Dependence on Russian gas and oil Remains a Problem

Government

Tristan Azbej, Minister of State of the Prime Minister’s Office responsible for helping persecuted Christians (left) and Bence Rétvári, Parliamentary State Secretary of the Ministry of Human Resources, at Pilisvörösvár, Pest County, on May 3, viewing more than HUF 210 million worth of medical equipment being donated to Transcarpathia through the Hungary Helps program. The aid consignment includes medicines, medical equipment, including infusion pumps, first aid boxes and bandages.

Photo by Attila Kovács / MTI

Hungary is not able to “wean itself from Russian crude from one day to the next,” MOL chairman-CEO Zsolt Hernádi told shareholders at an annual meeting on April 28. He stressed that MOL’s refinery in Százhalombatta (30 km southwest of Budapest) had been “optimized” for Russian oil. MOL’s refineries take delivery of 120 million liters of Russian crude a day, turning out diesel, petrol and other products “indispensable for the economy,” he added.

The government’s international spokesman, Zoltán Kovács, reiterated that sentiment on May 2, telling the United Kingdom’s BBC Radio 4 there could be “no alternatives” to Russian gas and crude for the country for the next three-to-five years. He added that all proposals on sanctions extending to Russian energy that the Hungarian government had seen so far would cause the Hungarian economy to grind to a halt, as 65% of the country’s crude and 85% of its gas comes from Russia.

Meanwhile, as Russia’s Gazprom ceased gas deliveries to Bulgaria and Poland, the Minister of Foreign Affairs and Trade Péter Szijjártó said transit deliveries of Russian gas to Hungary via Bulgaria were continuing on schedule in a Facebook post on April 27. He noted that Hungary gets 3.5 billion cubic meters of gas a year, or roughly 10 million cubic meters a day, through a pipeline that runs through Bulgaria and Serbia.

However, the European Union intends to reduce Russia’s gas imports by up to two-thirds by the end of this year, with the ultimate goal of divesting itself entirely by 2030, EU Energy Commissioner Kadri Simson said at a European Parliament plenary session in Strasbourg on May 3. She added that the committee had contacted all major gas suppliers to help replace Russian gas and also plans to boost renewable energy and energy savings where possible.

Following a meeting with European Union energy ministers in Brussels the same day, State Secretary for Energy Policy Attila Steiner said a proposal in which Hungary and Slovakia could get some relief if the EU moves forward with an embargo on Russian oil has not yet been delivered in writing.

As of April 27, 642,000 people fleeing the war in Ukraine had arrived in Hungary, the prime minister’s chief advisor for internal security György Bakondi said on TV news channel M1, 20,000 of whom had each applied for asylum in Hungary or a temporary residency permit.

Free Transport

So far, he said Hungary had spent more than HUF 40 billion on assistance for the refugees. Additionally, the Budapest Transport Center (BKK) announced on May 2 that free travel on public transportation for refugees from Ukraine, which had been introduced on March 4, would be extended until May 31.

The website, Safe in Hungary, offers Hungarian companies access to a list of job seekers who had fled Ukraine for Hungary, in compliance with all legislation on personal data. So far, 220 companies have registered on the website, and about 400 refugees have already been able to find employment as a result.

Increasing parts of the Hungarian economy are finding themselves under growing strain from the conflict in Ukraine. Augmenting input prices and logistics difficulties have been dampening the agricultural sector, according to a summary by Takarékbank and MKB Bank analysts.

Business daily Világgazdaság also noted how Hungary’s automobile producers had been affected. Compromised supply chains with suppliers in Ukraine have been affecting local units of Audi and Mercedes-Benz, while Magyar Suzuki has been unable to deliver vehicles to the two warring countries as delivery companies have suspended their operations in the region.

According to Tamás Flesch, the honorary president of the hotel association, in addition to the lack of Russian and Ukrainian guests, tourists have proven reluctant to come to countries in the region because of the war, making the tourism situation in Budapest worse than during the pandemic.

This article was first published in the Budapest Business Journal print issue of May 6, 2022.

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