Hungary Gets US Exemption for Russian Oil

US President Donald Trump granted Hungary an exemption from sanctions on purchases of Russian oil, providing a major win for Prime Minister Viktor Orban.

Hungary has won a “general, indefinite exemption” on purchases of Russian oil and natural gas via two main pipelines, Orban told reporters after a bilateral lunch with Trump at the White House on Friday. 

A White House official, however, described the exemption as being for one year. The deal netted wins for Trump too, with Hungary agreeing to a raft of US energy investments.

Orban has leveraged his ties with his ideological ally to win the favorable treatment. Hungary has ramped up its reliance on Russian energy while fellow European Union members by and large have sought to drastically cut such procurements after Moscow’s invasion of Ukraine.

Trump has punished other buyers of Russian energy, most notably India, for interrupting what the president has said are efforts to end Putin’s invasion of Ukraine. The president earlier this year issued a 50 percent tariff on Indian goods. 

The Trump administration’s decision last month to impose sanctions on Russia’s biggest oil companies threatened to undermine Orban’s already shaky bid for a fifth consecutive term in an election next year.

A stagnant economy, allegations of widespread corruption and a cost-of-living crisis have helped propel a nascent opposition party into a double-digit lead in some polls ahead of Hungary’s elections in April. The contest is the most serious challenge to Orban’s uninterrupted rule since 2010.

Trump said Orban had done a “fantastic job” and hailed him as a “great leader,” issuing a fresh endorsement for his re-election.

The US president also bought into Orban’s argument that landlocked Hungary had little alternative to Russian energy, contradicting his own officials who had pointed to the existence of a Croatian pipeline that can supply crude from the Adriatic Sea.

“They don’t have sea, they don’t have the ports,” Trump said before his meeting with Orban, adding that it was “very difficult” for Hungary to procure non-Russian energy.

In fact, Orban has doubled down on Russian energy because of its lower price – allowing him to maintain a flagship promise to keep energy costs in check for Hungarian households. Ramping up reliance on Russian energy has also endeared Orban to the Kremlin, with Budapest widely seen as Moscow’s closest EU partner.

It’s far from clear, though, whether keeping the status quo for now on Russian energy will be enough for Orban’s re-election. Orban had expected a flood of investments after Trump’s return to the White House, which have yet to materialize. Instead, it was Orban who announced Hungarian orders on Friday.

Hungary signed a $114 million contract with Westinghouse Electric Co. to purchase nuclear fuel for Hungary’s atomic plant, currently supplied by Russia, the State Department said in a statement. 

Hungary also committed to spending $600 million on US liquefied natural gas, the statement said. Hungarian Foreign Minister Peter Szijjarto said the price was still under negotiation but said it was for 400 million cubic meters of LNG annually for five years.

The sides also signed a memorandum of understanding for Hungary to purchase as many as 10 small modular reactors in a deal that could be valued at as much as $20 billion, the State Department said. Szijjarto confirmed the intent at a briefing with Orban but said Hungary may eventually buy fewer reactors than that, depending on economic needs.

Bloomberg was first to report the deals earlier on Friday.

The modular reactors have the potential to upend the long-delayed, Russia-led expansion of Hungary’s nuclear plant, a person familiar with the negotiations had said. 

Russia’s Rosatom Corp. is scheduled to pour the first concrete for new blocks only in February – almost 12 years after the signing of the nuclear contract.

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