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Welcome home. As the situation in the Middle East spirals this week, Russia’s war in Ukraine is intensifying. It is still partly funded by European payments for fossil fuels. As explained in today’s newsletter, cutting off cash flows proves a frighteningly challenging task.
During discussions on EU energy policy
For many in Europe, the case of rapid movement from Russia’s dependence on gas seems uncontrollable. As the EU is trying to strengthen Ukraine’s defense against Moscow’s invasion, how can we continue to channel large sums of money against Vladimir Putin’s war machine?
That debate is common in Brussels, with authorities pushing for plans to halt all Russian fossil fuel imports from the start of 2028. The EU’s energy strategy includes a significant increase in gas imports from alternative suppliers and an accelerated shift to green energy.
However, there is no unanimous consensus among the 27 EU members under this plan. This is the most powerful opponents from the Hungarian government of Victor Orban. This prompted the European Commission to formulate a plan to use trade laws to ban Russian gas contracts to avoid potential Hungary’s veto, the FT reported this week.
Orban’s critics denounced him for an unfair level of support for the Russian regime due to his particular affinity with Putin’s authoritarian style of governance. Orban’s own weakening of civil liberties and the Hungarian rule of law led to a freeze of billions of euros in EU financial support.
This week we heard Budapest’s response to this criticism, which was described in a ferocious manner this week by Hungary’s Foreign Minister and Trade Minister Szijjártó. Szijjártó is one of Russia’s most attentive friends and has traveled 13 times since the Ukraine invasion.
However, he argued that the continued warm attitude towards Moscow was driven by pragmatism about Hungary’s energy security rather than ideology.
Critics who criticize his government as “Russian spies, Moscow dolls…” have no knowledge of the realities of the physical and infrastructure of the region,” Syjart told FT’s Marton Dunai at the FT-Kathimirini Energy Transfer Summit in Athens.
Unlike Germany and France, which have invested heavily in infrastructure to import liquefied natural gas, “We are an inland country that relies on our neighbors and their neighbors,” pointed out.
This is the main reason Hungary continues to import most of its oil and gas from Russia, he said. The European Commission says that while purchases from Russia fell from 45% of EU gas imports in 2021 to 19% last year, only 3% of EU oil imports came from Russia in 2024.
Under the Brussels Repowell plan to phase out Russian energy imports – announced three months after Russia’s February 2022 invasion of Ukraine – Hungary will need a massive upgrade of its gas interconnection infrastructure with its neighboring countries. Szijjártó accused the European Commission of refusing to provide support for such investments due to its broader strategy, rather than moving away from fossil fuels.
The efforts of Southeastern European countries to secure EU financial support for the expansion of gas pipeline infrastructure “we’ve been rejected by Brussels and say that gas will not become part of the energy mix in ten years’ time.
Of the 27 EU member states, Hungary is an outlier in the continued warmth of its relationship with Moscow. Even in the erosion of democratic principles, at least in the eyes of fellow EU members, as demonstrated by the extraordinary financial pressures they applied. Many Hungary critics will see the flagship strategy as another effort to hold hostages to secure concessions.
However, in terms of discomfort over EU energy policy, Budapest is far from alone. A fellow inland state, Slovakia, opposed efforts to phase out Russian gas. Another coastal-free country, Austria this week urged the EU to be opened to resume Russian energy imports at the end of the Ukrainian War.
At a meeting in Athens this week, figures from senior governments and businesses in several southeastern European countries (most of which support the end of Russian gas imports) expressed misfortune at the gap between the region’s expensive energy prices and the cheap rates in Northern Europe.
Greek Prime Minister Kiliakos Mitotaki said “we are at a disadvantage” after failing to build a fully integrated EU energy system. “We have a fair distribution in terms of moving towards our (energy strategy) goals. Why should we pay such a high price in the market, or at least aim for price equality?”
Price disparities in the region are attributable in part to the slowness of the EU to implement market reforms and interconnection infrastructure to promote cross-border energy sales. It is also because northwest countries deploy lower cost renewable energy on a larger scale than their Southeastern peers, making them more effective in developing their own physical and market ties.
The debate over responsibility for these fundamental issues will ring out just like discussions about Orban’s actions both domestically and internationally. However, the ethical and security grounds for the EU’s shift from Russia’s energy will, however effective, be much more difficult and destructive than other member states. Relieving tensions over this will be a key test of EU energy strategies and broader European projects in the coming months and years.
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