – as experts from the Centre for Eastern Studies assess – the flagship project of Russian-Hungarian cooperation. The first block's completion was initially planned for 2032. However, the European Commission, after investigations, found irregularities related to temporary fuel supply exclusivity, possible violations of public procurement regulations, and the granting of illegal state aid. It is estimated that the block may be commissioned even a decade later.

Dominik Hejj, an expert on Hungarian politics, said in an interview with businessalert.pl this year that economic cooperation with Russia is in Hungary's interest because "it helps to maintain good political relations, which are especially important during wartime."

The gas agreement with Russia seems less optimistic for Hungary. Similar to Slovakia and Austria – which have benefited from cheap Russian gas so far – Central European countries will no longer receive resources from the east via the so-called "Friendship" pipeline. This was confirmed by Vladimir Putin himself on 19 December at the annual press conference summarising the year at the Kremlin. The dictator stated that the transit agreement between Gazprom and the gas companies of the aforementioned countries will expire at the end of 2024, due to Ukraine's refusal to extend it.

– This contract will no longer exist, that much is clear. But that’s fine — we will survive, Gazprom will survive – Putin summarised briefly. This development mainly results from Ukraine's refusal to renegotiate the agreement. Kyiv has blocked gas transit to Hungary and Slovakia, which maintained a dependency on Russia. On Thursday, 19 December, Ukrainian President Volodymyr Zelensky announced that Ukraine would not extend the Russian gas transit. Hungarians can now only count on gas transmission from Russia from the southern direction.

– This will not be a problem for us because Hungary will be able to import gas through the Turkish Stream pipeline, said Hungary's Foreign Minister Peter Szijarto in October. He pointed out that the Turkish Stream (a pipeline running from Russia under the Black Sea and Turkey to southern European countries – editor's note) could soon become a real alternative for gas transport, also for other Central European countries.

Hungary imports 5 billion cubic metres of natural gas annually under a 15-year contract with Gazprom signed in September 2021. Gas from Russia accounted for 80 per cent of the total imported resource in Hungary.