Hungary stops supplying gas to Ukraine and makes its own gas deal with Russia

The news of the day is Hungary’s decision to stop the supply of gas to Ukraine despite its pledge to assist its beleaguered neighbor. Although the AFP news service assumes that the decision came after “threats from Moscow,” I have a different take on the matter. To make my case I have to go back a few weeks in time.

It is true that Russia was playing games with its gas supply to Poland and Romania, but Hungary was in no way affected by these Russian measures, most likely because of the cozy relationship that exists between Putin and Orbán. On the contrary, in the last few months large amounts of gas arrived in the country from Russia. Currently, the storage facilities are 60% full, and even larger amounts of natural gas will come from Russia in the next few months. Poland indeed had to temporarily stop its supply of gas to Ukraine on September 10, only to resume its operations two days later when Russia assured Poland that it would send an adequate supply of gas to the country in the future. Romania began receiving less than the usual amount of gas on September 15.

Instead of worrying about natural gas from Russia, on September 18 a very upbeat article appeared in Magyar Nemzet telling its readers that “we can be the gas center of Europe.” The article reported that two days earlier Miklós Seszták, minister of national development, conducted negotiations with Anatoly Yanovsky, Russian deputy minister for energy affairs, concerning the storage of 500 million cubic meters of Russian gas in Hungary “to facilitate the supply of Europe with gas in case of irregular transit shipments through Ukraine.” These plans are not new.  They were apparently first discussed in October 2012 when Aleksey Miller, CEO of Gazprom, had a meeting with Viktor Orbán in Budapest. However, the precondition for such a deal was the nationalization of the storage facilities. The Hungarian government subsequently purchased them from the German company, E.ON, at an incredibly high price. Although auditors warned the government about the pitfalls of the deal, Orbán insisted. It looked as if he did not care about the price. Now we know why.

Yanovsky had barely left Hungary when Aleksey Miller arrived in Budapest. The meeting of Miller and Orbán was kept secret from the Hungarian people, who read about it on Gazprom’s website. This is not the first time that we learn about important meetings and bilateral negotiations from the media of countries for whom close relations with Hungary, a member of the European Union, are important but who are not exactly friends of the West. The Hungarian government would rather not inform the world about its dealings with such countries as Iran, Belorussia, Azerbaijan, and Kazakhstan. According to Gazprom, “the talks were focused on the issues of reliable and uninterrupted gas supplies in the coming winter period. The parties paid special attention to the implementation of the South Stream project and noted that it was progressing on schedule.”

Source: Gazprom.com

Source: Gazprom.com

This morning, three days after the Miller-Orbán meeting, Viktor Orbán announced that Hungary would indefinitely suspend supplying Ukraine with natural gas. According to Itar-Tass “the decision was made to meet the growing domestic demand for gas,” FGSZ, the Hungarian company operating the pipeline, said. Yet MTI reported today that even Serbia might be able to receive gas from the Hungarian storage facilities. So, surely, there is no shortage of gas in Hungary. The European Union is anything but happy about the suspension. Helen Kearns, a spokeswoman for the European Commission, in an answer to a reporter’s question on Hungary’s unilateral suspension of the gas supply to Ukraine, said that “the message from the Commission is very clear: we expect all member states to facilitate reverse flows as agreed by the European Council.” Naturally, Naftogaz, the Ukrainian gas company, also urged its “Hungarian partners to respect their contractual obligations” and said the Hungarian decision “goes against the core principles of the European Union single energy market.”

After delivering his usual Friday morning radio interview Viktor Orbán left for Berehove (Beregszász), in the area of Ukraine south of the Carpathian Mountains officially called Zakarpattia Oblast, to deliver a speech at the Hungarian-language college situated in the town where about half of the population is Hungarian speaking. Altogether there are three smaller territorial units within the oblast where there are significant Hungarian populations: in the uzhhorodskyi raion (33.4%), in vynohradiv raion (26.2%), and in the area around Berehove where they are actually in the majority (76.1%). Altogether there are about 120,00 Hungarians out of a total population of 1,254,614. The distribution of Hungarians in the oblast can be seen here.

Orbán indicated in his early morning interview today that Hungary will support Hungarians in the neighboring countries who demand autonomy. Although he did not specifically mention the Hungarian diaspora in Ukraine, he was obviously also talking about them. This was not the first reference to possible autonomy for Hungarians in this region of Ukraine. At the outbreak of the Russo-Ukrainian crisis Orbán already mentioned such a demand. He made it clear, again not for the first time, that his main concern in this very serious international crisis is the fate of the Hungarian minority. He promised his audience that Hungary will not do anything that would harm his Hungarian brethren, which I found interesting in light of the decision to cut the flow of gas from Hungary to Ukraine.

