Weekly Briefing, Vol. 53. No. 4 (HU) July 2022
Natural gas supplies of Europe: The Hungarian position
In recent weeks, looming energy supply problems have dominated the headlines of the European and international media. Members of the European Union have decided to approve an emergency deal to curb European demand for natural gas. The decision was preceded by a heated debate that highlighted the problems of shared decision-making in the EU. The “one size fits all” approach only works when countries with very similar conditions make an effort and regulate areas together. However, the EU has always been about diversity, and therefore decision-making has also been slow to take into account the different interests of countries. Recently, voices have become louder that want to abolish these forms of decision-making. They seem to be changing the way the European Union has functioned for decades, pushing countries to give up their sovereignty and embrace federal structures.
Introduction
The European Union’s energy supply problems have been evident since the outbreak of the Ukraine war, but these problems have only worsened for several reasons. On the one hand, European countries have imposed a complete ban on coal imports and a (partial) ban on oil imports from Russia. On the other hand, the majority of EU member states supply arms to Ukraine. In this situation, it should not be surprising that Russia is trying to avenge these countries by cutting and/or restricting natural gas supplies to them. For a few weeks, the idea of imposing sanctions on natural gas imports from Russia was also floated, but this proposal now seems to be off the table, as the European Commission must have realized that this measure would lead to a complete collapse of the European economy and supply problems in the winter of 2022-2023. We should keep in mind that before the war, the EU imported 40 percent of its natural gas from Russia. This week, Russian energy company Gazprom said that gas supplies to Germany would drop to 33 cubic meters per day starting Wednesday, or about 20 percent of the original amount of imported Russian gas. And Germany is not alone, as several other EU member states are already facing lower gas supplies. To minimize the problems, the European Commission has put forward an emergency plan to curb natural gas consumption by 15 percent. Although the proposal was approved by member states this week, the initial proposal was weakened because several countries hesitated and indicated they might have problems with the European Commission’s proposal. At the end of the day, only Hungary voted against the proposal. This briefing looks at the Hungarian position in this case and the political steps Hungary has taken in recent weeks.
“Winter is coming”
According to the European Commission press release, member states have agreed to voluntarily reduce natural gas production by 15 percent between Aug. 1, 2022, and March 31, 2023. The basis is the average consumption of the last five years. How member states achieve the reduction in consumption will be determined by the states themselves. The regulation allows the European Commission to impose mandatory reductions across the European Union in the event of an EU-wide alert. Ireland, Cyprus and Malta are exempt from the mechanism because the island states’ energy systems are not connected to continental energy grids and neither positive nor negative spillover effects are expected. Countries whose natural gas storage facilities are filled beyond requirements are exempt from the regulation, and critical industries that are overly dependent on natural gas consumption, or industries whose consumption has increased by at least 8 percent compared to average consumption over the past five years, receive an exemption. The regulation was issued because the European Commission and member states have concerns about the coming winter, which is very likely to threaten household energy supplies as well.
The Hungarian stance on the EU regulation
The Hungarian foreign minister stressed that the government will ensure that both households and businesses are supplied with sufficient energy in the coming months. He added that Hungary’s gas supply is continuous and uninterrupted and the so-called Turkish Stream now supplies half of Hungary’s consumption. He emphasized that the government did well – without listening to critics – when it supported the construction of the pipeline, which is a direct line from Russia to Turkey under the Black Sea. (Gazprom has begun delivering gas via Turkish Stream, including to Bulgaria and North Macedonia, and the Serbian pipeline will be inaugurated in 2020).
Hungary was the only country to vote “no” on the European Commission’s proposed regulation mentioned above. The foreign minister was asked by a Hungarian broadcaster TV whether the country would comply with the regulation if the European Commission enforced mandatory solidarity with other EU member states. The minister replied that “the natural gas stored in Hungarian storage facilities will be used in the interest of the Hungarian people and the Hungarian economy.” (He added that Serbia has purchased 500 million cubic meters of natural gas through two Hungarian energy companies and the gas is stored in Hungary.)
After the Extraordinary Transport, Telecommmunication, and Energy Council, the Hungarian Foreign Minister stressed that the regulation has no legal basis and that the regulation is not physically implementable, but rather a communication action. Hungary argues that the Treaty on the European Union clearly defines the right of member states to shape the energy mix, ensure security of supply and structure the economy. It is not a shared responsibility with the European Commission, therefore the adopted proposal lacks the proper legal basis. He added that the European Commission has disregarded Hungary’s energy supply structure, which is the result of decades of development. Half of the energy consumption is natural gas and Hungarian family households are responsible for half of this natural gas consumption.
The Hungarian foreign minister said, “While the leaders of the major Western European countries were talking about being able to solve their natural gas supply without Russian sources, why the fuss, why this emergency now?” he asked. [1] In other words, he pointed out the contradiction in Western European actions and behavior. He added that at the moment, Hungarian gas storage facilities are filled to 28.5 percent of Hungary’s annual consumption, while the European average is 18 percent. He explained that half of Hungary’s gas consumption is delivered through Turkish Stream and 100 percent of the gas volume is secured, while the rest of Hungary’s consumption comes through Nordic and Western pipelines. In this case, 53 percent of the gas is secured.
For this reason, as we mentioned last week, the Hungarian Minister of Foreign Affairs was instructed to purchase an additional 700 billion cubic meters of natural gas beyond the contract volumes mentioned. For this reason, the Hungarian Foreign Minister visited Moscow on July 21, 2022. He said the visit to the Russian capital served two purposes: to secure additional gas for the country and to declare that Hungary wants peace. The Hungarian approach when it comes to natural gas supply is that it is not possible to secure gas supply for Europe and Hungary without Russia. “Like it or not, [buying extra gas] wouldn’t be possible without resources from Russia, … The fact remains . . . without Russian resources it is simply impossible to buy so much extra natural gas in Europe today.” [2]
The next quote from the foreign minister reveals the long-term foreign policy strategy, perhaps we can call it a grand strategy: “We don’t want a world order again where we find ourselves on the periphery of one bloc, in a buffer zone or in an area next to a buffer zone,” he said. “We’ve been through that once. We lost decades over it.”[3]
Summary
The question of how to secure the EU’s natural gas supply reveals a deep fault line between Hungarian and Western European attitudes on this issue. And this can also serve as a case study illustrating the different attitudes toward sovereignty. While Hungarian foreign policy views energy security as a matter of national sovereignty, the European Commission tries to find common solutions. Although the formulation of finding common solutions is attractive and catchy, the Hungarian government has rightly pointed out that it lacks a legal basis in the Treaty on European Union. But apart from the legal aspects, it is a physical rather than a legal or moral issue that the continent is dependent on Russian sources, and we cannot free ourselves from this dependence in the short term.
[1] https://demokrata.hu/vilag/szijjarto-peter-olyan-mint-amikor-elore-megirjak-az-iteletet-561099/
[2] https://www.ft.com/content/bc68bae2-dbac-4e0c-a424-531258c094e6
[3] https://www.ft.com/content/bc68bae2-dbac-4e0c-a424-531258c094e6