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Orban’s gas intrigue: Hungary plays on contradictions between Russia and the US

Author : Georgiy Kuhaleyshvili

Budapest helps ExxonMobil to enter the market of the countries of Central and Eastern Europe with Romanian natural gas and press Russia's position, and Washington will support the Hungarians in disputes with the EU
13:48, 13 February 2018

Read the original text at 112.ua.

112 Agency

These days, Hungarian Prime Minister Viktor Orban stated that a contract for the supply of natural gas from Romania for a period of 15 years would soon be signed. According to Orban, three Hungarian firms have won the corresponding tender in Romania. Hungary would purchase 4 billion cubic meters from Romania each year, which is equivalent to half the volume of the annually consumed amount of the “blue fuel.” In 2015, Hungary has consumed 7.5 billion cubic meters of natural gas, of which 6.8 billion cubic meters were imported. The Hungarian Prime Minister believes that the supply of natural gas from Romania will begin after 2022. Orban also stressed that the era of Russia’s gas monopoly in Hungary would come to an end. Orban's statement on the supply of Romanian gas corresponds to the position of the US and the European Parliament on the need to reduce the EU's dependence on Russian gas.

Related: Poland opens new gas reservoirs close to Ukraine's border

Last year, Orban advocated deepening energy cooperation with Russia. In 2016, Gazprom supplied Hungary with 5.54 billion cubic meters of natural gas (81.5% of the total volume of natural gas imports). Last summer, the Hungarian Government, and Gazprom agreed to extend the sections of the Russian gas pipeline Turkish Stream to Hungary. In 2017, Viktor Orban has twice met with Russian President Vladimir Putin. They discussed the prospects for cooperation in various fields, including the energy field. Orban has a negative attitude towards anti-Russian sanctions and believes that they harmed the economies of Hungary and Russia in the amount of 6.5 billion dollars. In 2015, he argued that the United States exerted pressure on Hungary due to energy ties with Russia and the country's participation in the Russian gas pipeline project South Stream, which is no longer relevant.

 

Global Energy Network Institute

Map of gas pipelines in Hungary

Reducing the dependence of European countries on the supply of Russian gas meets the interests of the United States. At the end of January this year, US Secretary of State Rex Tillerson said that Russia would use energy resources as a political tool if it expanded the capacity of its gas pipeline along the bottom of the Baltic Sea to Germany, bypassing the countries of Central and Eastern Europe. In his opinion, Europe needs to diversify the directions for the purchase of energy resources, since the commissioning of the second branch of the Nord Stream gas pipeline would undermine the energy stability and security. The second branch would allow doubling the capacity of the existing gas pipeline (now it is 27.5 billion cubic meters of gas per year). Also, Russia is implementing a project of the Turkish Stream gas pipeline (two branches with a capacity of 15.75 billion cubic meters) along the bottom of the Black Sea and Turkey's territory in the EU. As there is a potential threat of imposing US sanctions on foreign companies that invest large sums of money in the construction of Russian gas pipelines, Gazprom does not exclude financing the Turkish Stream at its own expense.

Related: Foreigners want to extract gas in Ukraine: What are their chances?

Deputy Chairman of the Board of Gazprom Alexander Medvedev believes that the share of Russia in the European gas market might increase to 40% after 2025. For 9 months of 2017, Gazprom's share in the EU market was 34%. Having a stable income from sales of natural gas, the Kremlin will continue to carry out aggression in Ukraine, develop new types of conventional and strategic weapons, sponsor separatist regimes in post-Soviet countries, Eurosceptic parties in the EU and spend big money on information campaigns to influence political processes in America and Europe.

Related: Georgia refuses from Russian natural gas

Perhaps, the US decided to create conditions for the weakening of Moscow's positions on the gas market in the EU and to derive economic benefits from it. Tillerson promised Poland to help reduce energy dependence on Russia by supplying liquefied natural gas from the United States. For Hungary, the Americans came up with another alternative to Russian gas. It is not accidental that Orban started talking about the supply of natural gas from Romania. In April last year, the US oil company ExxonMobil, where Tillerson held the position of chairman of the board of directors from 2006 to 2017, worked on the possibility of investing $ 942 million in the development of a deep-water gas field on the “Neptune” block on Romania’s Black Sea shelf. An agreement with the Romanian oil and gas company OMV Petrom on the development of this shelf was reached in 2008. The development of the Romanian oilfield should begin in 2018. Natural gas reserves in the field are estimated at 84 billion cubic meters. Hypothetically, these volumes would be enough to completely replace the supply of Gazprom’s natural gas for the needs of Hungary, Slovakia, the Czech Republic, and Poland for 3-4 years. This time is enough to cause significant damage to the Russian economy by reducing natural gas exports. In 2016, Gazprom supplied to these countries 24.84 billion cubic meters of natural gas, which is about 14% of the total volume of supplies to Europe (178.3 billion cubic meters).

