The Geopolitics of Russian Gas: Hungary’s Role in Securing Energy Transit to the EU

Introduction

The axis of political leaders supporting Russian gas transit—Orbán, Vučić, Erdoğan, and Bulgarian politicians—poses a serious challenge to EU and U.S. efforts to counter Moscow’s geopolitical ambitions. By enabling Russian gas flows, these countries risk undermining the integrity of the European gas market and prolonging Russia’s war efforts in Ukraine. Bulgaria’s role in this process makes it an accomplice in replenishing the Kremlin’s military coffers, while Hungary remains a key player in dividing Europe’s energy markets along East-West lines.

The unfolding dynamics illustrate the complex intersection of geopolitics and energy security in Europe, with Hungary and its allies deepening their dependence on Russian gas—despite the broader EU push to reduce reliance on Moscow. As the battle over gas transit routes intensifies, Hungary stands at the forefront, leveraging its strategic position to shape regional energy dynamics and secure its own interests. Orbán has emerged as Putin’s key ally in circumventing Western sanctions and EU attempts to curtail Russian energy revenues, which are converted into

Orbán’s Reliance on Russian Energy

Orbán has no intention of abandoning Russian gas or oil, as these resources serve as his strategic “Archimedean lever” against what he perceives as the EU’s irrational policies. His energy strategy is not just a reflection of current political interests but the culmination of Russia’s long-standing efforts to establish economic and political footholds in Central Europe following the collapse of the Berlin Wall.

Several key Hungarian companies—such as OTP Bank and MOL Group—trace their origins to the early 90’s and proceeds from the trade with Russian energy. According to the Hungarian press, the prominent Russian oligarch Megdet Rahimkulov played a pivotal role in their formation, leveraging his wealth from brokering Russian gas and oil sales and providing seed capital for key Hungarian companies.

Hungary’s Regional Expansion

Thanks to Orbán’s continued support and close coordination with Moscow, Hungarian companies have expanded their influence throughout Eastern Europe. MOL has acquired refineries in Slovakia and Croatia and created regional energy exchanges, positioning itself as a benchmark for gas and electricity markets across South and Eastern Europe.

More recently, MOL made strategic acquisitions in Azerbaijan, including:

• • A 9.57% stake in the Azeri-Chirag-Guneshli oil fields.

• • An 8.9% share in the Baku-Tbilisi-Ceyhan oil pipeline.

As part of the production-sharing agreement for the Azeri-Chirag-Guneshli field, Azerbaijan has extended the consortium’s rights to extract non-associated gas (NAG) from the field, which holds estimated reserves exceeding 113 billion cubic meters. Production is expected to begin in 2025, with MOL showing a particular interest in this gas, even more so than other consortium members, which include BP, SOCAR, INPEX, Equinor, ExxonMobil, TPAO, ITOCHU, and ONGC.

MOL’s swift entry into this consortium and the substantial $1.57 billion investment—well beyond the company’s typical capacity—raised eyebrows against its balance sheet – MOL’s total upstream sales are projected to decline by 38% to $2 billion in 2023, underscoring the scale of the investment. The motivation behind this move appears to lie in coordinated efforts between Budapest and Moscow.

Transit Negotiations and Pressure on Ukraine

Though these deals primarily ensure a steady supply of oil for MOL’s regional refineries, they also secure Hungary a foothold in Azerbaijan’s gas sector and position Orbán as a key player in negotiations regarding Russian-Azeri gas swaps and the extension of Ukraine’s gas transit post-2024. Hungary has simultaneously engaged in complex negotiations with SOCAR, Gazprom, and Naftogaz concerning the potential transit of Azeri gas through Russia, starting in 2025. These negotiations have been accompanied by unprecedented pressure on Kyiv from Hungary and Slovakia with thinly veiled threats that in retaliation both countries will block electricity exports to Ukraine.