While Viktor Orbán was in Berehove, representatives of the European Union, Russia, and Ukraine got together to come up with an energy deal that would ensure the supply of Russian gas to EU members and Ukraine over the winter. In return, Ukraine would repay $3.1 billion of its debt to Russia.  The first installment, $2 billion, would be due by the end of October and the rest by the end of December. If Russia agrees to this deal, it would avert an immediate crisis, although it would not resolve the deeper dispute over what price Kiev should pay for past and future deliveries. The Ukrainian government earlier filed suit with the Stockholm Arbitration Court against Russia for making it overpay for gas since 2010. A decision may be reached by next year.

On the one hand, Ukraine seems to be happy that, after so many unsuccessful attempts, there is hope of an agreement but, on the other hand, it is unhappy that the price of Russian gas “is dependent on the decisions of the Russian government.” According to Kyiv Post, “Ukraine will under no circumstances recall its suit from the Stockholm Arbitration Court.”

If this deal goes through, as it seems that it will, perhaps it was unnecessary for Hungary to unilaterally and abruptly stop the flow of gas to Ukraine. By this decision Orbán further emphasized his pro-Russian sympathies and undoubtedly further alienated himself from Western governments.

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tappanch
Guest

Ukraine can answer to Orban’s hostile step in kind.

At this instance, (12:55 AM local time), Hungary is able to produce only 75% of its energy needs. An additional 14% is coming in from the Ukraine.

Hungary: + 4367
Slovakia: + 765
Ukraine: + 630
Austria: + 267
Romania: + 40
Croatia: – 578
Serbia: – 121

live numbers:

http://mavir.hu/web/mavir/home

tappanch
Guest

Correction:

Hungary’s own production was only +3324 a few minutes ago.

The total balance was the number +4367

Member

As of midnight, Zulu time, Hungary can only supply 1% of his own friends and 99% of his enemies.

hkr
Guest
“By this decision Orbán further emphasized his pro-Russian sympathies and undoubtedly further alienated himself from Western governments.” What extreme stupidity. The gas storage is only at 53% and winter is coming. Should Hungarians risk starvation and freezing to appear “pro-American”? How many Hungarians should die before Balogh the blogger is satisfied? You load up the storage therby ensuring the safety of your country and that Hungarians will not die to the cold and then you can worry about being “pro-American” enough. What kind of crazy person expects a country to hurt itself and its national interests to appear “pro-American”? This is slave mentality. In reality Hungary is totally vulnerable to what happens in Ukraine. All the gas Hungary gets goes through Ukraine! The Ukrainians already have full control of the totality of the gas. If they let it to go to Hungary it goes to Hungary. If the Ukranians take the gas for themselves it will never reach Hungary. If the Ukrainians stop the flow, if Ukrainian neo-Nazis blow up the pipeline, if the Ukrainian government nationalizes the pipeline and other cases the gas will stop. If the gas stops all gas to Hungary stops. If that happens and Hungary… Read more »
cheshire cat
Guest

hkr

“What kind of crazy person expects a country to hurt itself and its national interests to appear “pro-American”? This is slave mentality. ”

Then why did Orban agree to reversing gas at the European Council (of heads of member states), and sign contracts in Hungary’s name to do so? Slave mentality?

hkr
Guest
You are confused. What happened at the EU council was an agreement to make it technically possible to transmit gas backwards towards Ukraine. Hungary can already do this, because it has this capability, but other countries do not. The EU urges them (the other countries) to create this. It has nothing to do with Hungary because it is already technicly possible for Hungary to transmit gas. But you cannot expect a small country like Hungary to freeze and starve in order to give all the gas to Ukraine. Ukraine has 5 times the population of Hungary and thus consumption of gas. Ukraine has already total control over all the gas. Ukraine can easily load up the storage from the pipeline. They can take the gas direct from the pipeline which they have full control over. But if they do take the gas there will be none left for Hungary, which is why Hungary is more vulnerable than Ukraine. This is why before winter you must load the storage to 100% before you give away gas for free. In the summer it was fine to give a little gas to Ukraine. Before the winter it would risk Hungary remaining without gas.
tappanch
Guest

I noticed something. Hungarian domestic electricity production has gone down by more than 20% since 2010.

