Hungary’s change of government has led to the expected decisions on energy policy, which could result in serious financial losses for Russia.
Budapest Makes the Decision Brussels Demands
Budapest has described Russia’s actions as a threat to Hungary, Europe and the international order.
“Russia’s behavior poses a threat to Hungary, Europe and the world order as a whole,” says a publication in Hungary’s Official Gazette signed by Prime Minister Péter Magyar.
This comes at a time when Russian raw materials still account for more than 90 percent of Hungary’s total oil imports and up to 80 percent of the gas the country consumes, purchased at preferential prices. This suggests that Magyar has decided to wind down the business relationship with Russia that existed under his predecessor, Viktor Orbán, and is prepared to accept deliberate economic losses and higher prices at the pump in exchange for a political break with Moscow.
Brussels is demanding this in return for the release of frozen subsidies from European funds.
Hungary has the technical capacity to import oil through the Croatian Adria pipeline, while the Hungarian energy company MOL can work with other suppliers. However, Croatia has agreed to supply Hungary only with non-Russian oil purchased on the global market and delivered by tanker to the Croatian port of Omišalj. This would inevitably push up the price of gasoline and diesel at Hungarian filling stations by roughly 15–25 percent.
Hungarians Will Have to Live With Lower Standard of Living
Most Hungarians are unlikely to support a sharp increase in the cost of living. The population has become accustomed to state subsidies for energy and fuel prices. The Hungarian authorities, however, have already begun a large-scale information campaign aimed at explaining to citizens that economic difficulties are not the result of the new policy but rather the “heavy legacy” of the past.
European funds, once released, will ease the situation for a time. But if inflation gets out of control, mass protests in Budapest will become inevitable.
Magyar’s Tisza party has already lost 10 percentage points in the polls, falling from 53 to 44 percent. Orbán, meanwhile, has demonstratively given up his parliamentary mandate and is now conducting his campaign “from the streets,” presenting himself as a defender of ordinary Hungarians.
Russia Could Lose Investments While Hungary Avoids Penalties
For Russia, however, the situation is unfavorable.
If Budapest can prove in court that Rosatom was responsible for delays in commissioning the second stage of the Paks nuclear power plant, Hungary could be fully released from paying penalties. Magyar’s move to revise the agreement with Rosatom effectively means freezing or completely canceling the construction project.
As for gas agreements, Budapest is likely to act through accession to European sanctions, which are recognized in international law as force majeure. Hungary would therefore avoid paying Gazprom any penalties.
In the oil sector, Hungary has no obligation to pay compensation for abandoning Russian crude because transit through the Druzhba pipeline is governed by short-term commercial contracts.
Hungary’s example once again shows that economic preferences — cheap gas, discounted oil and loans — do not guarantee that Russia will retain the loyalty of a country after its political elite changes.
The mistake lies in the fact that Moscow has consistently built long-term security and business strategies around specific political figures — Orbán and his party, Maduro and the Chavistas, Yanukovych and the Party of Regions — without sufficiently accounting for the characteristics of the region and its population or for the activities of geopolitical rivals.
As a result, a change of leader can instantly destroy investments accumulated over many years and lead to a loss of influence and reputation.
Russia needs to invest in its own country or conclude agreements that are effectively “ironclad.” Russia has never had, does not have and never will have allies other than its army and navy. Politicians and businesspeople keep forgetting this simple truth.
