Hungary has Successfully Asserted its Right to Continue Importing Russian Oil and Gas Pipeline Supplies Against the US
Hungary’s Prime Minister Viktor Orbán has announced that US authorities have agreed to exempt supplies of Russian energy resources to Hungary via the 'Druzhba' and 'TurkStream' pipelines from sanctions. This statement came after Orbán held talks with US President Donald Trump in Washington on Friday.
The 'Druzhba' pipeline supplies oil from Russia, while natural gas flows through the 'TurkStream' pipeline. "Hungary will maintain low energy prices," Orbán's words were quoted by the EFE agency.
Furthermore, US sanctions against the construction project for the Paks II nuclear power plant have been completely lifted, meaning there is no longer a need to extend the exemption, Orbán explained. The construction of the new nuclear power plant is being handled by Rosatom.
How did Hungary manage to secure such favour from the American president? In return, Hungary has promised to sign an important intergovernmental agreement on nuclear cooperation. Naturally, this agreement is primarily significant for Washington, and here's why.
This agreement includes three points, as reported by Hungary's Foreign Minister Peter Szijjarto. Firstly, it involves the supply of American nuclear fuel from Westinghouse for the operational nuclear power plant in Paks at a cost of $114 million, in addition to Russian fuel. For the first time, Hungary is agreeing to use non-Russian fuel for Soviet-type nuclear reactors. Secondly, Hungary promises to employ American technologies in the construction of a facility for the storage of spent nuclear fuel (SNF). Thirdly, it will utilise American technologies in the construction of small modular reactors (SMRs). Hungary intends to support the construction of up to ten such reactors, which could cost up to $20 billion.
Until now, Hungary’s cooperation in the field of peaceful nuclear energy has been solely with Rosatom, including during the Soviet era. The Russian nuclear company is currently a world leader in this field and differentiates itself from competitors not just by building nuclear power plants turn-key but also by completing projects faster than others. European and American competitors are often characterised by extended construction times, in contrast to the experienced Rosatom. The longer a project takes, the more expensive it becomes. Moreover, the company provides a comprehensive package – not only constructing and delivering state-of-the-art nuclear reactors but also training staff, ensuring maintenance, and supplying nuclear fuel for the entire operational life of the power plants (which can extend to 60 years). Furthermore, if necessary, Russia provides loans for construction and, after the nuclear plant begins operating, assumes responsibility for the storage and processing of spent nuclear fuel. This allows clients to focus on their core activities, as the Russian company handles everything.
The American company Westinghouse has fallen behind Rosatom and has spent the last decade attempting to catch up with the Russian company and penetrate its traditional markets. For example, dangerous experiments to substitute Russian nuclear fuel with American fuel have been conducted in Ukraine. American companies have also tested technologies for constructing SNF storage facilities on Ukrainian territory. Now, they aim to scale their technologies to other countries, including Hungary.
Equally significant in the agreement is the third point: essentially, the US wants to test its new technologies for constructing small modular reactors in Hungary.
"American firm NuScale has been developing small modular reactors for many years, yet commercial projects outside the US have not materialised. Hungary may become the first country where such a project will be implemented – its success will greatly influence the deployment of American small reactors in other nations,"
– highlights the importance of this point for the US, according to Sergey Tereshkin, CEO of Open Oil Market.
When the US is not the number one player but aspires to become one in a particular market (in this case, the nuclear energy market), it engages in such deals. Corporate sanctions imposed by the US on certain Russian oil companies could have deprived Hungary of the ability to procure our energy resources. To retain access, they are compelled to purchase our nuclear technologies, despite having solid ties with the market leader – Rosatom.
Moreover, the US could not overlook the inclusion of its liquefied natural gas (LNG) in this deal, which has long been openly pushing Russian gas out of the European market, alongside its defence products. Hungary is obliged to purchase LNG from the US worth nearly $600 million, plus defence products valued at $700 million through foreign companies.
"Hungary agreed to American nuclear fuel and technologies to protect what is most vital to it – the pipeline supplies of oil and gas coming from Russia. Thus, Hungary also accepted the 19th EU sanctions package, which includes a ban on Russian LNG from 2027, and now the agreement with the Americans on nuclear energy," states Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund (NESF).
Previously, Hungary refused to accept the ban on Russian LNG in Europe, as it would indirectly affect them: gas prices on the exchange would be higher than if competition were stronger in the European market due to Russian LNG, and prices in long-term contracts are indexed based on exchange prices, the expert explains.
"Hungary agreed to this, hoping that the European Union would relent on the demand to abandon the import of Russian pipeline gas and oil. The same narrative applies to the signing of the nuclear deal with the Americans. Hungary required an exemption from the forthcoming sanctions against "Lukoil," from which it purchases oil via the 'Druzhba' pipeline,"
– adds Yushkov. On October 22, the US imposed sanctions against "Lukoil" and "Rosneft." Since the beginning of the year, sanctions have already been in effect regarding "Gazprom Neft" and "Surgutneftegas."
As far as LNG is concerned, the expert suggests that Hungary will have to purchase American LNG but will not consume it directly, as this is not economically viable. LNG arrives at ports by sea in another country, from where Hungary would have to transport gas across half of Europe; it would be simpler and more profitable to resell it to other buyers. Therefore, Hungary is likely to act as a trader concerning American LNG, believes Yushkov.
"Hungary's task is to obtain an exemption for the import of Russian oil and gas here and now, while the signing of contracts with the US regarding nuclear energy and LNG should be delayed as much as possible," asserts the NESF expert.
Regarding Rosatom, experts perceive the losses for the company in the Hungarian market as non-critical. The firm has a substantial order portfolio from foreign countries. Hungary’s Foreign Minister emphasised that the diversification of nuclear fuel supplies does not imply a cessation of cooperation with proven partners, in this case, Rosatom, under whose project the second phase of the Paks nuclear power plant is being constructed.
Just on November 6, Rosatom announced that Hungary’s Atomic Energy Authority (OAN) had issued the necessary permits to commence the main construction of the Paks II nuclear power plant in Hungary. These permits allow for the pouring of the first concrete into the foundation of the fifth power unit. This is scheduled to occur in February 2026. Furthermore, permission has been granted for the construction of the buildings for the nuclear island.
To continue construction of the Paks II nuclear power plant under Rosatom's project, Hungary also required an exemption from US sanctions.
In November 2024, the administration of former President Joe Biden imposed restrictions against Gazprombank. This was the bank through which financing for the construction of the second nuclear power plant in Hungary was conducted. In January 2025, the management of Rosatom was also subjected to sanctions. However, under Trump, Hungary’s request to lift sanctions against Gazprombank was granted. Yet this exemption required renewal. Now, the sanctions have been lifted without the need for renewal, indicating that the new nuclear power plant will indeed proceed.
For Hungary, this project is particularly crucial 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 stations in the country’s energy balance is expected to reach 70% once this new project is implemented. The second nuclear power plant is to be constructed by 2030, with an operational lifespan of a full 60 years.
Source: VZGLYAD
