Breaking ranks with EU, Hungary ready to pay for Russian gas in roubles

A handout photo made available by the Hungarian PM's Press Office shows Hungarian Prime Minister Viktor Orban holding a press conference at the PM's office in the Castle of Buda in Budapest, Hungary, 06 April 2022, three days after winning the general elections. [EPA-EFE/Zoltan Fischer HANDOUT HANDOUT EDITORIAL USE ONLY/NO SALES]

Hungary said on Wednesday (6 April) it was prepared to pay roubles for Russian gas, breaking ranks with the European Union which has sought a united front in opposing Moscow’s demand for payment in the currency.

Hungary will pay for shipments in roubles if Russia asks it to, Prime Minister Viktor Orbán told a news conference on Wednesday in reply to a Reuters question.

Russian President Vladimir Putin has warned Europe it risks having gas supplies cut unless it pays in roubles as he seeks retaliation over Western sanctions for Moscow’s invasion of Ukraine.

With weeks to go before bills are due, the European Commission has said that those with contracts requiring payment in euros or dollars should stick to that.

Hungary’s Foreign Minister Peter Szijjarto said earlier that EU authorities had “no role” to play in its gas supply deal with Russia, which was based on a bilateral contract between units of Hungarian state-owned MVM and of Gazprom.

Hungary has been one of a few EU member states that have rejected energy sanctions against Moscow in response to the invasion, which Russia terms a “special military operation”.

Prime Minister Viktor Orbán, whose government has pursued close business relations with Moscow for over a decade, swept to power for a fourth consecutive term in elections on Sunday, partly on a pledge to preserve security of gas supply for Hungarian households.

Reliant on Russian gas

While Putin’s demand has raised hackles in many of Europe’s capitals, its governments – which on average rely on Russia for more than a third of their gas – are discussing the issue with energy companies.

On Monday, Slovakia said it will act in unison with the EU, while Poland’s dominant gas company PGNiG has maintained that its original contract with Gazprom which expires at the end of this year is binding on both parties.

In Austria, energy firm OMV said on Friday it had had initial contact with Gazprom about paying for natural gas in roubles, though the government in Vienna said there was no basis for payment in any currency other than euros or dollars.

The European Union so far has not imposed sanctions on oil and gas from Russia but is preparing to propose a ban on coal imports and other products.

The European Commission’s intention “that there should be some kind of common response from countries importing Russian gas” was not considered necessary, Szijjarto said, adding that countries had individually signed bilateral contracts.

“And … no one has a say in how we modify our own contract.”

Hungary, which is heavily reliant on Russian gas and oil imports, signed a new long-term gas supply deal last year under which Gazprom is expected to ship 4.5 billion cubic metres of gas annually.

Meanwhile, Putin has discussed expanding Moscow’s economic cooperation with Belgrade, including in the energy sector, with his Serbian counterpart Aleksandar Vučić on Wednesday.

Serbia’s contract for Russian gas expires on May 31. “Talks about the new contract need to be launched as soon as possible,” a statement from Vučić’s office said.

Russian gas deliveries to Europe via three key pipeline routes were broadly steady overall on Wednesday morning, with eastbound flows into Poland from Germany falling back to zero after briefly resuming overnight.

[Edited by Nathalie Weatherald]

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