Hungary’s pivotal role in these talks highlights the central role of Russian gas in the region’s energy dynamics. Without Russian gas, the planned “alternative” transit routes from Azerbaijan through Russia and Ukraine are unfeasible. Azerbaijan alone cannot compensate for the roughly 14 billion cubic meters of Russian gas that transits Ukraine annually.

The uncompromising nature of Hungary’s pressure on Ukrainian authorities is exposing the ultimate beneficiaries behind the push to continue Russian gas transit – those who have long profited from the export and transportation of Russian energy and remain determined to secure their interests—even as war rages in Ukraine.

Exploiting corruption networks in Ukraine’s gas transit dilemma

One more reason for Orban’s sudden urge to secure and extension to the Ukrainian gas transit agreement has been provided by the former head of Ukraine’s TSO – OGTSU, Serhiy Makogon, who believes that the suspension of transit for Gazprom might lead to arbitration proceedings by Hungary, Slovakia and others buyers for breach of contract. “Gazprom may face billions of dollars in claims from gas buyers. Gazprom’s obligation to deliver gas to Slovakia or Austria, and if the gas does not arrive in the EU, the buyers might go to arbitration for compensation for losses”.

Unlike the oil transit experts remain cautiously optimistic that Kyiv will resist the pressure on the gas transit substitution. Yet, one shouldn’t underestimate the ability of both Russia and Hungary to exploit the remaining corruption networks in Ukraine. The recent Lukoil incident is an example of such intricacies. In June, Ukraine halted the transit of Russian oil to Hungary, citing invasion-related sanctions. Budapest quickly offered a workaround: MOL, a Hungarian company, would buy Russian oil at the border and allow it to flow through Ukrainian pipelines as owned by Hungary. After three months of negotiations, MOL announced that it had reached an agreement. Curiously, Ukrainian officials remained silent until media scrutiny forced the issue.

Hungary’s Gamble and the EU’s Dilemma

Across the EU, there are advocates for energy deals that use questionable certificates of origin to obscure the true source of gas, whether from Azerbaijan, Turkey, Kazakhstan, Turkmenistan, or other regions, often disguising these supplies as alternatives to Russian gas. These deals are not confined to Hungary and Slovakia. Azerbaijani President Ilham Aliyev recently suggested that such negotiations are underway, purportedly at the behest of the EU, during the Chernobio International Forum in Italy on September 6, 2024. Both sides seem to share a common interest: while Ukraine relies on transit revenues, countries like Austria and Slovakia could face significant disruptions without access to this fuel.

However, the European Commission has firmly distanced itself from Orbán’s attempts to secure the continuation of Russian gas transit through Ukraine. EU Energy Commissioner Kadri Simson clarified that neither the Commission nor its officials are involved in negotiations to maintain the transit, stressing that Orbán’s actions do not reflect a coordinated EU effort and certainly do not represent official EU policy. Hungary, which currently holds the rotating presidency of the European Council, has a history of framing its national interests as broader EU concerns.

Orbán’s Geopolitics and Ukrainian Transit

Orbán’s efforts are not limited to gas but extend to Russian oil, benefiting Russia’s strategic interests. As Putin’s revenues from energy exports dwindle, Orbán’s actions seem aligned with Moscow’s goal of sustaining energy sales, which remain crucial to funding its war effort.

Orbán is wagering on the outcome of the U.S. elections and the possibility of a second Trump presidency, hoping it might support preserving Russian gas transit as a classic case of transactional diplomacy. He portrays the transit route as one of the few remaining avenues for engagement between the Russia and Ukraine. However, The Bruegel Institute has calculated that while Ukraine earns annually $850 million from transit fees, Russian gains in revenues $6.5 billion —a vital source of funding for its war in Ukraine.

