MOL & Surgut Prediction Still Holding Water

The news was a shock…. Could I have been wrong? In an earlier post, I analyzed Hungarian and Russian wrestling moves in the area of gas. I predicted the Hungarian government wasn’t moving fast to release Surgutneftegaz from its holding in MOL. The news had Hungarian development minister,Tamas Fellegi, stating that the Hungarian government would be buying the 21.2% stake in MOL that Surgut holds.

But alas, apparently there was mixed up, and it was corrected the next day that the minister only stated that Hungary was interested in buying the stock as it would be beneficial for Hungary and Central Eastern Europe.

The news that emerged, which is interesting, Surgut’s holding in MOL are part of a larger discussion with Russia over a broad range of energy issues, according to the ministry’s corrected statement. Now this is interesting. Because a) it confirms Hungary is taking a holistic approach to its relations to Russia – in the area of energy and b) that I was right (which is important only for me). As I stated before, “Hungary can sit back and see if anything comes up they can either barter off, or raise the money to buy it outright.”

Maybe I’ve lived in Hungary for too long (which I have), but it is also clear that Hungary can gain more than just the 21.2% ownership in MOL if it decides to purchase it (apparently this can be financed by the open market). On the table for discussion is South Stream and a gas agreement for 2015. If there are other energy issues besides these, the government may also be seeking to gain some leverage. But based on these two topics, it can be seen where the Hungarians might be seeking some additional leverage. Why not make the Russians pay for more of the Hungarian portion of South Stream or gain some lower priced gas? (although this is relative in a market with current low gas demand and a post 2017 environment with South Stream/Nabucco/Krk LNG).

Overall, I’m more unclear as to how the Hungarians will be able to extract any significant, or meaningful concessions from the Russians in energy (particularly over these two mentioned areas). If the Hungarian Government wants to get away from energy dependency with Russia, a more productive path would be to limit further energy deals – not extend these. But then this is central Europe, and interdependency is important for all.

development minister Tamás Fellegi