Category Archives: News

New Journal Article: The Power of Policy Regimes: Explaining Shale Gas Policy Divergence in Bulgaria and Poland

The Power of Policy Regimes: Explaining Shale Gas Policy Divergence in Bulgaria and Poland

Authors: Andreas Goldthau and Michael LaBelle

  • First published:


Shale gas policies vary significantly across Europe, notably in Russia-dependent Central Eastern Europe. Most strikingly, Bulgaria banned shale gas, whereas Poland remains firmly committed to fostering it despite its drawbacks. This article uses a policy regime approach to explain the shale gas puzzle. Drawing on a large set of interviews, the piece investigates regime strength as the causal factor that explains the adoption of specific shale gas laws (Poland) or a fracking ban (Bulgaria). It finds that the Polish shale gas policy regime was strong, based on a powerful political narrative and characterized by an institutional process ensuring the buy-in of actors from relevant policy levels and subsystems. In Bulgaria the policy regime was weak, failed to co–opt key stakeholders, and was institutionally ill-designed. The findings show how different degrees of policy regime strength translate into diverging policy trajectories in two countries that otherwise operate in similar environments.

The article can be found here.

European Commission energy report identifies progress and set backs in Hungary

Giving Hungary’s energy regulatory authority greater political independence and improving investment certainty are recommendations recently published by the European Commission’s report on Hungary’s energy sector. Identified in the report are Hungary’s regional integration and consumer dissatisfaction with gas suppliers.

Contributors to the report, including analysis on Hungary, are Michael LaBelle, an Assistant Professor at Central European University, CEU Business School and Department of Environmental Sciences and Policy, and Andras Deak, Research Fellow at the Institute of World Economics of the Hungarian Academy of Sciences. Working with energy consultancy AF for the European Commission, the overall report provides a snapshot and recommendation for each EU member state.

Electricity price change by component 2008 – 2012 (source: Eurostat, energy statistics)
Electricity price change by component 2008 – 2012 (source: Eurostat, energy statistics)

The 2014 report found overall improvement in the EU’s energy infrastructure and market. Consumers in some markets have more choices for electricity and gas suppliers, cross-border trading increased and wholesale electricity prices declined by one-third and gas prices were stable between 2008 and 2012. Suggestions included more substantial regional cooperation, use of smart meters and linking more closely wholesale and retail pricing – so lower wholesale prices translate into lower retail prices.

The report on Hungary included the progress made linking Hungary’s electricity market to the Czech Republic and Slovakia. This increased the amount of electricity available on all these markets creating regional price convergence. The report also noted that Hungarian gas consumers are the least satisfied in the EU.

Deterioration in the regulatory environment and notably the powers of Hungarian Energy and Public Utility Regulatory Authority were identified as problematic areas. Actions by the Hungarian government during the reports timeline of 2012- to early 2014 noted the removal important independent functions of the energy regulatory of network tariff setting authority. These political actions resulted in the reduction of energy prices by 20% (subsequently more since the completion of the report). The appeals process against the authorities decisions was also altered removing Hungary’s courts from providing sector oversight. Overall, the report identifies actions by the Hungarian state of increasing its ownership while investor owned utilities lost money and were dissuaded from investing in the sector.

The full report can be found here, and the report on Hungary can be found here.



 Future Events Energy Investment Forum 2015

Date:  Thursday, November 5, 2015 – 8:30 am to 5:00 pm

Roundtables of CEOs – Where are we headed? Orientations and possibilities on the domestic energy sector

Moderator: Dr. Michael LaBelle, professor, Central European University Business School and in the Department of Environmental Sciences and Policy

Conversation participants:
Dr. Eric Depluet, CEO, E.ON Hungária
Sándor Fasimon, COO (Hungary), MOL Group
Attila Ságodi, Partner, Head of Sector Government, Infrastructure, Energy & Utilities, KPMG


The Politics of Shale Gas in Eastern Europe: Technology Innovation, Regulatory Legacy and Energy Security

Date:  Friday, November 6, 2015 – 8:00am to 9:15am

Input: Andreas Goldthau, Professor of Public Policy, School of Public Policy, CEU

Commentator: Michael LaBelle, Professor at CEU Business School and Dept. of Environmental Sciences and Policy

Commentator: Andras Jenei, Energy Policy Advisor

Past Events

“The evolving notion of security in law and policies on energy investment: international and national perspectives”, University of Liverpool in London, May 29, 2015

News: Conference Explores the Impact of Public Policy in the Shale Gas Industry, University of Pittsburgh, April 18-19, 2015

SCEE Weekly News Review

The quick turn around by the Bulgarian government to support at least one Russian/Bulgarian project was displayed fully on Saturday Nov. 13, 2010. The prime ministers of Russia and Bulgaria Vladamir Putin and Boiko Borisov sat down and agreed to establish South Stream Bulgaria AD to develop the Bulgarian section of the pipeline. Gazprom and the Bulgarian Energy Holding (BEH) will be the main principles in this project. However, as reported by in the Russian press, this means little.

