Hungary and Slovakia unveil "historic" gas link

By bne IntelliNews March 28, 2014

bne -

Hungary and Slovakia opened a link connecting their gas networks on March 27. The project, part of EU efforts to strengthen supply security in the eastern end of the bloc, comes as the region discusses accelerating efforts to reduce its reliance on Russian energy.

The Hungarian-Slovak gas interconnector is of historic significance, Hungary's Prime Minister Viktor Orban said at a ceremony to open the pipeline in Szada, which was also attended by his Slovak counterpart Robert Fico. He noted that the pipeline will not carry gas of Russian origin into Hungary. "Whatever happens to the east of us, gas will arrive in Hungary in any event," he said, according to MTI news agency.

The construction of the pipeline was co-funded with the EU. It adds to links that have recently been opened between Poland and the Czech Republic in the Visegrad region as part of wider efforts to develop the European gas grid. The "North-South gas corridor" is designed to run from Poland to the Balkans and the Adriatic Sea.

In addition, it's intended to open Central and Eastern Europe up to potential gas supplies from Western-European directions. The overall strategy is to help reduce the heavy dependence of countries in the eastern part of the EU on direct Russian supplies, which makes these countries vulnerable to high prices and political interference from Moscow.

Coalition of the unwilling

The Ukraine crisis offers a prime test of Brussels' efforts to align infrastructure and policy across the EU in order to strengthen the bloc's resilience. With CEE members states reliant on Russia for between 60% and 100% of gas demand, most have baulked at implementing hard-hitting sanctions against Moscow's annexation of Crimea.

Many have warned that they will resist any attempt by the bloc to impose another stage of sanctions, on trade and economic ties, which Brussels has said will follow should Moscow "escalate" the situation. Orban reiterated his opposition in an interview published on March 28 by business daily Vilaggazdasag.

"Economic sanctions are in the third round and it would be fortunate to avoid these because it is not in the interests of either Europe, or much less Hungary," said the PM.

Orban has promised Hungarians to make their energy prices the cheapest in Europe. Pushing prices for households lower in the last 18 months, the state is in the midst of taking over utilities, including the main importer of Russian gas, which accounts around 80% of annual demand. Budapest has also recently agreed a €10bn loan from Moscow to expand the country's nuclear power plant.

Slovakia, which hosts the mainline overland route for Russian gas which comes via Ukraine into the EU, has proved similarly reticent to rile Moscow. Earlier this week, pipeline operator EUStream sat down in Brussels to talk over reversing part of the network in order to pump gas from elsewhere in the EU to Ukraine, which is struggling to pay its gas bill to Russia.

However, PM Fico was quick to urge caution. "We are ready to help them, but any kind of help has its bounds and it is economically limited," he said. "Slovakia's first priority is to ensure guaranteed and secure Russian gas deliveries through Ukraine to the country."

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