Orbán’s efforts are supported by Aleksandar Vučić in Serbia and Recep Tayyip Erdoğan in Turkey, as well as top politicians within Bulgaria, the so-called Turk Stream ‘gang’, all of whom seem committed to helping Russia increase gas sales to the EU. New contracts have been announced for additional Russian gas deliveries for the coming winter and for 2025:

• • Serbia: 400 million cubic meters of surplus gas

• • Hungary: Nearly 2 billion cubic meters more in 2025, reaching a total of 8.5 billion cubic meters

Bulgaria’s Role and the Impact of Turk Stream

The additional Russian gas volumes require expanded transit capacity, which Bulgartransgaz (Bulgaria’s state transmission operator) has already secured, indicating Bulgaria’s choice between transiting Russian and non-Russian gas. Bulgaria’s participation reinforces Orbán and Putin’s strategy rather than aligning with EU energy goals. If Ukrainian transit routes close, Bulgaria will become the only conduit for Russian gas to Europe, and the transit infrastructure allocated for Russian supplies will limit the flow of non-Russian gas.

Despite Energy Minister Vladimir Malinov’s public support for non-Russian gas transit through Bulgaria’s vertical gas corridor, in practice, Russian gas dominates Bulgaria’s transmission system and the future spells greater dependence. To date, no non-Russian gas has flowed through the Balkan-Turk Stream, while Russian gas flows in all directions.

Bulgaria’s Gas Transmission System: A Case Study in Russian Gas Dependency

Bulgaria’s gas transmission system remains a clear example of the country’s deep dependency on Russian gas, especially visible in the capacity utilization of its key entry-exit points. Analyzing data from Bulgartransgaz, (all data as of October 22), we can see how this reliance plays out in the flow of gas into Bulgaria.

Main Gas Entry Points into Bulgaria

1. 1. Strandja-Markoclar Interconnector (Turkey-Bulgaria)
      • • This interconnector has a technical capacity of 6 billion cubic meters per year (bcm/y).
      • • The gas flows through the BOTAS transmission system in Turkey, where the “Turkish” blend entering Bulgaria is composed of at least 45% Russian gas.
      • • In 2024 the average daily entry rate has been 5 million cubic meters per day (mcm/d), totaling 1.5 bcm for the year so far.

1. 1. Strandja 2-Markoclar Interconnector
      • • This interconnector is dedicated exclusively to Russian gas, primarily feeding the TurkStream pipeline.
      • • So far in 2024, the average daily entry rate has been 43.7 mcm/d, and the total volume of gas entering Bulgaria through this route has been 12.9 bcm.

Greek Entry Points into Bulgaria

1. 1. Interconnector Greece-Bulgaria (IGB)
      • • This pipeline predominantly supplies Azeri gas under a contract with Bulgargaz. In 2024, it has transported 746 mcm of Azeri gas.
      • • However, the pipeline has also operated in reverse mode, carrying Russian gas from TurkStream, totaling 136 mcm so far this year.

2. 2. Siderocastron-Kulata Interconnector
      • • This entry point primarily receives LNG imports via Greek intermediaries via the Revithoussa terminal in Greece.
      • • In 2024, at least half of the LNG imported into Bulgaria was Russian LNG, despite its classification as non-Russian.
      • • Due to Gazprom’s aggressive price tactics, the volume of LNG imported into Bulgaria from Greece has drastically dropped to 50 mcm in 2024, while Russian gas flows via TurkStream into Greece and then via Kulata-Siderocastron have reached a record high 2.6 bcm (so far this year).

Russian vs. Non-Russian Gas Utilization Rates of Bulgaria’s Transit System

Despite the EU’s push for diversification away from Russian gas, the reality in Bulgaria shows a stark contrast. Of the total 17.746 bcm of gas entering Bulgaria in 2024(until October 22), less than 9% comes and is further used in Bulgaria or transited to neighboring countries from non-Russian sources. The vast majority – more than 90%, continues to be Russian gas, with much of it ultimately transiting through Bulgaria to countries like Hungary, reinforcing Viktor Orbán’s reliance on Russian energy.

