Sanctions Mutiny Update: Hungary Prepares to Resume South Stream Pipeline Construction

Parliamentary speaker Laszlo Kover threatened on October 27 that Hungary could leave the EU if it continues to try to dictate to Hungary

This article originally appeared in Business New Europe


Hungary wants to have its section of the Russian-led South Stream gas pipeline up and running within two years, according to the head of state energy "champion" MVM. The comments appear simply further provocation towards the West from Budapest.

<figcaption>Another sign of "high-level cooperation" between Hungary and Russia</figcaption>
Another sign of "high-level cooperation" between Hungary and Russia

"We could put shovel to dirt as soon as six months from now but we would like to complete the Hungarian stretch by 2017," MVM CEO Csaba Baji told Napi Gazdasag, according to Reuters.

MVM owns 50% of the Hungarian stretch of the project, which is designed to bypass Ukraine's transit system to carry 63bn cubic metres a year of Russian gas under the Black Sea and to Austria's Baumgarten gas hub. Amidst the poisoned relations with Moscow over its role in the Ukraine crisis, Brussels is seeking to raise energy diversity - especially in CEE - has clamped down on South Stream, which it says breaks EU rules on liberalization.

It has ordered all work on the project halted until contracts are redrawn in line with regulations. Even Bulgaria, which is far more dependent on Russia gas than Hungary, and non-EU member Serbia have complied. However, with relations with the EU and US nosediving, Hungary says it plans to continue regardless, and even insists it will try to accelerate the project.

Useful idiot?

Budapest has found itself at the sharp end of criticism from Washington and Brussels since Prime Minister Viktor Orban met with Gazprom CEO Alexei Miller on September 22. In what appears a classic ploy by Moscow to pick off individual EU states from bloc policy, Hungary promptly halted reverse gas supplies to Ukraine. 

For its part, Gazprom agreed to raise gas supplies to Hungary, even as others feeding Ukraine with gas are seeing deliveries limited by "technical issues". The Russian supplier will also park 700m cm in Hungarian storage facilities. Miller also came away speaking confidently of Hungary's commitment to South Stream.

Baji said the storage deal is a sign of "new high-level cooperation" between Hungary and Russia. Those relations really kicked off in January, when Orban surprised by scrapping a tender to hand Russia a €10bn deal to expand Hungary's only nuclear power plant at Paks.

However, it was in the summer that the PM really pricked up ears in the West. As the US and EU accused Russia of waging a covert war in eastern Ukraine and expansionist policy to recreate the USSR, Orban cited it as a model for his efforts to build an "illiberal" democracy.

MVM has been earmarked as a state holding for the utilities assets the Orban government began buying from foreign investors in 2012; a move that takes Russian "state champions" such as Gazprom as a blueprint. Budapest has also extended state ownership in banking, manufacturing and other "strategic" industries - another route travelled by Russia. 

Barricades

The barbs from the West are multiplying, but Orban has turned criticism from outside Hungary into a cornerstone of his strong mandate at home, where Fidesz won a second constitutional majority in April. The PM and his entourage now appears ready to go toe to toe with the West, and provocative news flow and comment is emerging on a daily basis.

A prosecution of foreign-backed NGOs is seen as symbolic of the "intimidation of civil society," as expressed by US President Barack Obama. A scandal erupted in mid-October when Washington announced it had banned six government officials from entering the US due to corruption concerns. It is the only reported instance of a travel ban placed on a Nato ally.

EU officials meanwhile have openly called for people to join recent protests across Hungary against the government's plan to introduce the world's first internet tax. Budapest's candidate to the new European Commission was rejected earlier this month because of concern over his role in introducing controversial changes to judicial, media and human rights legislation at home.

Officials in Budapest are now lining up to fire back across the barricades. Parliamentary speaker Laszlo Kover threatened on October 27 that Hungary could leave the EU if it continues to try to dictate to Hungary "like Moscow once did". Speaking to news channel HirTV, he added that if anybody “west of us” takes democracy seriously, they should stop the “verbal cold war”, according to MTI.

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