Hungary and Ukraine Spar Over Russian Gas Supplies

Hungary and Ukraine became embroiled in a bitter dispute over Hungary’s long-term natural gas supply agreement with Russia. The two countries issued stern statements as the diplomatic squabble escalated.

Governments in Kyiv and Budapest are embroiled in a political standoff after Hungary signed an agreement with Russia on long-term natural gas supply. The dispute ensued as the routing of the gas transit will bypass Ukraine, causing massive losses for the country in transit fees.

The gas deal
Hungary signed a 15-year natural gas supply deal with Russia's state-controlled energy company Gazprom on September 27 during a visit to Budapest by Gazprom CEO Aleksei Miller. Under the agreement, Hungary will start receiving Gazprom's gas starting from Oct. 1 via TurkStream and the pipelines of South-Eastern Europe. Hungary is set to receive 4.5 billion cubic meters of natural gas annually, accounting for roughly 50% of the country’s annual gas consumption. Russia is the single largest natural gas provider for Hungary and the gas has so far been imported via a pipeline through Ukraine. This transit route has become increasingly risky due to political differences between Russia and Ukraine, which caused disruption in gas deliveries over the years. In response, Hungary has sought to diversify gas imports, building cross-border interconnectors with most of its neighbors and securing supplies via a liquefied natural-gas terminal in Croatia.

Russia has also built transit routes avoiding Ukraine, of which the most notable are the Nord Stream pipelines to Germany and the TurkStream link to Turkey.

The United States criticized the extension of the TurkStream pipeline into Bulgaria, Serbia, and further on to Hungary, claiming it strengthens Moscow’s control over Europe’s energy industry. Washington plans to boost exports of liquefied natural gas to ports on the Adriatic and Aegean Seas to help diversify energy supplies to Central and Eastern Europe.

The Hungarian government announced at the end of August that it had agreed with Gazprom on the conditions of a new gas supply deal for 15 years, with a clause to change purchased quantities after 10 years.
Under the new deal, Hungary and Russia will use two routes for gas transit – 3.5 billion cubic meters will arrive in Hungary via Serbia and 1 billion cubic meters via Austria.

Diplomatic squabble
Shortly after Hungary announced the deal with Russia, the Foreign Ministry of Ukraine accused Hungary of making a “purely political, economically unreasonable decision." The government in Kyiv said in a statement that the decision was taken “to the detriment of Ukraine's national interests and Ukrainian-Hungarian relations.” The statement went on to say that Ukraine will ask the European Commission to assess whether the agreement respected European energy legislation.

In response to the Ukrainian claims, Szijjártó told a news conference that for Hungary, energy safety is a matter of security, sovereignty and economy rather than politics. "You cannot heat homes with political statements," the minister added.

One day later, the Hungarian minister denounced Ukraine’s criticism of the natural gas supply deal in a Facebook post as a "serious violation of Hungary’s sovereignty." Szijjártó also summoned Ukraine's ambassador to Budapest over what he said was Kyiv's attempts to block Budapest's new long-term gas supply deal with Russia.

Relations between the two countries have been tense for years because of a dispute over the linguistic rights of some 150,000 ethnic Hungarians living in western Ukraine. Kyiv passed a law in 2017 that restricts the use of minority languages in schools, prompting sharp criticism from Hungary. In response, Hungary blocked Ukraine's efforts to build closer ties with NATO and the European Union.