Officially on friendly terms

The Budapest Times

Written by Ágnes Lukács

Thursday, 30 July 2009

The Russian ambassador to Hungary Igor Savolsky spoke to journalists last Tuesday about the negative impact of the international financial crisis on Russia, the decline in exports and imports between Hungary and Russia, and the planned Russian-backed South Stream gas pipeline.

Russia’s GDP has fallen by 10% this year, investments by 15%, exports by 40% and imports by 47%, Savolsky said. Bilateral economic relations have also been hit, as Russian exports to Hungary fell by 49%, and imports by 40%. The ambassador stressed, however, that Russia regards Hungary as a particularly important economic partner.

“Political dialogue is unbroken despite the change of government,” Savolsky said. Political and economic relations with Russiaflourished under former prime minister Ferenc Gyurcsány, who visited Russia several times including at the onset of his “lies” speech crisis which sparked riots in the autumn of 2006.

“There have been no problems between the two countries since Gyurcsány’s departure,” Savolsky said, noting that caretaker Prime Minister Gordon Bajnai has also named Russian-Hungarian relations as among his priorities.

Pressure in the pipeline

The Russian ambassador gave a vague answer to a question on how the likely victory of opposition party Fidesz in the next general elections will affect Russian-Hungarian relations: “it is difficult to predict what will happen,” he said.

He acknowledged that he was aware that Fidesz chairman Viktor Orbán, who has indicated that he would pull out of the South Stream agreement if Fidesz wins the next general elections, would like to lessen the spirit of cooperation between the two countries. South Stream is a competitor to the western-backed Nabucco pipeline which will use non-Russian sources for gas to lessen Europe’s energy dependence on its eastern neighbour. A pro forma agreement on Nabucco was signed a week earlier.

“That’s definitely not the way it’s going to work,” Savolsky asserted. He appeared unconcerned by the possibility of Hungary abandoning the South Stream, saying that he could not imagine Hungary wanting to withdraw. “Hungary is an important partner and the current plans are the ideal resolution, both financially and technically. If, however, Hungary really wanted to pull out, we would have to lay the pipes elsewhere. As a result, Hungary would lose several hundred million euros,” he said.

Business is business

On the recent tensions between Hungary’s largest oil company MOL and Russia’s Surgutneftegaz (Surgut), Savolsky said the Russian state is not involved: “It is a question of two private companies. The two partners need to sit down and negotiate,” he said. In March Russian-Hungarian relations were soured by Surgut acquiring 21.2% of shares in Hungarian energy giant MOL. It was not allowed to vote at MOL’s AGM because the share transfer from Austrian OMV, far above market rate, was not recognised. Surgut said it would turn to the courts to deem the AGM invalid.

In early July, Russia’s oil extraction licensing body Rosnedra gave MOL and its Russian joint venture partner Russneft until the end of the year to come up with a plan to utilise 95 per cent of associated gas from the Zapadno-Malobalykskoye field venture (ZMB) to which they hold the rights. The move prompted speculation that Russia was trying to force MOL to give Surgut a say in the running of the company.

State-owned Russian gas firm Rossneft has sued Russneft, claiming its 50 per cent stake in the Siberian field in lieu of unpaid debts.Under pressure, MOL the week before last said it was considering selling its share in ZMB rather than losing it. Last Thursday MOL said that it had come up with a plan regarding utilising the gas that it would present to the ZMB board on 4 August. MOL also denied claims made in the Russian daily Kommersant. According to news agency MTI, it reported that a board meeting of ZMB slated for Monday was cancelled after MOL’s representatives did not attend because “the meeting was not called according to rules in the company charter.”

Malév

Two further Russian interests were also addressed: one-time Hungarian state airline Malév and the Paks nuclear power station. Savolsky expressed regret that the previous Russian owner of the Hungarian airline Malév, AirBridge, had to pull out due to insolvency. Official bankruptcy proceedings have recently been launched, the ambassador said.

Savolsky expressed optimism that the new owner, the Russian state-owned Vnesheconombank will solve the airline’s problems and get Malév in the black within the next three years. In June Malév signed a letter of intent for the purchase of 30 Russian-built Sukhoi Superjet 100 aeroplanes at the Paris Air Show for USD 1 billion (EUR 703.97 million).

Nuclear

He was particularly confident about cooperation with the Paks nuclear power station: “there is a good chance of Russian companies being involved in the project to expand and extend the lifetime of the plant,” he said.

Earlier this month Paks announced that it was laying the groundwork for future expansion after an approval from parliament in March. The lifespan of the plant’s first block expires at the end of 2012. Paks provides 40 per cent of the country’s electricity.

Earlier this month Russia’s TVEL, which already service Paks, said it could build a facility to make fuel for nuclear power plants in Hungary and beyond and expressed interest in participating in the construction of more blocks at Paks.