Hungary gas supplies secure, will pay for gas as Putin wants it - Foreign Minister

Although the news that Russia's Gazprom has stopped gas supplies to Poland and Bulgaria is worrying, as a significant part of Hungary's gas imports come from the same direction [Bulgaria], it is important to know that transit supplies via Bulgaria are not affected, so gas supplies to Hungary will continue to run smoothly and according to schedule, said Szijjártó.

He pointed out that while the Poles and Bulgarians had a payment obligation to Gazprom that had expired in recent days and had not fulfilled the Russian request, which is why Gazprom had taken drastic action, Hungary's next payment obligation to the Russians will not be until 22 May.

Despite a series of warnings from Brussels and the latest EU guidance, he clarified once again that the Hungarian state company will pay for the gas exactly as Russian President Vladimir Putin had requested in a decree. This is why Hungarian gas supplies are not in danger, he explained.

A significant part of the natural gas supply to Hungary, 3.5 billion cubic metres per year, or about 10 million cubic metres per day, enters Hungary via the so-called southern route, through Turkey, Bulgaria and Serbia.

From this point of view, the news that Gazprom's deliveries to Bulgaria have stopped may be worrying, said Szijjártó, adding that

the news is accurate in that the gas destined for Bulgaria is not being supplied by Gazprom.

He stressed that according to Gazprom's information, transit, i.e. delivery via Bulgaria, either to Serbia or Hungary, is independent of this. Gazprom has contracts with different Bulgarian companies for the delivery of quantities to Bulgaria and for transit deliveries, he added.

Szijjártó reminded that Gazprom Export is asking roubles for gas, but there is "a solution whereby we can transfer the price of gas in euros to our euro account with Gazprom Bank, Gazprom Bank will convert it into roubles, and the roubles will be transferred to Gazprom Export," he said.

This effectively confirms his announcement on 11 April that this is how the Hungarian state company will pay for Russian gas imports, thus ignoring the latest warning and recommendation from Brussels.

EU guidance on paying in roubles for gas

EU companies may be able to work around Russia's demand to receive gas payments in roubles without breaching sanctions if they pay in euros or dollars which are then converted into the Russian currency, the European Commission said on Friday.

The companies would also need to seek additional conditions on the transactions, such as a statement that they consider their contractual obligations complete once they have deposited the non-Russian currencies, Reuters reported.

The Commission said companies should continue to pay the currency agreed in their contracts with Gazprom - 97% of which are in euros or dollars.

Companies with contracts stipulating payments in euros or dollars should not accede to Russian demands. This would be contrary to the sanctions in place,

a Commission spokesperson said.

In an advisory document sent to member states on Thursday, the Commission said Russia's proposal risked breaching EU sanctions since it would put the effective completion of the purchase - once the payments are converted to roubles - into the hands of the Russian authorities.

However, Moscow's decree does not necessarily prevent a payment process that would comply with EU sanctions against Russia over the Ukraine conflict, the Commission said.

Brussels said in the document that there were options that could allow companies to continue lawfully paying for gas.

EU companies can ask their Russian counterparts to fulfil their contractual obligations in the same manner as before the adoption of the decree, i.e. by depositing the due amount in euros or dollars,

the document said.

However, the procedure for securing exemptions from the requirements of the decree is not yet clear, it said.

Before making payments, EU operators could also make a clear statement that they consider their contractual obligations to be completed when they deposit euros or dollars with Gazprombank - as opposed to later, after the payment is converted into roubles, the document said.

"It would be advisable to seek confirmation from the Russian side that this procedure is possible under the rules of the decree," the document said.

The Commission's advice is not legally binding, but is an attempt to steer the discussion while member states work out how they can continue to pay for Russian gas.

The EU's sanctions regime does not prohibit companies from opening accounts with Gazprombank, or engaging with the bank to attempt to seek a solution, the document said.

Uniper, Germany's main importer of Russian gas, on Monday said it would be possible to pay for future supplies without breaching European Union sanctions even though Moscow has demanded payments in roubles.

According to an initial and therefore still non-binding assessment, we still consider a compliant future payment processing to be feasible,

Uniper said in an e-mailed statement to Reuters.

Uniper said it was essential for the German utility to act in accordance with sanctions law and that it was in close contact with the German government on the issue without providing more details. 

Cover photo: Portfolio