Domestic production / Total demand

2010: 87.8%
2011: 84.5%
2012: 81.2%
2013: 71.8%
2014: 67.1% (first 8 months)

donlaszlo
Guest

Gazprom used to have destination clauses in long term contracts with its European customers to avoid price arbitrage among them. The Commission has been fighting these clauses for ten years now. Gazprom’s Hungarian contract may still have such a clause, and if Hungary wants more Russian gas deliveries, it is understandably required to comply with it. Certainly, neither the Russians, nor the Ukrainians care too much about the repercussions of their conflict on Hungary´s interests. When Ukraine reversed the flow in its gas transmission system in winter 2009, pressure in Hungary fell down to zero…

Guest

@hkr:

Why didn’t the state controlled Hungarian gas company fill up its reserves during the summer when consumption was surely lower? To have only 6ß% at the start of the heating season seems a bit ridiculous to me …

PS and OT:

We already bought our firewood – in case there might be problems with the gas supply, and all our neighbours here in the village did the same …

chandlerozconsultants
Guest

Reblogged this on hungarywolf.

Hannes
Guest
Hungary produces about 20% (about 2bn cm which can be more depending on the amount gas gas we use, some 9-10bn cm/annum) of the natural gas it uses. That is a small, but substantial portion. Only the rest comes – mostly – from Russia via Ukraine (but we have the Austrian pipeline too and now the Slovakian, which does not operate yet), but just as it was mentioned in the article Hungary can and will store gas for Serbia, and also for Russia. The two means the same, because the point is the gas in the storage will be held in the name of someone other so that we could get some money from the storage and – more importantly – will be able to say that we can’t give it to someone else — which is Russia’s interest, because it doesn’t like that its customers sell Russian gas to Ukraine, thereby helping its very enemy. Ukraine is no friend of Hungary according to Orban and his people around him. But when did Hungary help anybody? Hungary only wanted to take advantage of its neigbours (remember Teleki). The love of the ethic Hungarians is a pathetic show played to the… Read more »
Pantheon
Guest

Orban allied himself with the troubled warmaking Russia.
Clouds are gathering above Hungary like in the Horthy era.
Speeches in Subkarpathian schools will poison the Nato relationship.
Shaping up as a new suicide, while the oligarchs smile.

Even small Hungary needs good moral leadership to be a member of the civilized world.

Close ties with Russia, and Asian republics are the immoral choices, but smart short term money making schemes for our ultra rich leadership.

Clever people leave, and do not worry about firewood in Hungary for the next winter.

zoobulz
Guest

@ Hannes: “The love of the ethnic Hungarians is a pathetic show played to the nationalistic voter base.”

Orban is visiting Cluj/Kolozsvar soon. From what I’ve heard, the local Hungarians don’t want him coming to stir up trouble. They don’t need that, and have managed themselves fine for a while now. And they’re ‘puzzled’ by his cuddling up to Putin.

Marcel Dé (@MarcelD10)
Guest

May I express a perhaps minor objection to the illustration you chose? It doesn’t consider the fact that energy mixes largely vary from one EU country to another.

For instance, gas represents 2% of Sweden’s energy mix (100% RU), while it represents 38% of Italy’s (20% RU). While I’m aware that energy sources are not fully substitutable (especially not on short notice), Italy’s dependency on Russian gas is actually much higher than Sweden’s. In the same manner, Hungary’s dependency is much higher than Poland’s, etc.

In fact, the most dependent EU countries (with a population > 5M.) are Hungary and Slovakia.

Member

And now what’s left to be proud of being hungarian? Always choosing the wrong side just like Orbans great idol, admiral Köbányai Horthy Miklós. How can we ever face the ukrainian people with good consience, not to mention our allies?

Guest
I know I will get flamed again for this but it needs to be said. I said in another set of postings that all countries in Europe must ally themselves either to be pro-America or pro-Russian. The US is not permitting anything in between. Your are either with them or against them and we have seen 3 visits from McCain this year to threaten Orban. Has the US actually ever helped Hungary? I don’t think so. Russia has a mixed history depending on your perspective. Orban is obviously betting on the Russian side and I believe it is the correct path at this time. Ukraine is not bound or regulated in any way by EU laws but Hungary is. So this limits what he can and cannot do. Russia cut back gas supplies in early September to exactly the amount negotiated in the contracts and has stopped supplying any extra thus is not liable for any violations of contracts.It is clever and insults them for failing to negotiate extras on the assumption it would always be available as it has been in the past. Another interesting yet quiet set of developments is Russia has purchased most if not all of… Read more »
Pantheon
Guest

To the attention of the friendly opponents of the Hungarian Spectrum:
USA has to discard the bad allies and to fight enemies with determination.
The USA has to encourage civil reforms in the undemocratic allied and enemy countries:
Hungary, Syria, Turkey, Iraq, Iran, Saudi Arabia, Qatar, Venezuela, Cuba, Argentina, Russia, Pakistan, Lebanon, Afghanistan.
It is too costly to fight the terror plotted by these countries!

