Mykola Volkivskyi, Political Expert, President of The First International Ukrainian Foundation of Development.
Fedir Kyryliuk, Professor of Taras Shevchenko National University of Kyiv, DSc (Philosophy), Prof.
Artem Oliinyk, Political Scientist, Assistant Researcher of the Academy of Political Sciences of Ukraine.
A few days ago, there was a resonance in Europe due to the unexpected signing of a long-term agreement on gas transportation from Russia to Hungary, bypassing Ukraine. A new supply agreement has been signed between Hungary’s MVM and Russia’s Gazprom for 15 years, with the possibility of revising the terms in 10 years. It enters into force on October 1. Under the contract, Hungary will receive 4.5 billion cubic meters of gas a year: 3.5 billion will pass through Serbia via the Turkish Stream gas pipeline and 1 billion through Austria. In recent years, the country has diversified gas imports by opening cross-border highways with most of its neighbors, in particular by securing supplies from Royal Dutch Shell through a gas terminal in Croatia. The Ministry of Foreign Affairs of Ukraine reacted to the unfriendly act of Budapest and postponed the meeting of the joint intergovernmental Ukrainian-Hungarian commission on economic cooperation. In turn, Hungarian Foreign Minister Peter Siyyarto accused Ukraine of trying to interfere in his country’s internal affairs. He called the agreement with Russia on gas, not a political agreement, but a matter of energy security.
It should be noted that Russia constantly dictates its terms, including energy supply routes, especially to countries that are critically dependent on Russian energy supplies. In the case of Budapest, Moscow also reserves the opportunity to generate revenue from the resale of already imported gas. Gazprom not only stimulates further gas prices in the EU but also sends extremely transparent signals to Europe that additional supplies are possible only through Nord Stream -2. This is an obvious fact, which is confirmed by the decrease in exports by the Russian monopoly compared to previous years and the refusal to reserve additional capacity of the Ukrainian GTS. Russia’s gas monopoly, which is designed not so much to generate economic profits as to produce hybrid geopolitical results, is involved in many episodes where pro-Russian forces in Europe are stepping up their efforts.
Since Ukraine has always been an important partner and transit of both Russian energy to Europe and various goods, we did not have to look for defenders of common European and Ukrainian values for a long time. Ukraine, as a link between East and West, remained so after the start of the war in 2014, because there were no alternatives that could compensate for the loss of status. The construction of Nord Stream 2 was an important strategic victory for Putin because he can not only directly meet the needs of Germany, but also have a powerful influence on the leading (most important) EU country – Germany. Moscow’s next steps to create (search for) new logistics solutions for countries with low gas consumption clearly show one thing: Ukraine must become an isolated suburb, through which no important path passes, and which to support in the confrontation with Russia does not make sense – no one will not lose in case of aggravation of a situation. Authoritarian countries should be authoritarian Belarus, influential Turkey, territorial waters of several countries, but not Ukraine, through which transportation is easier (due to developed infrastructure) and much cheaper due to geographical location. Same Hungary would receive gas from Russia to itself in a much shorter way and with greater reliability, thanks to Kyiv’s experience in transportation.
By the way, we are witnessing a state of warming relations with Moscow on the part of countries that often have misunderstandings with Brussels and Strasbourg. Austria’s historical mediocrity between the two systems after World War II may explain its case. Many Serbia’s claims and non-support of its wishes at the EU level require it to find an ally outside Europe – Russia. The Hungarian government’s activities call into question the country’s normal presence in the European community, while its policy of blocking negotiations on Ukraine’s future NATO membership confirms the post-socialist country’s efforts to gain weight in the EU at the expense of its neighbors. And we think that the similarity of the rhetoric and tactics of Moscow and Budapest is not a coincidence. In addition, the populist statements of Orban and his subordinates about exclusive conditions for their country, other prices, and direct negotiations with the customer without the supervision of Brussels will soon become the main thesis that will convince Hungarians, although this is not the case. And elections are coming.
Russia expects to use Hungary’s interest in obtaining gas at favorable dumping prices (including for domestic political dividends) to encourage the government to refrain from transiting some of its imported gas through Ukraine. The Kremlin’s agreement to supply gas through Serbia and Austria was originally planned as a blow to Ukraine’s economy, while Budapest played into Moscow’s hands. The estimated base price of gas under the contract with Russia will be $ 260 per 1,000 cubic meters. Hungary uses this foreign policy situation to receive dividends in the elections on the eve of the 2022 parliamentary elections. The EU should not allow Russia to use gas as a lever of political pressure. Instead, it should force Gazprom to sell gas at the borders of the Energy Community so that European traders can choose further transportation routes.
