Ukraine slams Gazprom's Hungary deal, demands sanctions

Ukraine has called on the US and Germany to impose sanctions on Russia's state-owned energy giant Gazprom following a deal the firm made with Hungary, depriving Kyiv of gas supplies and transit fees.

The deal, which was signed last week in Budapest and covers the next 15 years, will see gas supplies of up to 4.5 billion cubic metres sent to Hungary every year. 

The head of Ukraine's gas transport company, Sergiy Makogon, said that Hungary had received its gas via the Ukraine "for decades" and that there had been no violation of contractual obligations.

"The strengthening of the dominant position of one player and their use of leverage for obviously political purposes against the backdrop of a shocking rise in gas prices in Europe must be stopped," he added.

Read more: MEPs urge Gazprom probe over sky-high gas prices

The Ukrainian foreign ministry issued a statement decrying the Hungarian deal, saying it was a "purely political, economically unreasonable decision", and calling on the European Commission to investigate whether it was in compliance with EU energy law.

Hungary's Prime Minister Viktor Orbán - who is facing next year what is expected to be his first genuinely competitive election since 2010 - dismissed the criticism, saying that without the Gazprom deal, Hungarians would be looking at much higher gas bills.

"We need gas. This is the reality. You [Ukraine] need to agree with the Russians," he said in an interview with public radio.

In a press release, Gazprom said that an "important component" of the deal was "the diversification of supply routes". From now on, Hungary will receive gas via TurkStream, which crosses the Black Sea from Russia to Turkey and on through Bulgaria and Serbia. 

Crucially, this means that Hungary will no longer receive gas via the Ukrainian route - something which Kyiv has denounced as the "use of gas as a weapon".

Not only does the deal deprive Ukraine of the transit revenues, but it also means that it can no longer import reverse flow gas via Hungary, which it has done since 2015, as a way of not buying directly from Russia.

In May, US President Joe Biden declined from imposing further sanctions on the Nord Stream 2 pipeline, which he said was provisional on Russia refraining from using "gas as a weapon".

Read more: Biden waives Nord Stream 2 sanctions in push to mend ties with Germany

In July, that red line was seemingly strengthened when Biden and German Chancellor Angela Merkel agreed to impose sanctions if Moscow weaponised gas supply.

"The monopolization of gas routes by Gazprom, which we are currently witnessing, raises questions about the basic principles of functioning of EU gas markets - competitiveness and transparency," Ukraine’s national gas transport company said in a tweet.

Ukraine's relations with Russia have been in crisis since the annexation of Crimea in 2014, as well as Moscow's continued backing for separatist movements in the country's east.

Writing on Facebook, Yuriy Vitrenko, the head of Ukraine's Naftogaz, called on both Washington and Berlin to honour what he said were pledges to get tough with Moscow if it crossed the red line the two countries agreed on.

"We publicly and privately warned our partners in Germany and the USA that this could happen, and that ending physical transit through Ukraine will create huge threats to Ukraine and Europe.

"The Kremlin does it deliberately. It's not even sabre rattling, it's an obvious use of gas as a weapon.

"A joint statement from the United States and Germany indicates that if the Kremlin used gas as a weapon, there should be an appropriate reaction. We are now waiting for sanctions to be imposed on the 100% subsidiary of Gazprom, Nord Stream 2," he added, in reference to the Biden-Merkel announcement in July.

Read more: US & Germany Strike A Deal Over Nord Stream 2

Similar concerns have been voiced in Poland. Gas supplies via the Yamal-Europe pipeline which traverses the country were down 77% on Friday, with Gazprom booking only one-third of available capacity for October.

Kremlin spokesperson Dmitry Peskov said that Gazprom was filling all its obligations under existing gas contracts. 

"There have been and will be accusations against Russia, the majority of which are politicised," Peskov said when asked about Ukraine's complaints.

"The main thing in this situation is that we are consistently fulfilling our obligations."

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