PM Orbán has paid a visit to Moscow this week

HUNGARY - In Brief 03 Feb 2022 by Istvan Racz

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Now that weekly adjustments of the MNB sterilisation rate are off the agenda (at least for now), we can turn to other issues on Thursdays, when otherwise 1-week deposit tenders are held. So our note for today deals with PM Orbán's visit to Mr. Putin two days ago, or more broadly how Hungary's prime minister is trying to position his country in a precarious balance between NATO/EU and Russia among the current, rather difficult circumstances. So, here are the recent events and related considerations we see as interesting:- In July 2021, a gas pipeline connecting Serbia with Hungary was completed. Hungary now has such connections with six of his seven neighbours, providing the country with a choice on which way to import natural gas, depending on circumstances. Hungary's government maintains distinctly friendly relationship with its Serbian counterpart.- In October 2021, Hungary signed a 15-year agreement with Russia on the imports of 4.5bn m3 of natural gas per year. Of this, 3.5bn m3 would come through Serbia and 1bn m3 from Austria. This represents about 45% of Hungary's total gas consumption. Domestic production covers another cca. 15% of domestic consumption.- The gas transport deal with Russia runs against current EU policy, according to which members should not enter into similar contracts, as those would increase their dependence on Russia. This claim is only true if they get gas from Russia cheaper than the European market price. Should Russia fail to implement long-term agreements, their partners would just fall back to reliance on the European gas market, where they would be anyway without the agreements. In fact, a long-term gas contract with Russia lessens a ...