This situation highlights Bulgaria’s pivotal role in facilitating the continued flow of Russian gas into Europe, in direct contradiction to the EU’s broader energy diversification goals.

Orban’s Arguments for Russian Gas Take Up: Security and Price

Proponents of Russian gas, like Orban, justify their position with two primary arguments:

1. 1. Energy Security: They argue that without Russian gas, physical shortages could threaten domestic energy supplies. While Austria has managed to diversify by importing gas through Germany, Hungary and Slovakia, deliberately, have not taken comparable steps to reduce their dependence on Russian gas.

1. 1. Lower Prices: Gazprom offers competitive prices, particularly on spot markets with substantial discounts to TTF. Unlike Russian gas supply under the long-term agreements with Hungary, Slovakia, Serbia, and Austria, which are less flexible and tied to TTF.

Market Dynamics: Gas Prices in Hungary and Austria

Putin’s strategy aims to flood the region with Russian gas via Turkey’s hub at discounted prices, eventually replacing Europe’s main energy exchange, the main gas exchange in West Europe – the Dutch TTF. Along the Turk Stream route—through Turkey, Bulgaria, and Hungary—gas prices are consistently lower due to spot supplies of Russian gas. This shift would isolate Eastern and Central European markets from Western Europe, consolidating Moscow’s influence.

Recent price trends on Central European exchanges reflect these shifting dynamics. On Hungary’s CEEGEX market recently, daily prices fluctuate between EUR 35 and EUR 39 per MWh, mirroring broader European trends. Hungary (CEEGEX) has been more reliant on Russian gas, particularly through TurkStream, which has sometimes resulted in lower spot prices compared to Austria’s CEGH VTP. Austria, meanwhile, benefits from a more diversified supply, including LNG from Western Europe. Intermittent volatility reflects changes in demand and the availability of non-contracted gas, including Russian imports via Turkey.

The Risk of Market Fragmentation

Russian gas continues to enter Bulgaria through four key companies – MET, DEPA, Mytilineos and a Litasco local daughter company – Sustainable Energy Supply. Turkish, Greek, Hungarian, Romanian companies are delivering Russian gas to Serbia, North Macedonia, Greece, Romania, and beyond—ultimately reaching Central and South-Eastern Europe.

The European Commission must recognize the threat of market fragmentation, as a Gazprom-dominated segment emerges in South-Eastern Europe. Hungary plays a central role in this development, with Bulgaria acting as the main entry point. This growing dependence on Russian gas not only undermines the EU’s strategic energy goals but also helps finance Russia’s war efforts through continued energy revenues.

Orbán’s Global Ambitions

Orbán has long harbored ambitions of becoming a major player on the European stage. These aspirations are closely tied to his ability to project influence within the EU, supported by financial resources derived from Russian gas and other energy revenues. He channels these resources into:

• • Expanding media networks in Europe.

• • Growing business networks in CEE through Hungarian state and private companies under his control.

• • Positioning himself as a key broker for Chinese and Russian interests in the EU.

Without the income from brokering Russian gas in Hungary and the region, Orbán would be left to rely solely on Hungary’s domestic economy, which lags behind in many key economic indicators. This would limit his relevance to the national stage, curtailing his regional and European ambitions.

Beyond Gas: Oil and Electricity Brokerage

Orbán’s ambitions extend far beyond the natural gas sector. He also seeks to dominate electricity trading and, crucially, crude oil brokerage. A core component of his strategy is securing an indefinite exemption from EU sanctions on Russian oil, allowing Hungary to facilitate the transport and trade of Russian crude to neighboring countries.
One key initiative is the proposed oil pipeline to Serbia, a project that would further cement Orbán’s strategic influence in the Western Balkans, allowing him to offer his services to both Russia and China.

Orbán’s interest in the Russian oil brokerage will be explored in greater detail in the next part of this analysis.

Ilian Vassilev