“The establishment of a joint company in general does not make the destiny of real construction clearer. This would happen only when an investment decision is made, but the perspectives here are very difficult to forecast,” expert Mihail Krutin points out cited by “Nezavisimaya Gazeta.”

Of course finally getting the Borisov government to agree to a project with Russia didn’t have any impact on current Russian gas prices for Bulgaria. According to the Bulgarian PM stated after the Russian PM left town that they would be getting lower gas prices – contradicting Putin’s assertion that these things are not connected.

And finally, according to, the visit also produced statements that technical progress is still being made in building Belene NPP and other partners will be joining the project. At a Climate Strategies conference in Budapest this week and the 5th Energy Forum last week, it is clear that despite widespread energy industry perspectives on the future growth of nuclear power (excluding German and Austrian perspectives that were vocalized at the Climate Strategies conference), financing and ownership structures still remain key hurdles to building nuclear power. And Belene is turning out to be the poster child for the difficulty of building nuclear power.

In other Russian interest related news, the Hungarians prove again they have Surgetneftegaz pinned to the mat. According to,the Metropolitan High Court of Appeal supported the earlier ruling of a lower court that the MOL was right to bar Surget from being listed in the share registry. Outside this narrow legal ruling, this is also connected to the Hungarian Energy Office not approving participation of Surget in MOL due to it not clarifying the companies ownership structure. Well, the only joke that can come from this ruling is that even if Surgut was now listed as a full owner of MOL, the Hungarian government would no doubt come up with a special tax to apply to Surget.

And in broader EU news, and something that will need to be followed up on in separate post, Bloomberg reports that the EU Commission outlined its energy infrastructure priorities for the next two decades. But specific projects won’t be identified until 2012. So maybe I have two years to write that post.

And finally, not only did the Bulgarian visit have energy as a central focus, but it just may set off a new round of democracy in Russia. Apparently, you can now vote and suggest a name for the dog that PM Borisov gave to PM Putin.

Hungary/MOL Officially Pins Russia/Surgut

A pin, or fall, is a victory condition in various forms of wrestling that is met by holding an opponent’s shoulders or scapulae (shoulder blades) on the wrestling mat for a prescribed period of time. (Wikipedia)

In a move that the sporty Putin must appreciate, Hungary and MOL, have been judged to have pinned the likes of the (rumored) Kremlin backed Surgutneftegaz. The judges can be seen to be the international financial analysts, and myself.

“While we cannot rule out talks between Surgut and the Hungarian government continuing behind the scenes, we doubt the buyout will take place in the near term,” commented Olena Kyrylenko, analyst at KBC Securities, on Thursday. (

Due to the tight shareholder conditions imposed by MOL and the Hungarian Energy Office and Parliament, the concerted strategy has resulted in Surgut stuck with its 21.2% stake in MOL. The Hungarian government lacks the money to retrieve the stock for Hungarian pride security of supply.  So now that they have proven that Surgut can’t really do anything with its shareholdings, Hungary can sit back and see if anything comes up they can either barter off, or raise the money to buy it outright. And for this I’m not making any prediction as to “how long the prescribed period of time” is that Hungary will be holding Surgut to the mat. Either way, they’ll probably be in this tight position for awhile. As Hungary lacks the financial resources until at least 2013! Enjoy the mat.

A bridge too far? Connecting Hungary and Slovakia

The end of summer in Central Europe, marked by cooler temperatures and rain, puts everyone to work on the gas issue. The election of Hungary’s Fidesz, this past spring, also allows us to see the emergence of a new energy policy. One suspects, more overtly diversified than the last administration. However, from what appears to be emerging, Hungary – and Orban, continue to play both sides, with the view that more routes of gas through Hungary the better – or at least until the bill comes due.

In my attempt to come up with a concise analysis, or perceive a significant shift in government policy, what emerges is simply a collection of news stories with high rhetoric and long-term contradictory plans. Although, one area does stand out and this is the efforts by the Hungarian state to buy/cajole/force its way into private energy companies operations (to be discussed elsewhere). And the long-term prognosis of this is continued high energy prices for consumers in Hungary, limited competition and limited efforts to transition to sustainable energy sources. But let me share some of the key stories this past week which make me so confused on where this is all headed.

Rivers of gas flowing to Hungary

Access to gas from the Causcauses and Central Asia could reach Hungary and Austria through the AGRI project (Azerbaijan Georgia Romania Interconnection) which will transport Azeri gas to the shores of Romania via the shores of Georgia via liquefied gas terminals. In some ways this seems more complicated than building a single pipeline connecting Azerbaijan to Europe (but then that is the story of Nabucco isn’t).

