Orban Attacks EU Energy Plan as Putin Link Nets Hungary Gas Deal

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Hungarian Prime Minister Viktor Orban said he won’t support a European Union plan to integrate the bloc’s energy policy a day after he reached a gas-supply agreement with Russian President Vladimir Putin.

Hungary wouldn’t support amending the EU’s charter to create an “energy union,” Orban told reporters in Budapest Wednesday. The country will also refrain from re-selling Russian gas to Ukraine, he said.

The plan “would require involving the EU in bilateral relationships,” Orban said. “For us, this would be abdicating our sovereignty.”

European leaders are looking for ways to cut the 28-nation bloc’s reliance on Russian oil and gas as the conflict in Ukraine chills relations with the Kremlin. Orban, who hosted Putin for bilateral talks, has often cited Hungary’s energy dependence for opposing stiffer sanctions on Russia.

Hungary was among the countries that suffered from disruptions in gas shipments as Russia halted deliveries twice in the past decade. Russia supplies at least 60 percent of the country’s consumption according to the International Energy Agency.

The European Commission, the EU’s executive, plans to adopt the energy pact proposal on Feb. 25, Vice President Maros Sefcovic said Feb. 4. The plan includes creating an internal market and uniting member states “to improve our negotiating power with non-EU countries,” according to an outline on the commission’s website.

The energy union proposal, on track to be released next week, focuses on measures that can be adopted over the next year and doesn’t include any treaty change proposals, an EU official said, asking not to be identified in line with policy.

Gas Deal

Orban said he agreed with Putin on Tuesday to avert a 3 billion-euro ($3.4 billion) gas payment by rolling over unused volumes from a 20-year-old contract that expires this year.

The agreement will ensure gas supplies for as many as five years, making a new long-term contract unnecessary, Orban said. That’s in line with Hungary’s interests not to lock in a set price amid gas-price volatility, he said.

Hungary currently pays $260 per 1,000 cubic meters of gas, he said. That compares with an estimated $270 average in Europe, Ekaterina Rodina, an oil and gas analyst at VTB Capital, a brokerage in Moscow, said by phone.

Orban has widened his nation’s energy cooperation with Russia since he returned to power in 2010. Last year, he agreed with Putin on a loan of about 10 billion euros to expand Hungary’s nuclear power plant and Russian state-owned gas exporter OAO Gazprom stored 700 million cubic meters of the fuel in the country. Gazprom is open to boosting this amount, Orban said.

Defiant Orban

Aside from Orban’s criticism of the sanctions, Hungary defied the EU to support South Stream, a Russian-backed pipeline that would have circumvented Ukraine. Putin canceled the project last year, citing the trading bloc’s opposition. The Hungarian leader also rankled some of his EU counterparts and the government in Kiev with a call for autonomy for ethnic Hungarians in Ukraine, echoing similar demands for the Russian minority by the Kremlin.

At home, Orban extolled what he labeled “illiberal democracy,” citing Putin’s Russia as a model.

More recently, Orban has toned down his rhetoric as relations suffered with NATO allies, including the U.S. He pledged to follow Berlin’s cue on foreign policy and hosted Merkel this month. Orban also traveled to Kiev to meet President Petro Poroshenko after the cease-fire agreement in Minsk.

At his news conference with Putin, Orban warned against isolating Russia.

“Russia and Hungary are mutually dependent on one another, even if this resembles more the dependence of, say, an elephant and a mouse,” Orban said. “We also have to give something in return as” Russia “needs to know it can count on us.”

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