Putin's Hungary Visit: "Win-Win"
Hungary has successfully negotiated the right to access, according to its needs, past years' take-or-pay natural gas contract volumes from Russian gas supplier Gazprom, in accordance with the country's 20-year gas contract which is set to expire this summer.
This, one of the results of an official visit Tuesday by Russian President Vladimir Putin to Hungary, where he met with with Hungarian Prime Minister Viktor Orban for talks on a host of economic agreements between their countries, including the gas contract renewal and Russia's financing of two new nuclear reactors in Hungary.
At an evening press briefing, Prime Minister Orban reported that the two sides had deliberated over Hungary's 1996 gas contract, reaching agreement on the unused volumes, a problem which he said has been solved.
“This means that with this agreement we have secured energy supplies for Hungarian families and we've guaranteed it for Hungarian industry, as well, ” commented the Hungarian Prime Minister.
“This is a big relief for us,” he added, admitting that the technical details of the contract had not yet been hammered out, but would be in the coming months.
According to Mr. Orban, the government would not have been able to continue its utility cuts without the leeway in the Gazprom gas contract going forward.
President Putin welcomed the chance to strengthen ties between Russia and Hungary in the oil and gas sector, in light of his country being the major contributor of hydrocarbons to Hungary, commenting: “We are glad to be a reliable delivery partner for Europe and for Hungary.”
He said the discussions not only included Hungary's gas contract but also its gas storages.
Of the latter, Mr. Putin said, “As you may know, we were forced to abandon the South Stream project, but we believe that what we have pulled together with the Hungarian side, including the joint venture, we should be able to use it when we expand our relations with our Turkish friends as part of the so-called 'Turk Stream'.
“There are many versions of it and we're willing to discuss these with all those who are affected,” he added.
Having not set foot in a European Union country since last summer, the Russian President was accompanied to Hungary by numerous high-level officials, including the heads of Gazprom and Russian nuclear power enterprise, Rosatom. Outside of the natural gas negotiations, ministerial and industry representatives on both the Hungarian and Russian sides signed a variety of economic agreements, including Russia's financing the bear's share of two new nuclear reactor units they are building in Hungary to the tune of EUR 13 billion.
Analyst Andras Deak, Senior Research Fellow at Institute of World Economics, HAS, explained the importance of the natural gas contract for Hungary: “Of course it is very important, but there's a wide range of options that we can take with it. Something has to be done because it's going to expire by the end of the year, but whether we continue with it is simply a technical act, or we sign an absolutely new contract – this was an open question.”
Deak contends that Gazprom's marketing of gas supply this year has been changing. “Less flexibility is provided for shorter durations, it is not clear whether they are ready to contract long term delivery points at the EU-Ukraine border, and this is the first long-term contract after South Stream. It could be quite challenging if the Russian side decides to contract under the new marketing regime – the contract could be much different from those in the past,” he explained.
Of what the Russian president's visit to Hungary means for gas diplomacy in Central & Eastern Europe, Mr. Deak explains, “The message is that Putin can derive political benefits from small Central European countries in exchange for economic concessions. That's the big story.”
As for the prospect of cementing Russian influence on where the gas supplied to Hungary will reverse-flow, Mr. Deak says it may be a moot point as the reverse flow route from Slovakia is available to Ukraine. “I don't think it's going to be a big issue,” he adds.
“Hungary needs Russia,” said Prime Minister Orban said at the press briefing. “For we Hungarians, it's important that Russia be open for our products; and it's also in our interests that we have access to Russian energy.”
He added that it is important to mend ties between the EU and Russia, that it needed a thoughtful resolution, which is what Hungary stands for. The security of the region, he said, can only be achieved with the cooperation of Russia.
-Drew Leifheit