If you thought this latest plan (among a group of plans for the southern gas corridor) would be a threat to Nabucco AGRI’s project organizers state there is no competition. “AGRI won’t replace Nabucco, it is complementary to Nabucco,” said Adriean Videanu, Romania’s minister of Economy, Trade and Business Environment. And as they point out in the article “He added the project could be finalized before the Nabucco because there are no political barriers for its completion”.

Apparently Hungary agrees with this assessment, or maybe they privately see Nabucco not going anywhere. Because now Hungary has signed up to the project, as it will be able to use the upgraded gas piplelines between Romania and Hungary to bring in the gas and either store it in Hungary or transport it to Austrian storage.

So to keep score, Hungary now has plans for gas transport from Nabucco, South Stream and AGRI. If there is any indication as to the viability of this latest plan, it is reminiscent of Italian backed proposals to create more modest pipelines transporting Central Asian and Russian gas (ITGI, TAP and White Stream). In addition, if no new infrastructure needs to be built, it will be the cheapest way for Hungary to diversify its supply. Meaning, it must put any cost/benefit analysis of Nabucco and South Stream under even more pressure. But then when you are talking about security of supply emphasis should be on benefits over cost, or should it?

Slovakia – too expensive for MOL

Regional cooperation in gas infrastructure is essential for Hungary’s security of supply. This line of reasoning has prompted MOL to act in the past, proposing NETS to interconnect Southeast Europe, and Orban to call for a North-South gas network in Central Eastern Europe. However, it appears that when it comes down to linking Slovakia to Hungary with a gas pipeline,  cost does outweigh the benefits.

In this story, the head of Slovakia’s gas transmission company, Eustream, CEO Antoine Jourdain, says MOL ain’t fulfilling its promise to connect the two countries. As the story’s opening says,

Hungary’s FGSZ Foldgazszallito, the gas-transmission unit of Hungarian oil and gas company MOL, halted construction of a planned gas pipeline between Slovakia and Hungary.

Jourdain told the newspaper that FGSZ stopped the joint project after conducting a survey whose results suggested that such a cross-border pipeline would not be profitable.

Apparently, MOL never got to the stage to move any dirt. I also understand the profit part (which MOL does do a good job of, while simultaneously building large amounts of interconnectors), what gets me in the story is the mention of rumors.

While [the Slovak paper] quoted unnamed Slovak government sources as saying that Hungarian government pressure could have had a role.

Hmmmm….This is what I’m confused about. If it is the explicit policy of the Hungarian government and MOL to increase North-South gas interconnectors then why would such a project come under pressure from the Hungarian government to be stopped?

First we can believe that that the interest in such a pipeline may not be high to justify the cost, as FGSZ-MOL states. However, from a security of supply perspective it may be a very effective – and needed – connection for Slovakia. Because Slovakia is 100% dependent on Russian imports, and with limited storage capacity (which Hungary has).

One explanation for FGSZ-MOL withholding on building the pipeline is they are waiting for more EU/HU/SK money to be available to build it. It is an essential pipeline for security of supply, so why wouldn’t more money become available. If trading volumes are low on it, compared to the cost of construction, then holding out for a few months may be the right business strategy.

Second Reason – MOL ownership

The second reason – and this just fulfills the attempt at making connections in the weekly stories, is the Hungarian government is actually slowing down this project. The fact that Hungarian Minister of National Development Tamas Fellegy, was in discussions on Aug 27th with Russian first deputy Prime Minister Viktor Zubkov, may hold some link.

Hungary is attempting to regain Surgutneftegas’s 21% holding in MOL. However, as everyone knows Hungary has no money. Therefore, Hungary has to find some leverage, or something to trade for this stake. I would suspect that Hungary would even take neutral activity on the part of Surgutneftegas until Hungary can find the money to purchase the shares. Therefore, is it possible that Hungary is using this interconnector as leverage? Weak, I know. But then the Hungarian bargaining position is also weak.

But this may not be so weak if you consider that Poland is now under EU pressure to cancel the ‘Gazprom Clause,’ as it most likely infringes on the conditions of the Third Energy Package. Contracts with Gazprom generally restrict the reselling of surplus gas to other countries. This has the effect of constricting the formation of regional and EU wide gas markets. Therefore, the EU Commission may take antitrust action against Poland. If Hungary were to build this interconnector, it would fall under a similar situation – since it too is dependent on Russian gas.

Gazprom/Russia would be opposed to a North-South gas pipeline as it reduces their monopolistic and direct connections it has developed with each CEE/SEE country.  They are interested in transmission pipelines and supply countries directly, not feeding into a competitive and robust European gas market. Or rather, a gas market in the CEE/SEE region that is competitive and robust. Western Europe with Russia’s gas allies (France and Germany) and the much lower market concentration, is not something Gazprom believes it can achieve a monopoly over – like in the CEE/SEE region.

