Hungary to circumvent EU sanctions through gas payment 'technical solutions'

Hungary to circumvent EU sanctions through gas payment 'technical solutions'
Hungarian Foreign Minister Peter Szijjarto (left) with EU foreign policy chief Josep Borrell.
By bne IntelliNews April 12, 2022

Hungary plans to pay for Russian gas in euros through Gazprombank, which will convert the payment into roubles to meet a new requirement set by President Vladimir Putin, Foreign Minister Peter Szijjarto told reporters during a break at a meeting of EU foreign ministers in Luxembourg.

Szijjarto acknowledged "heated debates in the media" over the matter of payment for Russian gas in roubles.

European Commission President Ursula von der Leyen said days earlier that paying for Russian gas in roubles would breach the sanctions against Russia. The EU sought a united front in opposing Moscow's demand for payment in the currency.

The remarks by the foreign minister come a day after the Hungarian government spokesperson Zoltan Kovacs said that payment in roubles for Russian gas is not a violation of European Union sanctions. Prime Minister Viktor Orban in an international presser has also confirmed that Hungary is prepared to pay with roubles for Russian gas

Orban said it is impossible for Hungary to turn off cheap Russian gas and buy expensive American energy instead, adding that it is not viable for Europe to count on the transportation of sufficent volumes of LNG.

Szijjarto explained in a Facebook post the way Hungary would continue to pay for Russian gas.

State-owned energy company MVM's subsidiary CEEnergy is setting up two accounts at Gazprombank, which is not on the list of sanctioned banks, a euro account and a rouble account. It pays euros to Gazprombank, which converts the euros into roubles, and this goes to Gazprom Export.

"So we pay in euros, the euros are converted into roubles by Gazprombank and the amount is paid to Gazprom Export. This solution doesn't violate any of the sanctions that have been imposed while also complying with the demands of the supplier," Szijjarto explained

He noted that the long-term contract signed in September on Hungary's gas deliveries from Russia allows for payment to be made in currencies other than the euro.

At Monday's meeting of the foreign ministers of the EU member states, no decision was taken on the imposition of sanctions on Russian oil and gas imports, although some members were in favour of a broader prohibition of energy supplies. Last week the EU leaders approved the fifth round of sanctions that includes a ban on Russian coal imports into the EU.

Hungary has opposed extending sanctions against Russia to oil and gas. Some 85% of its gas and 60% of oil needs are covered by Russian imports.

"We will not vote in favour of sanctions on oil and gas because these would effectively shut down the Hungarian economy," Szijjarto said.