Guest

Richard really is a troll or worse!

I just read the first sentence from his link:

“Putin kicked out the Rothschild bankers from his country. ” That was enough for me – thanks for not having to waste my time!

Pantheon
Guest

wolfi –
i have met yossi rothschield in Tuebingen.
He borrowed my typewriter to write his papers.
I think I have left it with him.
He was dirt poor and completely broke most of the times.
Check it out if he still lives in Tuebingen.
It is a genocidal incitement to call bankers and capitalists, the Jew, or the Rothschield if you want to use codes..
Luckily, Germany is now an enlightened relaxed country.
The leaders of Russia, Iran, Syria, Beloruss, Hungary have to be denied power and authority.
They are most hazardous to their own subjects.

Guest

Okay, you didn’t like that then take this from Bloomberg: http://www.bloombergview.com/articles/2014-09-26/ukraine-can-t-hide-putin-s-victory

Guest

Or this: http://www.telegraph.co.uk/finance/economics/11123047/Germanys-economy-goes-sour-as-Putin-unnerves-nations-shoppers.html

Maybe Orban, in this instance, has Hungary’s better interests at heart (at least as long as it parallels his own). Maybe he wants to break with the Hungarian tradition of always being on the losing side.

Guest

Lastly, I leave you with this bit of German television satire which cleverly explains the problems of paying too much attention to the mainstream media: http://youtu.be/jSOfQ7tgTLg

Guest

@Pantheon, is this you friend Rothschild?
This article contains a picture of him – he’s probably still at the university.
http://www.stuttgart.de/item/show/388824

Guest

@Richard:

Sure, the economy is down everywhere – in my eyes this is even a good sign, less spending, less consumption, less waste …
Btw Russia’s doing really bad: http://www.businessweek.com/articles/2014-08-28/putins-popularity-up-russian-economic-prospects-down

Guest

@Richard:

That’s the difference between Germany and Russia – on German TV you can watch satirical programs like “Die Anstalt” (The Institution, meaning: for crazies …) with a very critical program, but what do you see on Russian TV?

You are a really silly troll, almost funny in your ways …

Btw a German Green member of the European Parliament was just held back in Moscow, wasn’t allowed to enter. I hope that the sanctions against Russia will get more intensive!

Istvan
Guest
Wolfi there are apparently an abundance of trolls and Russian agents on this site, now including myself according to some. Such declarations are pointless I think. To the comment by Richard: President Obama is currently in my opinion attempting to use moral power to persuade Hungary to abandon its Eurasian drift towards the Russian Federation hence the promotions of civil society NGOs. As I pointedly put it the other day, much to the concern of some on this list, if the US were interested at this point in going full scale with interfering in the internal affairs of Hungary the effort would be multi pronged and might even include a potential regime change strategy. Camp Darby is a United States Military base that is located between Pisa and Livorno in Italy has pre-positioned an 2,000-acre Ammunition Storage Facility, whose 125 bunkers hold ammunition reserves sufficient for an potential military intervention in Central Europe. The 173d Airborne Brigade Combat Team, and the SETAF Infantry Brigade, 1/508th Infantry (ABCT) are located in Vicenza Italy. If things got to the point of losing Hungary fully to the Russian sphere of influence NATO and the EU would fundamentally be bypassed unilaterally by the US… Read more »
Pantheon
Guest

Thanks for the info on the medal awarded to Joseph Rothschild, who was a good young guy as he lives in my memory.

D7 Democrat
Guest

“Orban is obviously betting on the Russian side and I believe it is the correct path at this time. ”

Putyin will use Orban and Hungary for sure but with regards actually pumping money in to keep the country viable?

Problem for Fidesz and their Jobbik fellow travellers is that it is EU money which keeps the miserable regime here afloat not Russian (or US for that matter).

Guest

@Istvan:

Though your opinions differ in many respects from mine I’m sure you’re as much a democrat as the other regular commenters here and you’re surely no troll!

Richard however only talks in terms of power – human rights etc are of no interest to him. He probably would have sided with Horthy and Hitler 75 years ago …

And we all know what came out of that!

You can take it from there!

spectator
Guest

The really funny thing is, that people talking about “either” pro American or pro Russian, while we are Europeans – only geographically, mind you, but still – and at the main time Orbán trying to perform a balancing act, and – in my opinion – heading right into the spot in between the chairs.
Just look at it: the Russians take him as a pansy suckered into the deal of a lifetime (Paks) while the US seeing him as one spineless ally who will sell himself and his country to the higher – not even the highest – bidder of the moment.

It certainly demand nowadays some determination to admit: “I am Hungarian”, particularly if one still has some rigid vertebrae in space…

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