This happened just a few weeks after the completion of the construction of the Nord Stream 2 gas pipeline, which threatens the Ukrainian budget with billions of dollars in losses due to the loss of transit.
The Ukrainian Foreign Ministry sharply criticized the new agreement and threatened a showdown in the European Commission. Hungary, in turn, also did not go unanswered.
Hungary on September 27, 2021, signed a long-term contract with the Russian concern Gazprom for the supply of gas bypassing Ukraine. The document was signed by Dmitry Averkin, Deputy General Director of Gazprom Export, and György Kovor, Chief Executive Officer of the Hungarian energy company MVM Group.
The contract is for 15 years (until the end of 2036) with the possibility of revising the terms in 10 years. According to the agreement, Hungary will receive 4.5 billion cubic meters of gas per year. 3.5 billion will flow through Serbia through the Turkish Stream gas pipeline, and one billion through Austria.
Up to this point, most of the Russian gas entered Hungary in transit through Ukraine.
The contract did not come as a surprise: they were preparing for it back at the end of August during negotiations in Budapest between Hungarian Foreign Ministers Peter Szijjártó and his Russian counterpart Sergei Lavrov.
However, the signing of the contact took place a few weeks after the completion of construction and preparations for the launch of Nord Stream 2. Russia, which previously supplied natural gas mainly through Ukraine, has diversified its export routes by building subsea pipelines, the Nord Stream pipeline directly to Germany and the Turkish Stream pipeline from Russia to Turkey.
The head of Naftogaz, Yuriy Vitrenko, announced large losses due to the interruption of transit, as well as the risks to the security of Ukraine before the military aggression of the Russian Federation after the disappearance of transit as a factor in containing the escalation of the conflict.
"This affects competition in Europe. We can talk about a breach of the contract. Unfortunately, for Ukraine, the problems with Nord Stream 2 are becoming a symbol of Western corruption. There is a symbolic meaning, and this is $ 2 billion for us. This is a matter of our security," said Vitrenko.
Ukraine's reaction: This is a blow, we must respond to it
This contract may lead to a reduction or a complete stop of transit through Ukraine, despite the contract until 2024, said Serhiy Makogon, General Director of the GTS Operator of Ukraine. Makogon predicts that as soon as the Russian Federation has the technical ability to bypass Ukraine in transit, it will be launched through longer, but its own gas pipelines.
Shortly before the signing ceremony, Ukrainian Foreign Minister Dmytro Kuleba called the Budapest contract "a blow to Ukrainian-Hungarian relations." The Foreign Ministry called it "a purely political, economically unjustified decision."
"Hungary has dealt a blow to Ukrainian-Hungarian relations by excluding the Ukrainian gas pipeline from the scheme of gas supplies from Russia. This is a blow, and we must respond to it accordingly. There can be no regrets or condolences," Kuleba said.
In response, Kyiv postponed indefinitely the fifth meeting of the intergovernmental Ukrainian-Hungarian commission on economic cooperation, which was to take place on September 29-30 in Budapest.
The Foreign Ministry promised to apply to the European Commission to provide an assessment of the agreement's compliance with European energy legislation.
The ministry calls the Hungarian ambassador: they will say that gas transportation bypassing Ukraine undermines the national security of the state and the energy security of Europe, as well as that the new agreement between Hungary and Gazprom will deal a serious blow to Ukrainian-Hungarian relations.
Later on Tuesday, Kuleba called on Hungary not to "stir up emotions" over the crisis and to act pragmatically. He stressed that the issue of excluding Ukraine from the transit scheme was a requirement of the Russian Federation and Hungary accepted this requirement.
"I am opposed to being guided by emotions in this situation. We or our Hungarian partners. We do not deny Hungary's right to conclude an agreement with Gazprom. But we clearly see that Hungary could conclude an equally economically beneficial contract that would include transit through Ukraine. We understand that the issue of excluding Ukraine from the transit scheme was a requirement of the Russian Federation, Hungary accepted this requirement, it does not meet our interests, we protect our interests. That's the whole story," said Kuleba.
Hungary accuses of interference
Hungary accused Ukraine of interfering in its internal affairs on Monday after Kyiv criticized it for the agreements.
On Tuesday morning, Szijjártó wrote another post on Facebook, in which he said that he was "deeply upset" by the criticism of Ukraine and the decision to appeal to the European Commission.
"The Ukrainians have nothing to do with who we agree with. We consider it a serious violation of our sovereignty and national security interests to want to interfere with the gas supply of our country, the heating of the houses of the Hungarian people and the work of industry. This step is unfriendly after many subsidies (ventilators, medical equipment, caring for soldiers, resting children, investments) that Ukraine has received from us so far," Szijjártó wrote.
Hungary also summoned the Ukrainian ambassador.
European Commission will study the contract
The European Commission on Tuesday reacted to the conflict and promised to study the implications of a new gas contract between Russia and Hungary. This was stated by the representative of the European Commission Tim McPhee at a briefing in response to a question from journalists.
“I've already asked my colleagues to check the implications of the contract,” McPhee said.
Press Secretary of the Russian President Dmitry Peskov said that the Russian Federation is not going to use gas to put pressure on Ukraine. According to him, the new contract does not violate anyone's rights.
"This is a long-term contract, which, in fact, will guarantee reliable, predictable, rhythmic supplies of blue fuel to Hungary along again guaranteed, economically profitable routes. Nobody's rights are violated here. No international trade norms are violated here. And it is unlikely any country, including Ukraine, has the right to interfere in this aspect of Russian-Hungarian relations," Peskov said.
Peskov added that the Russian side is ready to discuss Ukraine's resumption of direct gas purchases if necessary.