Hungary strengthens economic ties with Russia amid EU sanctions

According to Hungary's Minister of Foreign Affairs and Trade, Peter Szijjarto, known for his pro-Russian stance, large Hungarian companies should serve as models for smaller ones on doing business in Russia, specifically in sectors not subject to sanctions. He stressed that his contacts in the pharmaceutical, food, medical, construction, energy, and agricultural sectors are not planning to exit the Russian market.

Szijarto highlighted that in 2023, Hungarian exports to Russia surpassed $1 (CAD 1.4) billion, and the involvement of giants like MOL should inspire others to be more active in that region.

According to Bloomberg sources, Viktor Orban has informed EU leaders he will not agree to extend sanctions against Russia until Donald Trump is inaugurated as the U.S. President. This move is speculated to be a strategy to obstruct further Western sanctions against Russia.

Despite the war in Ukraine, the government in Budapest continues the Paks II nuclear power plant construction with Russian Rosatom as the main contractor. The Hungarian-Russian agreement signed in 2014 in the presence of Prime Minister Viktor Orbán and President Vladimir Putin included a loan of approximately €8 billion to €9.5 billion (CAD 12 billion to CAD 14.2 billion) over thirty years to erect two new nuclear power plant blocks.

The expansion of the Hungarian nuclear power plant is Orban's largest economic project, and, as experts from the Centre for Eastern Studies assess, the flagship venture of Russian-Hungarian collaboration. The first block’s completion was initially set for 2032. However, the European Commission's investigations have uncovered irregularities concerning temporary exclusivity in fuel supplies, potential violations of public procurement rules, and the provision of illegal state aid. It's estimated the block might be commissioned as much as a decade later.

Dominik Hejj, a specialist in Hungarian politics, mentioned in a businessalert.pl interview this year that economic ties with Russia benefit Hungary because "they assist in maintaining good political relations, which are crucial during wartime."

The gas deal with Russia is less optimistic for Hungary. Like Slovakia and Austria, which previously benefited from affordable Russian gas, Central European countries will cease receiving resources from the east via the "Friendship" pipeline. This was confirmed by Vladimir Putin on December 19 at the year's annual press conference at the Kremlin. He stated that the transit agreement between Gazprom and the gas companies of these countries will terminate at the end of 2024, due to Ukraine's refusal to renew it.

“This contract will no longer exist, that much is clear. But that’s fine — we will survive, Gazprom will survive,” Putin briefly remarked. This situation mainly arises from Ukraine's refusal to renegotiate the agreement. Kyiv blocked gas transit to Hungary and Slovakia, which remained dependent on Russia. On Thursday, December 19, Ukrainian President Volodymyr Zelensky announced Ukraine would not extend Russian gas transit. Hungarians can only rely on gas transmission from Russia through the southern route.

“This won’t be a problem for us, as Hungary can import gas through the Turkish Stream pipeline,” said Hungary's Foreign Minister Peter Szijarto in October. He highlighted that the Turkish Stream (a pipeline running from Russia under the Black Sea to Turkey and then to Southern Europe) could soon become a significant alternative for gas transport, including for other Central European nations.

Hungary imports about 4.5 billion cubic metres (approximately 160 billion cubic feet) of natural gas annually under a 15-year contract with Gazprom signed in September 2021. Russian gas accounted for 80 percent of Hungary’s total imports.