The Energy Union: Too much profit for Hungary

Improving European gas security rests on greater coordination between EU member states. The original concept for the Energy Union was based on gas security, fortunately, the proposal is now expressed in a more holistic package. This includes energy efficiency and alleviating energy poverty. Maros Sefcovic, vice-president of the Energy Union was in Budapest June 16, 2015 to discuss the key points of the Union.

Energy security, nonetheless remains a central tenet based on secure coordination of the gas sector. The proposal foresees joint negotiations with Russia over gas deliveries. This is the most controversial aspect. Removing member states rights to directly negotiate with Russia reduces their sovereign activity and ability to manipulate consumer energy prices.

The Energy Union sets up the same paradigm struggle outlined in my recent analysis on this blog. That is, the built Soviet energy infrastructure in the region continues to influence the political orientation and decision making based on the effort to maintain lower energy prices in Bulgaria, Hungary and Poland. This results in a strong Russian orientation and decision by Bulgaria and Hungary to maintain centralized and politicized energy systems while rejecting EU market principles and market mechanisms that reduce Russian leverage. For Poland, this translates to strong self sufficiency and reliance on coal.

In the case of Hungary, Prime Minister Orban perceived the Energy Union as a threat against national sovereignty when President Putin was visiting in February 2015. Profits from the energy sector should not be allowed (Hungary Around the Clock, February 19, 2015). Profits place the EU at a price disadvantage against the [profit orientated] US. Hungary accepts the political power of energy over market efficiency for energy. He recently reiterated this stance while softening his overall acceptance of the Energy Union.

“Hungary supports the establishment of a European energy union but insists on preserving its national authority in energy prices and the composition of energy supply, Prime Minister Viktor Orbán declared at the Globsec conference in Bratislava on Friday. “We consider nuclear energy the energy
of the future,” he affirmed” (Hungary Around the Clock, June 22, 2015).

For Hungary, market orientated pricing is not allowed, thus driving the political leadership to secure deals with Russia to support lower politically agreed prices. This means building more Russian nuclear power and pushing to secure more Russian gas delivered via Southeast European countries from Turkey. The natural resources and technical know-how of Russia remain central to Hungary’s efforts to keep energy prices low.

The rejection of market forces in energy supply runs counter to EU membership and the development of the European energy system. Acceptance and implementation of politically centered energy prices continues the historical path established by the Soviet Union. The infrastructure of gas pipelines and nuclear power plants must be maintained to enable non-market pricing of energy.

There are two clear paths. One takes Hungary closer to Europe and this is the market orientated approach, and the other path maintenance Hungary’s dependence on Russia. Energy sovereignty is not given over to market players but to other other nations – in this case Russia maintains it’s political hold on Hungary as long as energy prices are socially and politically sensitive. This strategy does not contribute to European energy security or to political orientation towards the EU. Rather it perpetuates the past political system of central control and fosters political instability if the leadership of a country attempts to break away from a Russian orientation. The results of this strategy can be seen in Ukraine’s attempted break and struggle over gas pricing with Russia. Hungary continues to push closer to Russia and future political instability if a market orientated approach is politically chosen.

2 thoughts on “The Energy Union: Too much profit for Hungary”

  1. Interesting posts. The main thing in the fulfillment of the need for energy is the energy source of origin. This can occur if there is a monopoly and a great public response in the absence of other alternatives in meeting energy needs, whether for business or household. Therefore needs to be made a policy hierarchy between corporate and state institutions, where there is a complementary advantage and not a burden on society in general in using it. Of course this is very complicated, and it’s not necessarily be run in accordance with what is expected. Greetings. thanks for the share.

  2. One of the most important things is the ownership of the energy source of the energy. this is what is currently contested by the power of the countries in the world. for it is necessary to develop a regulation through the market and the authorities that govern the world of energy needs, in order to avoid monopoly and inequality of resources. however, it is unlikely to ever happen. information of interest. thanks for the post.

Comments are closed.