Related: Deadline for bids from potential partners for gas transportation management extended until March

The US lobby for the interests of ExxonMobil in Europe, for which Gazprom is a competitor. Not without a reason deployed the United States its anti-missile defense system in the Romanian village of Deveselu. Usually, Americans create military bases and strongholds in those countries where they have economic interests. American businesses need security guarantees before investing large sums of money in ambitious projects. The interests of American congressmen who are interested in cutting off oxygen from Russia and forcing it to stop its aggressive foreign policy, and the interests of American oilmen, who are not averse to cashing in on natural gas, met in Romania and Hungary.

Hungary is convenient for ExxonMobil to start shipping natural gas from the Black Sea shelf of Romania. Both countries border on each other. In 2010, Romania and Hungary opened a 47-kilometer stretch of the Nabucco gas pipeline along the Arad-Szeged route, which connects the Hungarian and Romanian gas distribution systems. The Nabucco gas pipeline project for the transportation of natural gas from the Caspian fields to the EU has not been implemented. However, the existing developments can come in handy. Until 2020, Romania plans to build a gas pipeline that will connect Hungary, Bulgaria, and Austria with its Black Sea field. This gas pipeline, worth 220 million euros, will allow supplying 4.4 billion cubic meters of gas per year to Hungary. In October 2017, Hungary and Slovakia agreed on the construction of the North-South gas pipeline under the Eastring project. With a favorable combination of circumstances, Hungary has a chance to transit the Romanian natural gas to Slovak consumers. Hungary can set a precedent for a voluntary abandonment of Russian natural gas and question the arguments that there are no other alternatives to ensure EU energy security other than the Nord Stream and Turkish Stream gas pipelines.

Related: Ukraine gas production rose by 4% in 2017

Orban is moving towards the US, promising to buy large volumes of natural gas from Romania, contrary to previously reached agreements with Gazprom. Perhaps he is making such sacrifices in order to establish relations with US President Donald Trump. Orban did not resemble the leaders of Germany and Turkey, he did not criticize Trump for unilateral recognition of Jerusalem as the capital of Israel in December last year. Then Hungary blocked a joint statement by 28 EU member states criticizing Trump's position on the Jerusalem issue. During the campaign, Orban supported Republican Trump, not Democrat Hillary Clinton. During a telephone conversation with Orban in 2016, Trump stressed that he respected Hungary very much. Orban is interested in supporting Trump in disputes with the EU. The Hungarian authorities are ardent opponents of the European Commission's plan to accommodate Muslim refugees from Italy and Greece in other European countries. The quota meant providing 1294 refugees with shelter, but Hungary failed to do it. Refugees come into Hungary through the state border with Serbia and Croatia, so special fences were built, equipped with video surveillance, to prevent penetration. Last year, the Hungarian authorities built 4 military bases to patrol the border areas and timely detain refugees for subsequent deportation. There is a threat that the European Commission will continue to insist on its positions and will impose sanctions against Hungary.

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Russia cannot help Hungary in the dispute with the EU. The Kremlin supports the ultra-right Eurosceptic party "Jobbik", which has built its image on anti-migrant sentiments and xenophobia and is a political rival of the "Fides" party of Viktor Orban. But the US can help. However Trump is negatively treated by the European Commission and the EU Council, the United States has the last word in ensuring Euro-Atlantic security. During his visit to Warsaw last year, Trump stated that the Poles had the right not to let Muslims. The American president is pursuing a tough migration policy like Orban does. Hungarians and Americans build relations on the principle of "quid pro quo." Budapest helps ExxonMobil to enter the market of the countries of Central and Eastern Europe with Romanian natural gas and press Russia's position, and Washington will support the Hungarians in disputes with the EU.

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It is possible that Orban is trying to play on the contradictions between the US and Russia in order to bargain a discount on the price of natural gas from Gazprom. It is a common practice in business when a client begins to express an intention to find a new supplier just for the sake of the old supplier to reduce the price. In this case, the role of the "new" supplier is assigned to Romania. The appearance of Romanian gas in the Hungarian market will significantly reduce Russia's ability to use energy resources as a lever for pressure on EU member states. Increased free competition in the gas market of the EU will allow Hungary and other countries to "twist Gazprom’s arms" and defend its interests.  

Related: Gas price for the Ukrainian population: Will it grow or not?

 

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