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August 31, 2021

Russia agrees gas transit deal with Hungary, bypassing Ukraine

The foreign minister of Hungary has confirmed a 15-year deal with Russian authorities for gas transit through the country’s pipelines.

By Matthew Farmer

Hungary’s foreign minister Peter Szijjarto has confirmed a 15-year deal with Russian authorities for natural gas. The new deal bypasses Ukrainian pipelines, which are currently key to Gazprom’s infrastructure.

The new deal will take effect in October, after the current deal agreed in 1995 ends. Szijjarto said he found the agreed price in the new deal “much more favourable”, though he did not provide figures.

Under the new deal, Gazprom will ship 3.5 billion cubic metres of gas via Serbia, and 1 billion cubic metres via Austria. This marks a 7% increase on the 4.2 billion cubic metres Hungary used last year.

The current deal relies on Ukrainian pipelines connected directly to Russia refineries. Since the signing of this deal, Russia and Hungary have both expanded their international gas interconnectors, giving more trade options.

Ukrainian officials have recently voiced fears that Russia would use the Nord Stream 2 pipeline to decrease the flow of gas through the country. Ukraine currently derives more than $3bn in transit fees from gas flowing through its borders. The new deal may signal the start of large gas export growth to central Europe, or a redirection of existing gas flows. However, Ukrainian officials may interpret the deal as Russian reluctance to further invest in Ukrainian infrastructure.

Geopolitical analysts have said that Hungarian prime minster Viktor Orban’s favour for Russia might have influenced the deal. Orban has repeatedly supported the end of EU sanctions on Russia, while blocking several key EU climate votes.

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The two countries have also started collaborating on the construction of the Paks 2 nuclear plant in Hungary. Last week Russian foreign minister Sergey Lavrov said negotiations continued with “no grounds for any issues to arise”.

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