Hungary and Orban Will Lose Russian Gas Moving Through Ukraine and He Uses EU Presidency to Delay Ukraine Aid and Sanctions Extension Decision: Is the U.S. Election a Factor?

 

     Ukraine will not renew its contract with Russia’s Gazprom to deliver Russian gas via pipeline to Hungary, Slovakia, and Austria. Hungary is especially dependent on Russia for oil, gas, and nuclear fuel. There was some difficulty in the country in July when Ukraine shut off Russian oil to Hungary. Hungary is exempt from sanctions on Russian oil and gas, which makes up two-thirds of its oil imports. They will have sufficient supply in the near term. Currently, low fuel prices are expected by some to rise up to the EU average due to the supply crunch. Hungary’s exemption from the sanctions leads to its lower gasoline costs, relative to the EU. Hungary has other options for sourcing oil with new investments in pipelines coming from Azerbaijan. Orban recently invested in a pipeline that can bring Russian oil through Serbia. A current pipeline that delivers oil through Croatia includes high transport fees.

     Shutting the gas flow will make natural gas more expensive for Hungary, Austria, and Slovakia. Slovakia will also lose transit profits. An Essa News Article tells the story of other pipelines and how the oil shortage was resolved:

“TurkStream transports 494 billion cubic feet of gas to Europe through two export lines, with a total capacity of 1.13 trillion cubic feet. However, other deliveries not originating from Russia also occur via the Black Sea.”

“Reserving additional volumes for Slovakia and Austria through Gazprom might prove exceptionally challenging, as explained by Dr. Szymon Kardaś, an expert with the European Council on Foreign Relations. However, Hungary is assured.”  

“The second issue involves negotiations for gas from Azerbaijan. Despite controversies about using Russian systems for its transport, Kyiv is considering possibly allowing its transit.”

“A similar "maneuver" was applied to resolve the oil crisis. The Hungarians reached an agreement with Belarus, where Russian gas was reclassified as Hungarian gas. The Russians agreed. In this whole scenario, Orban continues to blame Ukraine and thank Russia for releasing Hungary from the Ukrainian grip, comments Dominik Héjj.”

“The Hungarian energy company MOL has reached agreements with oil suppliers and operators of the "Friendship" pipeline to continuously transport oil from Russia through Belarus and Ukraine to Hungary and Slovakia. Under these agreements, MOL becomes the legal owner of the oil at the Belarusian-Ukrainian border, allowing oil to continue reaching Hungary and Slovakia in the same quantities as before. However, this comes with an additional cost for MOL due to insurance—$1.5 per barrel.”

“Hungary will maintain deliveries but incur higher costs if a similar agreement is reached for gas supplies. This situation will benefit the Hungarian Prime Minister, who will likely blame Kyiv and Brussels for the higher gas prices.”

     If I understand this correctly, the bottom line is that the “Friendship” pipeline is now or is soon to be operating as normal delivering oil to Hungary, Slovakia, and Austria but with a new designation when it hits the border and an additional transport fee. Will the gas issue be resolved similarly? It does not comport with the EU’s goal of weaning away from Russian oil and gas. Orban has been criticized as doubling down on Russian hydrocarbons instead.

“In Poland, what is decoded as Kremlin propaganda is the official government narrative in Hungary. Budapest will not exit the EU, as it sees economic benefits from the free market. For Orban, however, it's always been a business arrangement, not a values-based community—sums up Héjj.”

     Hungary’s Foreign Minister noted that they are negotiating with Gazprom for alternate Russian supplies, possibly Russian LNG supplies. The EU wants to restrict Russian LNG as well.  

     In a related matter, RBC Ukraine reported that Hungary is considering blocking Ukraine aid. The aid consists of $50 billion loan that the US, EU, and G7 leaders have offered to Ukraine. The U.S. prefers a smaller amount. 

“Hungary is threatening not to agree to a change in the rules on how long sanctions are extended. The US insists that the EU should extend sanctions against Russia for 36 months instead of six months. This would allow the partners to protect themselves from the possibility that one of the EU countries could freeze Russian assets which would help close the loan.”

“One option is for Washington to contribute $5 billion, roughly equal to the amount of Russian assets frozen in the United States, and still leave Europe to foot the lion's share of the bill. It is also important that Japan has recently signaled that it may withdraw from the loan if the United States does not participate.”

      It is in the EU and other parties to the loan’s interest that it closes before the U.S. election since it could compel Trump if he were to win the election, to service the loan. Apparently, Orban is using the Hungarian EU presidency to play politics on this matter as RBC Ukraine reports:

“Hungary, which currently holds the EU presidency, said it had decided to postpone the decision on the loan to Ukraine until after the US presidential election. Budapest also postponed the decision to extend sanctions against Russia.”

     It should perhaps be better understood that if the West abandons Ukraine, Russia will continue until the whole country is taken. Then parts of Poland will be partially surrounded by Russia and Russian proxies. That would be the likely result of abandoning Ukraine. While invading Poland may not be a current top priority of the Kremlin, a Russian government in Kyiv would certainly make it more likely.

Ukraine has lost territory to the Russians in recent months mainly due to ammunition and supply shortages caused by eight months of delays in voting by Mike Johnson and the Republicans in Congress and aided by the illegal use of Starlink terminals Russia acquired on the black market.

 

 

 

References:

Hungary braces for energy crunch as Ukraine shuts gas tap. PRC. Essa News. October 14, 2024. Hungary braces for energy crunch as Ukraine shuts gas tap (msn.com)\

Orbán threatens to block loan to Ukraine to help Trump – Politico. Liliana Oleniak. RBC Ukraine. October 14, 2024. Orbán threatens to block loan to Ukraine to help Trump - Politico (msn.com)

Europe 'crisis' as one country breaks ranks and tries to buy more Russian gas from Putin. Kris Boratyn. Daily Express US. October 16, 2024. Europe 'crisis' as one country breaks ranks and tries to buy more Russian gas from Putin (msn.com)

EU betrayed, Putin celebrates. Tagtik. October 17, 2024. EU betrayed, Putin celebrates (msn.com)

Hungary's energy dilemma: Russian oil halt sparks urgency for alternatives. Essa News. July 18, 2024. Hungary's energy dilemma: Russian oil halt sparks urgency for alternatives (essanews.com)