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Hungary Signs New Long-Term Gas Supply Deal With Russia

Updated

Gazprom will ship 4.5 billion cubic meters of natural gas to Hungary annually.

Hungary has signed a new 15-year natural-gas supply deal with Russia's state-controlled energy giant Gazprom in a move sharply criticized by Ukraine.

The agreement was signed by Gazprom and Hungarian energy group MVM executives at the Foreign Ministry in Budapest on September 27, during a visit by the Russian company’s chief Aleksei Miller.

The Foreign Ministry of Ukraine, which will lose millions in transit payments, said Hungary's supply deal was a "purely political, economically unreasonable decision" that was taken “to the detriment of Ukraine's national interests and Ukrainian-Hungarian relations.”

The Ukrainian statement said the deal would have “a significant impact on energy security of Ukraine and Europe,” and that it will ask the European Commission to assess whether the agreement respected European energy legislation.

In turn, Hungarian Foreign Minister Peter Szijjarto told a news conference that for Hungary, “energy safety is a matter of security, sovereignty, and economy rather than a political matter."

"You cannot heat homes with political statements," Szijjarto added.

A Gazprom statement quoted Miller as saying that Hungary “will start receiving Gazprom's gas starting from Oct. 1 already via TurkStream and the pipelines of South-Eastern Europe."

There were no immediate comments from the EU executive.

Russia, which used to ship natural gas primarily through Ukraine, has diversified exports routes, constructing the Nord Stream pipelines to Germany and the TurkStream link to Turkey.

Hungary has relied on Russia for most of its natural-gas imports delivered via a pipeline through Ukraine, but in recent years it has diversified gas imports, opening cross-border interconnectors with most of its neighbors and securing supplies from Royal Dutch Shell via a liquefied natural-gas terminal in Croatia.

The Hungarian government announced at the end of August it had agreed with Moscow on all the conditions for a new long-term gas supply deal to take effect from October 1.

The duration for the agreement with Gazprom would be for 15 years, with a clause to change purchased quantities after 10 years, Budapest said, adding that the price has also been agreed.

Under the deal, Gazprom would ship 4.5 billion cubic meters of natural gas to Hungary annually, allowing the supply of around half of Hungary's annual gas consumption.

Two routes will be used -- 3.5 billion cubic meters will come via Serbia and 1 billion cubic meters via Austria.

With reporting by Reuters
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