Hungary and Russia: The Southern Stream and Nabucco

Here is a topic we haven’t talked about for a while: Europe’s reliance on Russian natural gas. Way back in early 2008 I wrote about the Russian pipelines that provide the bulk of Europe’s energy needs. Currently Hungary receives its Russian gas supply through the old Friendship pipeline that goes through Ukraine. Since then a new Russian pipeline reaching Germany was finished and the Russians have been working on a Southern Stream that will originate in southern Russia and will cross the Black Sea to Bulgaria where it will branch off to Romania, Hungary, Austria, Greece, and southern Italy.

At about the same time a number of European oil and gas companies, including the Hungarian MOL, got together to promote a new pipeline called Nabucco that would bypass Russia and would bring natural gas to Europe from Middle Eastern and Central Asian countries: Iran, Azerbaijan, Kazakhstan, Turkmenistan, and Syria. From the start Nabucco had its problems. Neither the financing nor the availability of natural gas was secured at the time; both remain up in the air to this day.

In late 2007 Ferenc Gyurcsány, then prime minister of Hungary, got into some trouble with both the European Union and the United States by appearing to prefer the Southern Stream over Nabucco. Gyurcsány’s excuse was that Hungary must be assured of a continuous supply of gas and therefore cannot turn down the Russian deal in favor of a project full of question marks. In any case, in February 2008 Hungary and Russia signed an agreement in principle to jointly undertake the construction of the pipeline on Hungarian territory.

Viktor Orbán, then in opposition, naturally attacked the socialist-liberal government for selling out Hungarian interests to Russia. He accused Gyurcsány of turning against the European Union by not wholeheartedly supporting the Nabucco project and instead joining the Russian Southern Stream.

Since then Orbán made a complete turnabout. First, the Orbán government made a deal with Russia about the Southern Stream pipeline going through Hungary and second, on April 23 Orbán announced that MOL is abandoning the Nabucco project altogether.

 

Nabucco, the Blue Stream, the Southern and the Northern Stream

Let us see what developments led to this decision. In March 2011 the Russian media reported that there was a possibility that Hungary might be dropped from the Southern Stream project altogether. An influential and well informed Russian website called Regnum claimed that Vladimir Putin was planning a trip to Slovenia and Serbia in order to find a new route for the Southern Stream. Earlier, in the spring of 2010, Croatia also joined the list of countries interested in the Southern Stream and thus Russia could have left out Hungary altogether as part of the “nationalist central Europe,” as Regnum called the region. After all, through Croatia gas can reach Austria and northern Italy.

If Orbán’s Hungary had continued its earlier anti-Russian policies, Russia could now retaliate. So Tamás Fellegi was promptly sent to Moscow to negotiate about the Southern Stream. Even though, if we can believe Regnum, the Russians would have been happier to talk to someone who was an energy expert, Fellegi succeeded. On September 16, 2011 the Russian Gazprom, the Italian ENI, the French EDF and the German BASF/Wintershall signed an agreement to build the Southern Stream and route it through Hungary. The European Union wasn’t happy, just as it wasn’t back in 2007-2008. Günther Oettinger, European commissioner of energy, expressed his displeasure. The Russian paper Kommersant remarked that the EU was not only pressuring Russia but also those member countries involved in the Southern Stream project.

The Orbán government signed the Southern Stream agreement last year. And just recently, on April 17, the prime minister talked with Alexei Miller, the CEO of Gazprom, in Budapest. It was a pretty hush-hush affair. Only a brief communiqué was issued by Péter Szijjártó, the prime minister’s personal spokesman. According to Szijjártó, the two talked about cooperation between the two countries; Orbán also wanted to be sure that the construction of the pipeline in Hungary would be “elevated into a very big national project.” Both men emphasized the timeliness and the importance of building this new pipeline. They emphasized that the project served the interests of both countries.

