Hungary Defends Its Right to Continue Purchasing Pipeline Oil and Gas from Russia Before the U.S.
The U.S. authorities have agreed to exempt the supply of Russian energy resources to Hungary via the "Druzhba" and "Turkish Stream" pipelines from sanctions, stated Hungarian Prime Minister Viktor Orban. Last Friday, he held talks in Washington with U.S. President Donald Trump.
"Druzhba" supplies oil from Russia, while "Turkish Stream" delivers gas from our country. "Hungary will maintain low energy prices," Orban said, according to EFE.
Furthermore, U.S. sanctions against the Paks II nuclear power plant construction project have been completely lifted, making it unnecessary to extend the exemption, Orban explained. The new nuclear power plant is being constructed by Rosatom.
How did Hungary manage to secure such favor from the American president? In exchange, Hungary promised to sign an important intergovernmental agreement on nuclear cooperation. Of course, this agreement is primarily significant for Washington, and here's why.
The agreement includes three points, as reported by Hungarian Foreign Minister Peter Szijjarto. Firstly, the supply of American nuclear fuel from Westinghouse for the operating nuclear power plant in Paks, amounting to $114 million in addition to Russian fuel. Hungary is agreeing for the first time to use non-Russian fuel for Soviet-type nuclear reactors. Secondly, Hungary promises to employ American technologies in constructing a storage facility for spent nuclear fuel (SNF) in Hungary. Thirdly, Hungary plans to utilize American technologies in the construction of small modular reactors (SMRs). Hungary aims to support the construction of up to ten such reactors, costing up to $20 billion.
Until now, Hungary had only collaborated with Rosatom in the field of peaceful nuclear energy, even during the Soviet era. The Russian nuclear company remains a global leader in this sector today. What distinguishes it from competitors is not only its ability to construct turnkey nuclear power plants but also its speed. European and American competitors are notorious for their long construction timelines, unlike the experienced Rosatom. The longer a construction project takes, the more expensive it becomes. Additionally, our company handles the entire project—constructing and supplying state-of-the-art nuclear reactors, training personnel, and providing maintenance and fuel supply for the entire operational lifespan of a nuclear power plant (which can extend up to 60 years). Moreover, Russia can grant loans for construction, and after a nuclear power plant starts operations, it even takes on the responsibility for storage and processing of spent nuclear fuel. The customer has nothing to worry about; everything is managed by the Russian company.
The American company Westinghouse has fallen behind Rosatom and has been trying to catch up over the last decade, infiltrating traditional markets for us. For example, Americans conducted experiments, quite risky at first, on replacing Russian nuclear fuel with their own in Ukraine. They also tested technologies for constructing SNF storage facilities on Ukrainian territory. Now, they wish to scale their technologies to other countries, including Hungary.
No less important in the agreement is the third point: essentially, the U.S. wants to test their new technologies for constructing small modular reactors in Hungary.
“The American company NuScale has been developing small modular reactors for many years; however, it has yet to realize commercial projects outside the U.S. Hungary could become the first country where such a project is implemented—its success will largely determine the use of American small reactors in other countries,”
– explains the significance of this point for the U.S. Sergei Tereshkin, CEO of Open Oil Market.
When the U.S. is not number one in the market but has ambitions to become so (in this case, the nuclear energy market), they engage in deals like this. U.S. corporate sanctions against specific Russian oil companies could have deprived Hungary of the ability to purchase our energy resources. If you want to retain access to them—purchase our nuclear technologies, even though they might not be necessary due to good relations with the market leader—Rosatom.
The U.S., of course, couldn't miss the opportunity to embed its liquefied natural gas (LNG) into this deal, which has long been openly pushing Russian gas out of the European market, along with its defense products. Hungary is obliged to procure LNG from the U.S. for nearly $600 million, plus defense products costing $700 million through foreign companies.
“Hungary agreed to American nuclear fuel and technologies to safeguard what is most important to it—pipeline supplies of oil and gas from Russia. Therefore, Hungary also agreed to the 19th EU sanctions package, which includes a ban on Russian LNG by 2027, and now—on the agreement with Americans on nuclear energy,” believes Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund (NESF).
Previously, Hungary did not agree to the ban on Russian LNG in Europe because it would indirectly impact it: prices on the exchange would be higher than if competition were strong in the European market due to Russian LNG, and prices in long-term contracts are indexed based on exchange prices, the expert explains.
“Hungary agreed to this, hoping that the European Union would relent in its demand to abandon imports of Russian pipeline gas and oil. The same story applies to the conclusion of an atomic deal with the Americans. Hungary needed an exemption from the already imposed sanctions against Lukoil since it purchases oil through the "Druzhba" pipeline,”
– says Yushkov. On October 22, the U.S. imposed sanctions on Lukoil and Rosneft. Since the beginning of this year, they have already been in effect against Gazprom Neft and Surgutneftegas.
Regarding LNG, the expert suggests that Hungary will have to buy American LNG, but it will not consume it because it is unprofitable. LNG is delivered to ports by sea to another country, from where Hungary will have to transport the gas across half of Europe; it is easier and more profitable to resell it to other buyers. Therefore, Hungary will likely operate as a trader regarding American LNG, believes Yushkov.
“Hungary's task is to obtain an exemption for the import of Russian oil and gas here and now, while the signing of contracts with the U.S. concerning nuclear energy and LNG should be stretched out as much as possible,” believes the NESF expert.
As for Rosatom, experts assess the losses for it in the Hungarian market as non-critical. The company has a large order portfolio from foreign countries. The Hungarian Foreign Minister emphasized that the process of diversifying nuclear fuel supplies does not mean abandoning cooperation with proven partners, in this case, with Rosatom, for which the construction of the second phase of the nuclear power plant in Paks is underway.
Just on November 6, Rosatom reported that Hungary's Atomic Energy Authority (OAH) issued the necessary permits for Russia to commence the main construction of the Paks II nuclear power plant in Hungary. These documents allow for the pouring of the first concrete for the foundation of the fifth power unit. According to the plan, this should take place in February 2026. Additionally, permission has been granted for the construction of the nuclear island buildings.
For the continuation of the construction of the Paks II nuclear power plant based on Rosatom's project, Hungary also required an exemption from U.S. sanctions.
In November 2024, the administration of former President Joe Biden imposed restrictions against Gazprombank. It was through this bank that financing for the construction of the second nuclear power plant in Hungary was managed. In January 2025, the leadership of Rosatom was also subjected to sanctions. However, under Trump, Hungary's request to lift sanctions against Gazprombank was granted. But this exemption needed to be extended. Now, sanctions have been lifted without the need for extension, indicating that a new nuclear power plant will indeed be built.
This project is particularly important for Hungary as it will increase the capacity of its nuclear complex from the current 2 GW to 4.4 GW. The share of electricity generated by nuclear power plants will reach 70% in the country's energy balance when the new project is implemented. The second nuclear power plant is expected to be completed by 2030, with a lifespan of 60 years.
Source: VZGLYAD
