At first glance, the Hungarian prime minister’s visit appeared to fulfill its purpose: abundant accolades and a waiver from sanctions affecting Russian oil, gas, and nuclear resources.
And this occurred just five months before a challenging election.
However, a deeper look reveals a more complicated scenario. The US imposed a stringent trade agreement – costing Hungary significantly.
Additionally, there’s been no advancement on Viktor Orban’s most pressing concern: resolving the war in nearby Ukraine, along with the extended repercussions it has on Hungary.
First, consider Orban’s prominent triumph – a waiver from US sanctions, which a White House representative informed the BBC is limited to one year, despite Hungary’s foreign minister Péter Szijjártó asserting it would be indefinite.
The duration is noteworthy. Trump evidently wants to support his ally’s electoral victory in April. Furthermore, the exemption somewhat aligns with the European Commission’s directive for all member countries to cease importing Russian oil, gas, and nuclear fuel by the conclusion of 2027.
What is lacking, from an EU viewpoint, is any political assurance from Orban to adhere to that requirement – a promise that the Czech government has both made and honored. Meanwhile, the EU is attempting to reinforce energy sanctions – inciting anger from Hungary and Slovakia.
Behind the scenes, the Hungarian energy firm MOL has been modernizing two of its refineries – Százhalombatta in Hungary and the Slovnaft plant in Bratislava – to refine Brent crude rather than the high-sulphur Urals crude flowing from Russian pipelines.
On Friday, MOL announced that up to 80% of its oil could be sourced via the Adria pipeline from Croatia, though it comes with increased logistical expenses and technical challenges.
Thus, Orban’s assertion, which resonated with Trump, that Hungary, being landlocked, lacks alternatives to Russian oil, may not be entirely accurate.
In total, Hungary and Slovakia have together disbursed $13bn (£10bn) to Russia for oil since Russia’s full-scale assault on Ukraine began in February 2022, extending through to the conclusion of 2024.
The one-year reprieve afforded by the US is certainly a beneficial relief for Hungarian families this winter.
Orban mentioned to pro-government journalists accompanying him in Washington that otherwise utility expenses “might have surged by as much as threefold in December.” Containing those costs through various measures has been a core aspect of his appeal in Hungary since 2013.
Thanks to the US exemption, Hungary can also keep purchasing Russian gas via the Turkstream pipeline, which runs through the Balkans, and fund it in hard currency ($185m just in August) using a loophole in Bulgaria. Additionally, Orban has committed to acquiring $600 million worth of LNG from the US, per Bloomberg.
A critical element of the arrangement in Washington pertains to nuclear energy.
Hungary has consented to procure US nuclear fuel rods for its Paks 1 nuclear facility (at a price of $114m), concurrently with those acquired from Russia’s Rosatom and France’s Framatome.
Russian intentions to finance and construct the nuclear expansion, termed Paks 2, have faced substantial delays due to technical and licensing complications. The US agreement to lift all nuclear restrictions on Hungary might facilitate the project’s revival, yet significant hurdles still exist.
Hungary has also settled on purchasing US technology to enhance the temporary storage of spent nuclear fuel at Paks for between $100m and $200m.
Potentially the most significant aspect of the agreement was Hungary’s promise to acquire as many as 10 small modular nuclear reactors from the US, costing between $10bn and $20bn.
Hungary requires electricity to run the massive Chinese battery factories being constructed throughout the nation. Smaller nuclear installations are less susceptible to construction delays and are simpler to licence.
Lastly, discussions are underway regarding a currency swap agreement – resembling a recent US-Argentina arrangement to support the peso – allowing the US and Hungarian central banks to exchange currencies.
This arrangement would imply that should a financial crisis arise in Hungary, the US central bank could provide dollars to Budapest, enhancing Hungary’s financial security.
In summary, Hungary secured a deal to purchase US gas, nuclear power, and unspecified military systems in exchange for a provisional exemption from US sanctions on Russian oil and gas.
However, it did not succeed in reinstating the US visa waiver program, discontinued in 2022, which negatively impacts bilateral trade. Nor did it secure a new date for a prospective Trump-Putin summit in Budapest aimed at attempting to resolve the Russia-Ukraine conflict.
Critics argue that reliance on Russian energy is simply being substituted with dependence on the US. The Orban administration contends that it is achieving a more diverse supply chain.
