Hungary prepares to bypass EU ban on South Stream

By bne IntelliNews October 23, 2014

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Hungary announced on October 22 that it is preparing legislation that would allow it to bypass EU oversight and start building its section of the South Stream gas pipeline. The move will only raise the tension in Budapest's strained relations with Brussels and Washington.

Antal Rogan, head of the ruling Fidesz party’s parliamentary group, told news portal that the economic affairs committee has proposed an amendment to legislation that would allow any company to build pipelines. Currently, only certified transmission system operators (TSO) can construct international routes. However, such companies are subject to international approvals because of the need to harmonise development plans.

"South Stream is going to be built, however, it would be important to enable as many firms as possible to compete for construction of its Hungarian segment," Rogan said in an emailed response to questions from Reuters. "That is because more companies are able to build pipelines than those that can operate pipelines."

The standoff between the West and Russia has provoked the EU to accelerate efforts to diversify away from Russian energy dependence. Brussels has ordered all work halted on South Stream, which is planned to bypass Ukraine's transit network to carry 63bn cubic metres of gas under the Black Sea and on to an Austrian hub. 


The Hungarian move appears purposefully designed to provoke the EU and US, which have recently signalled their anger over Hungary's stance on the Ukraine crisis. After Prime Minister Viktor Orban met Gazprom CEO Alexei Miller on September 22, Hungary promptly halted reverse gas supplies to Ukraine, which is struggling to agree a deal with the Russian state giant following a cut-off in June. Meanwhile, Gazprom agreed to raise supplies to Hungarian storage facilities. 

With winter approaching, Russia has sought to raise the stakes, limiting gas deliveries to Central European states feeding Ukraine and warning that reverse flows go against bilateral contracts. Slovakia, which needed several pushes  before it agreed to help Kyiv, has maintained reverse flows even as its own deliveries from Gazprom have been cut by 50%.

There are some signs that Western countries are finally losing patience with Orban’s increasingly authoritarian rule. A scandal erupted in Hungary in mid-October when Washington announced it had banned six government officials from entering the US because of corruption concerns. It is the only reported instance of a travel ban placed on a Nato ally.

Meanwhile, EU officials and parliamentarians have raised discussion over the state of democracy in Hungary under Orban, and the country's candidate to the new European Commission was rejected earlier this month because of  concern over his role in introducing controversial changes to judicial, media and human rights legislation.

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