Hungarian government buys gas with brutal euro loans

The Hungarian government has decided to create a special natural gas reserve. To do this, it would be ready to take out a huge loan in euros.

Create a huge reserve of gas

The Fidesz government wants to build up a huge stock of natural gas. A decree to this effect has been published in the Hungarian Gazette. The maximum size of the special natural gas reserve is 7,811,000 MWh.

The decree was signed by Minister of Industry and Technology László Palkovics. The government will also contract a loan in euros for the creation of a special gas reserve, up to a maximum of 1,850 million euros. But gas cannot be bought without a second thought. The maximum purchase price is the price calculated on the basis of market prices at the time of the contract, including system fees and related pricing costs up to the point of virtual exchange of the domestic gas system, writes napi.hu.

In practice, this currently translates into an exchange rate of €210/MWh, according to CEEGEX. The cost does not include system fees. The regulations come into effect on Friday.

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Security gas stocks disrupted in 2021

Last year, Fidesz dismantled the natural gas security reserve. On October 15, 2021, Minister of Innovation László Palkovics decided to reduce the natural gas security reserve. Previously, it fell from 15,374,000 MWh to 12,723,644 MWh.

Foreign Minister Péter Szijjártó met with Russian Foreign Minister Sergei Lavror two weeks ago. The purpose of the meeting was to ask Gazprom to purchase an additional 700 million cubic meters of gas. However, the Russians have not yet given any comments on this. At the time, the government led by Viktor Orbán had already approved the loan of 1,850 million euros.

At the end of July, the cabinet authorized the Hungarian Hydrocarbon Storage Association (MSZKSZ) to buy gas on credit. The loan is fully guaranteed by the State. The question is where the Hungarian state plans to buy gas and at what price. The Russians might have a higher price, but politically they are closest to the Orban government.