Putin ‘playing chicken’ with gas supplies as Russian economy
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Hungary, which has long been labelled as Russia’s closest ally in the European Union, has once again steered away fromthe the bloc and is now the only country currently receiving gas from Russia. It has been the most vocal critic of sanctions against Russia in the EU, which was galvanised by Moscow’s fresh escalation in the seven-month war: military mobilisation, nuclear threats and moving to formally annex a large part of occupied Ukraine. According to reports from Hungary, given that three of the four pipelines delivering Russian natural gas to Europe have been knocked out of commission, Budapest is now the only EU member state still receiving Russian gas supplies.
The EU is heavily dependent on Russian gas, and over the past few decades, the bloc has built four major pipelines to import Russian supplies, accounting for 40 percent of its imports in 2021.
Two of these pipelines, the Nord Stream 1 and 2, were struck by major leaks last week, with many claiming that Russia was responsible for this “sabotage”.
Each pipeline, flowing under the Baltic Sea to Germany, had a capacity of 55 billion cubic meters (bcm) per year and bypassed Ukraine and Poland to transport gas to Germany.
Even before the major leaks last week, Russian gas giant Gazprom has suspended flows through Nord Stream 1 “indefinitely”, citing maintenance work.
But Nord Stream 2 pipeline never began pumping gas, Germany mothballed the pipeline’s license following Russia’s invasion of Ukraine in February.
The construction and approval of the pipeline became a subject of major scrutiny late last year, as the US warned Germany and the EU that approving the gas pipeline would increase their reliance on Russia, at a time when 100,000 Russian soldiers were at the border of Ukraine for “training exercises”.
Meanwhile, the Yamal-Europe pipeline, which carries Russian supplies through Poland and Germany, has faced repeated disruptions over the past year.
On Monday, eastbound gas flows stopped via the pipeline to Poland from Germany, data from pipeline operator Gascade showed as exit flows from Germany’s border fell to zero.
Meanwhile, in April, Gazprom announced that it would stop deliveries of natural gas to Poland and Bulgaria through the pipeline after both countries rejected Vladimir Putin’s demand to pay for gas in rubles.
This only leaves the Turk Stream pipeline, which delivers gas from Russia under the Black Sea and through the Balkans, has a capacity of 31.5 bcm and is still in operation.
The pipeline terminates in Hungary, which means that currently, Budapest “is now the only EU member to which Russian gas still arrives”, according to Forbes Hungary.
Hungary’s close relationship with Russia has been under scrutiny over the past year, as the country, which cooperates with Russia on nuclear power, said earlier last week it would block any new energy sanctions.
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This relationship deepened yesterday after Hungary announced that it had reached a deal with Gazprom to postpone payments for winter gas supply, a move that could ease pressure on the country’s economy.
Hungary, which is heavily dependent on Russia for oil and gas shipments, saw its trade deficit balloon this year due to its surging energy costs, increasing its vulnerability and weakening the forint, which plunged to a record low versus the euro on Monday.
State-owned energy group MVM has agreed with Gazprom to defer its payments for gas purchases if prices exceed a certain threshold value, allowing MVM to pay for the gas over the coming three years if prices surge.
Development Minister Marton Nagy told Reuters: “We agreed on a threshold value, and the part exceeding this we don’t have to pay for now, but it goes into deferred payment”.
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