And then a few days later, on April 23, Orbán announced that MOL will withdraw from the Nabucco project altogether. The announcement came out of the blue. The prime minister happened to be in Brussels where he delivered a speech at the European Policy Center. It was during the question and answer period after the speech that he casually mentioned that as far as he knew “MOL was leaving the whole project,” meaning Nabucco. As it turned out, this piece of news was a surprise to the CEO of MOL himself. But now that the Hungarian state is heavily involved in MOL such surprises may become more frequent.

I guess I don’t have to elaborate on the Russian satisfaction that followed this statement. Kommersant has a weekly supplement called Vlast (Power) in which the editors wrote about Orbán’s announcement. The article considered MOL’s abandonment of the project a serious blow to Nabucco. It also noted that “the decision to withdraw from the project was taken at the state level and only then brought to the attention of the company’s management.” The article suggested that there may have been “political reasons” behind the decision. But, in any case, “Prime Minister Orbán deserves the title of the Hero of Russia according to the ‘authorities’  for his contribution to the defeat of the Nabucco project.” Quite a compliment.

One can speculate about the possible “political reasons” Kommersant was talking about. Whatever they may be, Russian-Hungarian friendship is flourishing while relations with the European Union are anything but congenial.

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petofi
Guest

Now tell me that this is all ‘pure’ and there isn’t the smell of millions of euros about all this new-found friendship…

PWT
Guest

Isn’t it obvious the the strongest possible national energy policy for Hungary, in terms of both energy prices and energy security, would be to have as many alternative gas routes built as possible and that the weakest possible policy is to be dependent upon a single source supplier?
If the government does, indeed, go forward with this weakest possible decision, then one will inevitably have to wonder at what price the government’s cave-in to Russia was purchased.

Solomon Fierce
Guest

Don’t let the anti-communist rhetoric fool you. Comrade Orban absolutely sees himself cut from the same cloth as Putin, or even more accurately, Lukashenko. Lukashenko’s grip over Belarus is the Viktator’s wet dream.

Member

Where os Louis Kovach to tell about what dangers of the communists (my wrong the leftists) pose for Hungary? Louis Kovach, please post some scholarly reference on Magyar Nemzet or Magyar Hirlap about the dangers of the Russians and China, and why you are at it, make sure you stop the influx of Hungarian ultra-leftists turning Hungary to Sin City.

Louis Kovach
Guest

Well let me see, the French (EDF), the Germans (BASF), the Italians (ENI) sign upo to a deal that Hungary is signing up also. But this is anti EU? It looks like when it is convenient in this blog, France, Germany and Italy become “fellow travelers” of Hungary against the EU. Nobody sees a problem with this line of reasoning.
Nabucco through Georgia and Iran….nobody sees any geopolitical problems there”.
The Blue Stream, as an example, makes a lot more sense than the Nabucco.
I am sorry some1, I do not even read the Magyar Nemzet or the Magyar Hirlap not that I would consider posting there.

GW
Guest

The problem is not making a deal with Russia. Hungary has limited energy sources, and any of them involves questionable regimes. For Hungary, it’s a matter of doing deals with devils or freezing to death. The problem is locking into a single monopoly supplier among these questionable regimes. Under a monopoly supplier, Hungary has no bargaining position with regard to price and terms of delivery, and to date, Russia has not been timid in using their advantage.

air max bw pas cher
Guest

Luis Kovach donde los huesos que contar acerca de los peligros de los comunistas (los izquierdistas de mi mal) posan para Hungría? Luis Kovach, por favor enviar una referencia sobre los aspectos científicos o de Magyar Hirlap Magyar Nemzet sobre los peligros de Rusia y China

Louis Kovach
Guest

@air max. I have stated that I do not read either the Magyar Hirlap or the Magyar Nemzet. Also I have stated that the Communists should NOT be marginalized, anywhere. However, I will restate it. Communism can be a danger to any country that is heading into economic chaos. Just see what is going on now in Greece.
Regards.

Member

@Louis … and that was Some1’s May 5 9:23 AM comment in Google Spanish.
These are just the regular blog spams. Just ignore them.

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