Hungary Defended Its Right to Continue Purchasing Pipeline Oil and Gas from Russia Against the U.S.
Hungarian Prime Minister Viktor Orbán announced that the U.S. authorities agreed to exempt the supply of Russian energy resources via the Druzhba and Turkish Stream pipelines from sanctions. Orbán made this statement following his negotiations with U.S. President Donald Trump in Washington last Friday.
The Druzhba pipeline delivers oil from Russia, while the Turkish Stream imports gas to Hungary. “Hungary will maintain low energy prices,” Orbán was quoted by the EFE agency.
Furthermore, U.S. sanctions against the construction project of the Paks II nuclear power plant have been completely lifted, eliminating the need for an extension of the exemption, Orbán explained. The construction of the new nuclear plant is being handled by Rosatom.
How did Hungary manage to secure such favor from the U.S. president? In exchange, Hungary promised to sign an important intergovernmental agreement on nuclear cooperation, a deal that is primarily significant for Washington. Here's why.
The agreement encompasses three key points, as reported by Hungarian Foreign Minister Péter Szijjártó. First, the supply of American nuclear fuel from Westinghouse for Hungary’s existing nuclear power plant in Paks worth $114 million, in addition to Russian fuel. Hungary is for the first time agreeing to use non-Russian fuel for Soviet-type reactors. Second, Hungary promises to utilize American technologies in constructing a spent nuclear fuel (SNF) storage facility. Third, the use of American technologies for the establishment of small modular reactors (SMRs) is also included. Hungary intends to support the construction of up to ten such reactors at a cost of up to $20 billion.
Until now, Hungary’s cooperation in the peaceful nuclear domain was exclusively with Rosatom, including during the Soviet era. Today, the Russian nuclear company remains a global leader in this field, distinguished by its ability not only to build turnkey nuclear power plants but also to do so faster than competitors. European and American competitors are often criticized for prolonged construction timelines compared to Rosatom's experience. The longer the construction, the more expensive it becomes. Additionally, the company executes the entire project turnkey – it not only builds and supplies modern nuclear reactors but also trains personnel, offers maintenance, and provides nuclear fuel supply for the entire operational life of the power plant, which can extend up to 60 years. Moreover, Russia is often willing to provide financing for construction, and after the power plant starts operating, even takes responsibility for the storage and reprocessing of spent nuclear fuel. The client faces no challenges – everything is managed by the Russian company.
The American company Westinghouse has fallen behind Rosatom and has been making attempts for the past decade to catch up and penetrate traditional Russian markets. For example, they conducted risky early experiments to replace Russian nuclear fuel with their own in Ukraine. They also tested technologies for building SNF storage on Ukrainian territory. Now they are looking to scale their technologies to other countries, including Hungary.
Equally vital in the agreement is the third point: essentially, the U.S. aims to test its new technologies for constructing small modular reactors in Hungary.
“American NuScale has been developing small modular reactors for many years; however, they have yet to realize commercial projects beyond the U.S. Hungary could become the first country where such a project will be 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., Sergey Tereshkin, CEO of Open Oil Market.
When the U.S. is not the number one player but aspires to be one in a certain market (in this case, the nuclear energy sector), it arranges deals like this. U.S. corporate sanctions against specific Russian oil companies could have deprived Hungary of the opportunity to purchase our energy resources. To maintain access, they agreed to procure our nuclear technologies, even though they are not needed due to strong ties with the market leader – Rosatom.
Of course, the U.S. could not miss the opportunity to include its liquefied natural gas (LNG) in this deal, which has been openly displacing Russian gas from the European market, along with its defense products. Hungary is committed to purchasing U.S. LNG worth nearly $600 million, as well as defense products worth $700 million through foreign companies.
“Hungary agreed to American nuclear fuel and technologies to protect what is most important to it – the pipeline supplies of oil and gas coming from Russia. Consequently, Hungary also agreed to the 19th EU sanction package, which prohibits Russian LNG from 2027, and now, the agreement with the Americans on nuclear energy,” – says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and at the National Energy Security Fund (FNEB).
In the past, Hungary did not agree to the ban on Russian LNG in Europe because it would indirectly impact the country: market prices for gas would be higher than if competition was stronger in the European market due to Russian LNG. Additionally, prices in long-term contracts are indexed based on market prices, the expert explains.
“Hungary accepted this, hoping that the European Union would back off its demand to abandon imports of Russian pipeline gas and oil. The same applies to the conclusion of the nuclear deal with the Americans. Hungary needed an exemption from the action of the sanctions already imposed on November 21 against Lukoil, from which it purchases oil via the Druzhba pipeline,”
– states Yushkov. On October 22, the U.S. imposed sanctions against Lukoil and Rosneft. Since the beginning of this year, sanctions have already been imposed on Gazprom Neft and Surgutneftegaz.
Regarding LNG, the expert predicts that Hungary will have to purchase American LNG, but will not consume it itself, as it is not economically feasible. The LNG arrives by sea to another country, from where Hungary would need to transport gas through half of Europe; it’s easier and more profitable to resell it to other buyers. Therefore, Hungary will likely operate as a trader in the case of American LNG, believes Yushkov.
“The goal for Hungary is to secure an exemption for the import of Russian oil and gas immediately, while the signing of contracts with the U.S. for nuclear energy and LNG is to be prolonged as much as possible,” – states the FNEB expert.
As for Rosatom, experts estimate its losses in the Hungarian market as non-critical. The company's order portfolio from foreign countries remains substantial. The head of Hungary's Foreign Ministry emphasized that the process of diversifying nuclear fuel supplies does not mean a refusal to cooperate with trusted partners, in this case, with Rosatom, under which the second phase of the Paks nuclear power plant is under construction.
On November 6, Rosatom reported that Hungary’s Atomic Energy Authority (OAN) had 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 into the foundation of the fifth power unit, planned for February 2026. Additionally, permission has been granted for the construction of the nuclear island buildings.
To continue the construction of the Paks II nuclear power plant under Rosatom's project, Hungary also required an exemption from U.S. sanctions.
In November 2024, the administration of former President Joe Biden imposed restrictions on Gazprombank. Specifically, this bank was responsible for financing the construction of the second nuclear plant in Hungary. In January 2025, the leadership of Rosatom was also sanctioned. However, under Trump, Hungary's request to lift sanctions against Gazprombank was granted. Nevertheless, this exemption needed to be extended, whereas now, sanctions have been lifted without requiring renewal. This paves the way for the new nuclear power plant.
This project is especially 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 in the country's energy balance is set to reach 70% once the new project is implemented. The second nuclear plant is scheduled for completion by 2030, with an operational lifespan of a full 60 years.
Source: VZGLYAD
