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Hungary Calls Bulgaria Levy on Russia Gas Transit ‘Hostile Step – Bloomberg

Fuel and oil rail wagons at the Zeletsyno train station near Nizhny Novgorod, Russia. Photographer: Andrey Rudakov/Bloomberg
Fuel and oil rail wagons at the Zeletsyno train station near Nizhny Novgorod, Russia. (Andrey Rudakov/Bloomberg)

Zoltan Simon, Bloomberg News

BUDAPEST
EnergiesNet.com 10 17 2023

Hungary pledged to retaliate against Bulgaria after the Balkan nation blindsided it with a tax on Russian gas transit, potentially threatening the viability of energy imports through a critical route.

The levy, which Bulgaria announced last week, came without warning and is considered by Hungary to be a “hostile step,” Foreign Minister Peter Szijjarto said on Tuesday. He said Hungary will work with Serbia, which also relies on the Balkan pipeline for natural gas, on a response.

“We’re not going to leave this step unanswered,” Szijjarto told state television after Hungarian Prime Minister Viktor Orban met Russian President Vladimir Putin in Beijing. Szijjarto didn’t provide any details on how his country might respond.

Putin assured Orban that Gazprom PJSC, the Russian gas exporter, will ensure supplies under the contractual terms, according to Szijjarto.

Bulgaria published a law on Friday introducing a charge of 20 Bulgarian lev ($10.81) per megawatt hour of Russian-origin gas, effectively raising its cost by about 20% of the price of Europe’s benchmark gas traded in the regional hub of Amsterdam.

The move isn’t targeted at Hungary or Serbia, but at Russia, which has sought to tap energy profits to finance its war in Ukraine, Bulgarian Prime Minister Nikolai Denkov said on Tuesday.

“We expect not to increase prices in Serbia and Hungary, but to reduce the profits of Gazprom,” Denkov was quoted by the Dnevnik.bg news website as saying at a conference. “That is, to reduce the funds that enter the state budget of Russia to wage the war.”

The move nonetheless caught Hungary and Serbia by surprise, prompting them to protest and scramble to ensure supply security ahead of the European winter season as both countries are reliant on Russian natural gas for heating.

Both Hungary and Serbia have maintained close ties to the Kremlin, even after Russia’s invasion of Ukraine last year, and have been slower at reducing their dependence on Russian energy. 

Orban’s meeting with Putin on Tuesday, where energy security topped the agenda, was the first by a European Union leader since an international arrest warrant was issued by the International Criminal Court in March against the Russian president for alleged war crimes.

‘More Subtle’

Given its reliance on Russia and need to diversify energy resources, Hungary “should conduct a much friendlier, more subtle foreign policy with the surrounding countries” to avoid its energy security weakness from becoming a bigger problem, said Tamas Pletser, an energy analyst Erste Group Bank AG.

Bulgaria by contrast has taken bold steps, including refusing to pay for Russian gas in rubles. That prompted Gazprom to stop supplying the nation and Sofia to switch to alternative suppliers. Last month, Bulgarian lawmakers approved a motion to gradually end imports of Russian crude oil, bringing the country in line with other European Union members.

Unlike Bulgaria, Hungary is a landlocked country, and the procurement of its energy supplies isn’t a political question but a physical one, Szijjarto said. 

“The minimum would’ve been that Bulgaria flag this step to us, but even better they negotiate,” Szijjarto said. “Neither happened here.”

–With assistance from Slav Okov and Veronika Gulyas.

bloomberg.com 10 17 2023

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