The governments of Hungary and Russia have a wide influence on the companies involved in the gas negotiations and use them to implement their geopolitical plans. Such companies include the state-owned MVM Group and PJSC Gazprom, as well as the private company MOL, which has a number of Hungarian pro-government ex-politicians and ex-government officials on board, as well as Gazprom’s Hungarian subsidiary, WIEE Hungary Kft. In April 2021, the Hungarian government transferred all its shares in MOL of 5.24% to the asset management fund Mol-Uj Europa Alapitvany, which led to the fact that it officially lost influence over the operational management of the company, probably in order to maintain its control over current members of the government after a possible transfer of power in 2022.
Hungarian Prime Minister Viktor Orban, who has been a staunch critic of the Soviet Union, communism and Russia for most of his political life, has drastically changed his strategy since 2010 to become Russia’s most powerful lobbyist in Europe. Explaining his steps to others, Orban said he was forging closer ties with Russia to strengthen Hungary’s international position. He was impressed by Vladimir Putin’s model of governance, where the business elite depends solely on the Russian leader and only a few independent players are allowed into the arena. Later, Orbán himself began to build a similar model in Hungary, moving away from democratic standards, establishing state control over the independent media, and suppressing dissent. All this makes it possible to assert Orban’s will to build an internal state system on the model of authoritarian Russia. Such cooperation today has led the Hungarian government-controlled media to share Russian propaganda stories, including the situation in Ukraine, as well as to create an image of “external enemies” and call for the protection of Hungarians abroad with a statement of “language harassment.”
Orban was included in the list of “Putin’s friends” not only because of ideological problems, but also because of joint economic projects launched with Russia. Orbán’s rhetoric strongly undermines the international legal order, as he calls for resolving issues with the aggressor in exchange for economic preferences. Despite EU sanctions against Russia, Hungary has taken the path of strengthening economic and political ties with that country. In 2015, after Russian President Vladimir Putin visited Hungary, Orban said he would not support the EU’s plan to integrate energy policy after Budapest signed a gas supply agreement with the Russian president.
Then Vladimir Putin promised Hungary a more flexible contract with Gazprom. The Russian vaccine against COVID-19 will soon be produced in Hungary after the Hungarian regulator recognized Sputnik-V in January 2021, despite objections from EU regulators. The clearest evidence of high-level political agreements between Hungary and Russia is that Russians have often “turned a blind eye” to doing business with Hungarians, even if it harms Russian investors. In early 2010, an agreement was signed with Rosatom on the modernization and expansion of the Hungarian Pax nuclear power plant without a public tender. The four power units of this nuclear power plant already produce more than 40% of all electricity consumed in Hungary, which makes the country energy dependent on Russia.
The new gas contract will further strengthen Russia’s influence in Hungary and affect political, security and economic processes in the EU. All further actions by Russia to change the route of gas transportation will lead to a significant increase in political and military risks for Hungary and the EU as a whole. The agreement will create a deep political gap in Hungary between the Eurosceptic government and the pro-European opposition, as well as affect the living standards of Hungarian citizens. Putin’s regime is a little different from the communist regime of the USSR in 1956, which suppressed the uprising in Budapest. Occupying parts of neighboring countries and creating severe conflicts, modern Russia is a worthy follower of the bloody traditions of the Soviet Union.
Broadly speaking, it is not just a question of losing the status of a transit country for Ukraine or not adding it to the state budget. The game spread significantly, stakes rose, and the Kremlin almost completed the phase of preparation for the next powerful blow. We are confident that, at the right opportunity, Moscow will provoke an energy crisis, similar to the one it created in the winter of 2006 and 2009; it will continue to put pressure on Berlin on existential issues, block negotiations on the Eastern Partnership, and, in the event of strong resistance, destabilize the EU with the help of satellites and loyal countries. Ukraine itself will not be the subject of conversation in high offices in itself, but the entire post-Soviet space, in exchange for security guarantees and the absence of military activity at the borders. All of these are real threats if the EU allows for such bilateral ties that threaten the security of the entire Union, and the United States reconsiders its role in Europe in reducing the presence of both troops and deterrence or defense systems. This cannot be allowed at any cost. Only a renewed Atlantic alliance can thwart the Kremlin’s aggressive plans and preserve peace in Europe.