Delay, delay…

The non-development of an actual physical gas pipeline compared to agreeing to another distant scheme to bring gas to Hungary stands out. It is all well and good to bring to Hungary some hypothetical frozen gas, from expensive still-to-be constructed terminals, but another to actually build a pipeline 100 km long. Now it is not clear the complete connections here, but regardless, slow movement by the Hungarian government on greater neighborhood cooperation, in actual projects, serves its own purpose as does agreeing to large transit volumes moving through Hungary. The winter heating season may be creeping up on us, but true supply diversification, at this point, looks as unattainable as a snowman in July.

Visegrade + Group Aims to Boost Energy Security

Being a new member of a club means sometimes you are not too sure how to act. It takes a while to figure how everything operates, how you should socialize and how you should express you opinions without overstepping. The meeting of the Visegrad + group on February 24th, 2010 in Budapest is proof that the new 2004/07 EU member states have come into their own.

The meeting itself was attended by the Visegrad group of countries, the Czech Republic, Hungary, Poland and Slovakia plus a range of other CEE and SEE countries’ representatives and international stakeholders, including the US. At the end of the day, they issued a wide ranging statement concerning energy security and investment. While the content of the statement itself is important and note worthy. What is the most noteworthy is that these countries came together themselves, in this format – that is initiated by themselves to discuss energy security.

Energy gatherings in the region usually come about by the initiative of non-state groups, or they are held in a bi-lateral or technical format. But not actually as a regional grouping of states, with Prime Ministers at the lead, taking the bull by the horns and stating “this is what we are going to do as a region.”

The statement from the conference itself is interesting. The Russian backed South Stream gets a little endnote, while Nabucco and diversification through interconnectors (see NETS project) gets emphasis. The timing is also interesting as Medvedev of Gazprom just made a sweep through the region to solidify support for South Stream with the regions’ governments.

The relegation of South Stream as an end-note is of particular interest as it doesn’t match up with the expressed public support that Hungary, Serbia and Austria have expressed for the project. Bulgaria is now putting the project on hold as it reviews the terms of its participation, it remains to be seen whether, the next Hungarian government will conduct a similar ‘review’. All in all, the end-noting of South Stream is akin to bringing your girlfriend to your new club then leaving her in the corner for the night. You may have some explaining to do the next day.

Content wise, the conference appears that the leaders of CEE and SEE countries now see advantages in working together. At the conference the Hungarian Prime Minister Gordon Bajnai summarized the infrastructure coordination best as a  “gas supply triangle.”

The draft strategy to reduce dependence on Russian gas supplies piped through the transit country Ukraine involve a liquefied natural gas terminal on Poland’s Baltic Sea coast, a similar terminal on the Croatian island of Krk in the Adriatic, and the much talked about Nabucco gas pipeline, which would transport Central Asian petroleum products through Turkey to Austria. The V4 leaders all endorsed Bajnaj’s proposal (source).

The coming Energy Triangle will take a significant amount of coordinated work on infrastructure and investment to bring the region up to a level that is reflected in the gas networks of Western Europe. Nonetheless, the reflection of the intent to coordinate this investment, and more importantly, taking the initiative themselves, the Visegrad and other CEE/SEE countries, have now found their own united voice. Sustaining this common agenda of energy security will take persistence by everyone, not just declarations at regional summits. The fact that this was part of the Visgrad Group, and not some EU/US/local conference organizers bringing these leaders together is a suggestion of how far meaningful cooperation is developing in the region.

It is also clear that these countries will have to balance their relations with Russia over their individualized approaches to energy security/dependency. As the leader of South Stream has stated, Nabucco and South Stream are not competing pipelines. If this is true, the new regional initiative in energy cooperation of Moscow’s former satellites won’t be a problem.

One final note, and this strikes at the heart of one of my growing annoyances of events in the CEE and SEE region. The international press coverage, or rather even the press coverage of Western European based news organizations of this event was near zero (according to Google searches). I don’t know if this was due to the lack of effort by the organizers of the conference or just a general lack of interest in energy/everything in Eastern Europe. But again, significant events go unreported. However, it remains to be seen what will be the long term effect of this agreement and how energy security cooperation will be improved in the CEE/SEE region. Follow through is everything.

News: Reuters analysis of Russia-Belarus dispute

SNAP ANALYSIS-Russia’s oil spat with Belarus via Thomson Reuters

By Chris Baldwin

LONDON, Jan 4 (Reuters) – Russia said on Monday it had resumed oil supplies to refineries in neighbouring Belarus after a brief rupture, but tensions were still simmering.

The following outlines some of the issues at stake. [more…]

Follow link for comments from Michael LaBelle of the