Non-Military Security

Establishment of a gas company and construction of a new pipeline. Hungary and Serbia are deepening their cooperation to strengthen their countries’ energy security

Bianka Niňajová

Dušan Bajatović, head of the Serbian state gas supply company Srbijagas, and László Fritsch, director of the Hungarian energy company MVM CEEnergy, have reached an agreement to establish a joint gas company. The signing of the agreement took place on Tuesday, June 20, following the inaugural meeting of the Serbia-Hungary Strategic Cooperation Council, which was attended by high-ranking officials from both countries. The newly formed company, SERBHUNGAS, will be headquartered in Novi Sad, Serbia. At Tuesday’s meeting in the Serbian city of Palić, the countries also agreed to construct a 128 km long oil pipeline connecting the Hungarian village of Algyő with the Serbian Novi Sad. Its purpose will be to ensure the supply of Russian oil to Serbia via the Druzhba pipeline. Serbia has been facing a ban on oil imports from Russia via Croatia after the European Union imposed another package of sanctions on Russia. In the long term, Hungary believes that after the end of the war in Ukraine, energy cooperation between European countries and Russia will be renewed. The pipeline construction would thus be strategically advantageous for Hungary, as the country could act as a transit state for natural gas heading to Serbia. At the same time, deepening cooperation with Serbia further strengthens Hungarian influence in the Balkans.

Political representatives of Serbia and Hungary have praised the cooperation and described the planned construction of the pipeline as the most important agreement between the two countries so far. “When we join these two countries in strategic cooperation, we will have enormous energy at our disposal, which we can invest in the interest of improving the position of our peoples,” Orbán said. Cooperation between Serbia and Hungary has never been as good as it is today, both in political and economic relations. Even the fact that Serbia, unlike Hungary, is not a member of the European Union or NATO does not pose any significant obstacle to cooperation. “The differences we have do not make our cooperation more difficult but add value to it,” Orbán clarified. Hungary and Serbia have already signed dozens of other joint agreements in the fields of infrastructure, agriculture and foreign relations.

Cooperation between Serbia and Hungary increased after Russia invaded Ukraine in February last year. The war had a substantial negative impact on the energy security of several European countries. Therefore, within the framework of friendly relations, Hungary and Serbia have been cooperating to ensure energy supplies for their residents. The Hungarian Minister of Foreign Affairs, Peter Szijjártó, described Belgrade as an “honest, reliable and fair partner in terms of natural gas transit.” The proof is the 4.8 billion cubic meters of natural gas that Hungary transported through the TurkStream gas pipeline. It brings Russian gas through Turkey to Serbia. In return, Hungary stored 300 million cubic meters of gas for Serbia in its reservoirs. In addition, the Balkan country represents a possible transport route also for the gas that Hungary wants to buy from Azerbaijan.

Russia continues to be the main natural gas supplier for Hungary and Serbia. Serbia renewed the contract with Russia in May 2022 for another three years. In 2021, Hungary agreed on a 15-year contract with Russia. Additionally, last August, Viktor Orbán’s regime decided to purchase additional 5.8 million cubic meters of gas per day. The planned construction of the oil pipeline and the establishment of a natural gas trading company can thus contribute to the higher energy security of both countries. The Hungarian Minister of Foreign Affairs also revealed that work is underway to double the capacity of the connection of the electricity distribution networks between Serbia and Hungary, which should be implemented by 2028. The two new nuclear units of the Hungarian Paks nuclear power plant should further contribute to increasing the security of electricity supplies in both countries. At the same time, Szijjártó emphasized Hungary’s expectation of financial assistance from the European Union to support the development of regional energy infrastructure, enabling Central European countries to access alternative sources.

Brussels has so far not supported the rapprochement between Hungary and Serbia in any way. Both countries have long-standing tense relations with the European Union. Although Hungary is a member of the EU, the Eastern European country’s attitudes are at odds with the bloc’s values. Regarding the war in Ukraine, Viktor Orbán has never publicly taken the side of Ukraine. Serbia tries to maintain a politically neutral position, despite the majority of Serbian citizens being pro-Russian, due to its own experience with NATO. At the same time, Serbia has historically strong economic ties with Russia and China. Thus, in addition to a sceptical attitude towards the West, the two countries also share an interest in deepening cooperation with countries in Eurasia, led by Moscow, Beijing and Ankara. This critical element forms the basis for joint strategic cooperation between Budapest and Belgrade.

Photo credit: Kuhnt

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