Hungary Blames EU, NATO Allies for Failing to Deliver on Energy

(Bloomberg) -- A U.S. demand that Hungary diversify its energy supplies away from Russia is being stymied by its European Union and NATO allies, the government in Budapest said, pushing back against critics of its close ties with Moscow.

The central European country is under pressure to reciprocate U.S. President Donald Trump’s administation, which has embraced Viktor Orban after the Hungarian leader alienated allies with a push to eradicate liberal democracy. After Washington made a U-turn last year by vowing to engage Orban rather than criticize his democratic failings, the relationship is being played out in energy, a vital issue in a region where Russia is the dominant supplier of gas.

The U.S. has prodded Hungary and other allies to find new sources of gas to reduce Russia’s influence in former communist Europe. Alternatives include a large undeveloped gas field in Romania, owned by Austria’s OMV AG and Exxon Mobile Corp., as well as the transport of U.S. liquefied natural gas via Croatia.

Hungary, which relies mostly on Russia to heat homes, has done its part by building connectors necessary to bring gas from Romania and Croatia. But its allies in the EU and the North Atlantic Treaty Organization haven’t held up their end of the bargain, Foreign Minister Peter Szijjarto said in an interview in Budapest on Wednesday.

“The U.S. government is one of the loudest in prodding Hungary to diversify its gas procurement sources,” Szijjarto said. “And yet this hinges on friends: Austrian friends, Croatian friends and American friends, on NATO or EU members. So far none have taken the step that’s needed to help us diversify.”

‘Huge Problem’

OMV this week said it was holding off approving a natural-gas project in the Black Sea, citing concerns about Romania’s regulatory environment. Szijjarto said that posed a "huge problem." While Croatia’s government decided Wednesday to invest 100 million euros ($115 million) in a floating liquefied natural gas terminal, Hungary’s top diplomat said U.S. deliveries from the country appear too expensive.

Other members of NATO and the EU have their doubts about the partnership with Hungary as well. Orban’s decision to allow Russia expand its sole nuclear plant and frequent visits to Budapest by President Vladimir Putin, including while the West tries to isolate him for aiding separatists in eastern Ukraine, have added to the optics of the country drifting eastward.

While Szijjarto said Putin would likely visit Budapest in the second half of the year, he called the relationship with Russia “transparent.” Hungary, he said, is a “reliable” NATO ally that’s keeping open lines of communications with the east.

“We don’t live on Mars. We live in central Europe, and here we’re always exposed to pressure from all directions,” Szijjarto said. “Our interest, based on our history, is that there be a normal relationship between east and West.”

‘Hungary First’

After years of criticism that increased Orban’s isolation, the Trump administration said last year it would engage with the Hungarian leader, who shares many of the U.S. president’s nationalist convictions and a staunchly anti-immigrant focus.

Still, while the U.S. has dialed down criticism over Hungary’s democracy, Washington has been exasperated by its inability to extract concessions from Orban, whose own pursuit of a nationalist agenda is straining the relationship of the NATO partners.

Aside from energy, another point of contention is the modernization of a defense agreement between the two countries that Hungary hasn’t signed. Szijjarto said he’ll travel to the U.S. next week to continue negotiations.

“I don’t think the political relationship has ever been this good” between the U.S. and Hungary, Szijjarto said. “Just as the American president has said ‘America first,’ what we’re saying is ‘Hungary first.”’

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