Hungary pledges to restart gas supplies to Ukraine as Russia boosts European storage

By bne IntelliNews October 9, 2014

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Hungary will resume gas supplies to Ukraine in January, Prime Minister Viktor Orban is reported to have pledged on October 9. Meanwhile, according to other reports,  Russia is filling Hungarian storage facilities in order to supply European customers through the winter without relying on Ukrainian transit.

Orban, in a meeting ahead of an EU employment summit  in Milan,  says he told German Chancellor Angela Merkela that Hungary will restart gas deliveries to Ukraine in the new year, reported MTI. Budapest suspended deliveries to Ukraine on September 25, days after Orban met Russian state-controlled gas giant Gazprom, in a move that raised suspicions Moscow was trying to split off individual EU states from EU policy to support Ukraine. 

Kyiv is locked in negotiations to agree a deal on gas supplies with Russia after being cut off in June. Pushed by the EU and US, Poland, Slovakia and Hungary have been pumping gas to Ukraine in a bid to reduce the pressure on Kyiv.

Orban said  that Hungary will soon rejoin that effort, but reiterated that for now his country must create its own energy stability. Hungary is “now preoccupied with filling up its own reserves", he said. However, as of January 1 the Hungarian-Slovak gas network interconnector will be fully online, he noted, and this will help Hungary to transport “non-Russian gas to Ukraine, if our Ukrainian friends should wish”.

However, reports in the local press suggest the country's storage facilities are not only being filled to secure Hungarian supplies  over the winter. Business daily Napi Gazdasag reported on October 8 that Gazprom wants to use them to avoid any interruptions to deliveries to European customers through the Ukrainian transit system, which carries around 60% of Russian gas exports to the EU.

Russia has reserved storage space in Hungary for 700m cubic metres of gas for Europe under an agreement reached between the two countries last month, the paper claims, according to Reuters. Gazprom plans to fill the facilities by the end of this month, it added, quoting unnamed sources.

Securing space in Hungary appears part of a wider Russian strategy to prevent disruptions to European supply due to the stand-off with Ukraine. Previous arguments between the pair led many eastern EU states to shiver through the winter in 2006 and 2009 as gas supplies were cut.

Gazprom is also set to acquire Europe's biggest underground gas storage facility this autumn, Deutsche Welle reported on October 8. The deal for the plant in the German town of Rehden, was made under an asset exchange agreement with German chemical conglomerate BASF. It was signed and approved by the European Commission last year.

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