Hungarian Prime Minister Viktor Orban has had great success in executing energy diplomacy. He is having to steer these discussions through the perfect storm that is today’s geopolitical environment. His administration’s efforts to balance energy needs and international relations have yielded mixed results, particularly in light of the ongoing conflict in Ukraine and sanctions on Russia.
Since 2013, Orban’s popularity has surged in Hungary, largely due to his government’s successful capping of utility bills, which has helped shield citizens from soaring energy costs. In doing so, this step has deepened his portrayal as the defender of Hungarian households against the pressure of outside forces.
Even amid the European Union’s historic sanctions against Russia, Hungary’s still getting that Russian gas. It exploits a Bulgarian loophole that allows such payments in hard currency via the Turkstream pipeline. This arrangement underscores Hungary’s strategic reliance on Russian energy supplies, even as broader European efforts aim to decrease dependence on Moscow.
Hungary last week obtained a one-year exemption from U.S. secondary sanctions on Russian oil, gas, and nuclear inputs. This exemption gives Hungary a stay of execution while Hungary finds its footing in a new energy landscape.
Orban’s government has instituted a ‘Look West’ government policy that has actively sought alternatives to Russian energy sources and has sought the US government’s support and help. Hungary negotiated a sweet deal to buy up American gas, nuclear power—plus a few weapons systems. In exchange, they were granted a short-term relief from U.S. sanctions.
Among the deals is a promise to buy U.S. nuclear fuel rods for Hungary’s Paks 1 nuclear power station. This acquisition will be $114 million. This facility is very important to Hungary, providing around 40% of the country’s electricity consumption. On top of that deal, Hungary has agreed to purchase $600 million worth of liquefied natural gas (LNG) from the U.S.
MOL MOL, Hungary’s national energy company, is investing heavily in retrofitting its refineries to run on Brent crude rather than Russian crude. This upgrade is a key step in Orban’s long-term plan to diversify and expand energy sources away from Moscow and Russian oil.
Russia’s plans to finance and build the Paks 2 nuclear extension are starting to encounter some serious roadblocks. Those hold-ups are due to continuing technical and licensing challenges. Now Hungary is angling to do even more to address these challenges. Specifically, it has pledged to invest between $100 million and $200 million in U.S. technology to help develop short-term storage capacity for spent nuclear fuel at the Paks facility.
Yet for all these successes, Orban suffered notable defeats in his meetings with U.S. officials. He fought unsuccessfully to bring back the U.S. visa waiver program for citizens of Hungary. This failure would have dire consequences for bilateral trade ties between the two countries.
The U.S. Federal Reserve and the Hungarian central bank are currently negotiating a currency swap arrangement. This initiative is intended to fortify Hungary’s economic security amidst growing global economic uncertainty.
Hungary has stood by agreements to buy up to ten U.S. small modular nuclear reactors. The expected price tag for this FTA deal is between $10 billion and $20 billion. This sizeable investment matches Hungary’s desire to increase its energy independence and pursue closer collaboration with American companies.
Orban commented on the potential impact of rising energy costs, stating that prices “could have gone up by up to three times in December,” highlighting the urgency of stabilizing energy resources for Hungarian citizens.
Since Russia’s full-scale invasion of Ukraine in February 2022, Hungary and Slovakia have paid over $13 billion for Russian oil. This expenditure represents the large financial stakes involved in their energy procurement strategies.