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Hungary concludes three energy agreements with Russia

Hungary inked three new agreements with Russia to ensure the continued supply of natural gas and crude oil, Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó announced after his visit in Moscow, flagging concerns of energy supply security in the next heating season.

After his meeting with Alexander Novak, Russia’s Deputy Prime Minister in charge of energy matters, and Alexey Likhachev, Rosatom’s Chief Executive, the Hungarian minister presented three new agreements tightening the energy relations of the two countries.

He argued that although Europe managed to got through this winter, energy supply security will be critical in the next heating season. “On the one hand, there is no guarantee that the next winter will be so mild, additionally the energy demand of the Chinese economy will increase significantly following the reopening of the country and on the necessary LNG capacities have not yet been built on the continent,” explained the minister.

He underlined that the continued supply of Russian gas to Hungary was crucial, welcoming the extension of the option for Hungary to increase, if necessary, the gas imports beyond the volume specified in the country’s long-term gas purchase agreements.

“About 80-85 per cent of Hungary’s natural gas supply comes from Russia, therefore the continuity and uninterrupted supply is fundamentally and critically important to us,” emphasised the minister.

He said that the Russian party assured him to provide everything for the continuous operation of the Turkish Stream pipeline despite the sanctions, thus this year’s maintenance will take place without interruption.

A second agreement extends Hungary’s option to defer payments of its gas over a 150 euros price threshold, irrespective of the current prices, he informed. From a peak in August, European gas prices have now dropped by 80 per cent. Natural gas futures in Europe were around 43 euros per megawatt hour in the beginnig of April.

The third agreement related to crude oil shipments. The Hungarian Minister highlighted that around 80 per cent of Hungary’s oil supply had been delivered via the Druzhba pipeline last year. Hungary and Russia agreed that the Russian supplier would continue delivering oil to Hungary’s oil and gas company MOL via the Ukraine-Hungary border. The minister also informed that MOL will settle the transit fee directly with the operator of the Ukrainian pipeline network.

Separately, the parties have agreed on changes to the construction and financing contract of the upgrade of the Paks nuclear power plant to enable the project’s continuation and completion.

Minister Szijjártó said that regardless of the war and the sanctions, the Paks contract had to be modified because of the technical and technological changes seen in the nine years since it was signed.

In 2014, Hungary signed a deal with Russia, awarding Rosatom the project to build two additional Russian VVER 1200 reactors at Paks. The new reactors will be built on a turnkey basis, with Russia providing a preferential loan of 80 per cent of the total construction cost of the two new units, which amounts to 12.5 billion euros.

“The sanctions have only added to this, so by modifying the contract Russia and Hungary had to find the legal framework that ensured that the nuclear plant can be built,” he said. Hungary and Russia have also agreed on how the construction and financing contract would be changed. “Once those modifications are finalised, they will be submitted to the European Commission for approval,” said the Hungarian minister.

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