Russia can influence politics in Central and Eastern Europe via the energy sector. Most of the Visegrad Group countries in Central Europe, for example, are dependent on Russia for natural gas. Some of those countries – like Hungary – recently attempted to diversify supply, only to pivot back toward Russia after pro-Russian leaders took over government positions. To get a sense of just how much influence Russia has in this region, The Cipher Brief spoke with David Koranyi, director of the Atlantic Council’s Eurasian Energy Futures Initiative and former chief foreign policy and national security advisor to Hungarian Prime Minister Gordon Bajnai.
The Cipher Brief: How much influence does Russia have in the Visegrad Group countries – Hungary, Poland, Czech Republic, Slovakia – vis-à-vis energy?
David Koranyi: The Russians retains a lot of influence, but It varies from country to country, and it is generally on the decline. Their influence is probably the least in Poland. The Polish energy mix is such that gas plays an important role, but due to the predominance of coal, nowhere near as important as in the rest of the Visegrad countries. Until recently, most of Poland’s gas came from Russia. Now they have the option to get liquefied natural gas through the terminal in Świnoujście, which is in the north on the Baltic Sea. Still, the Poles import significant quantities of gas from Russia. The Poles are relatively well-off in terms of their independence on natural resources, but there is some dependence on Russian gas imports and pricing is still an issue.
When it comes to the Slovaks, they are in close competition with the Hungarians in terms of substantial Russian influence, as the main trunkline that exports most of Russia’s natural gas goes through Ukraine and then Slovakia, yielding significant transit revenues for the Slovak economy.
Then you have Hungary, which is, at least in theory, in a much better position than it was a couple of years ago. It has built up interconnectors between countries. For example, it has an interconnector connecting to Slovakia and the western European markets. There has been an interconnector in Austria for a number of years now, so the Hungarians can access the Baumgarten hub there.
It is unclear, how the Orbán Government’s intentions to reinforce the energy relationship with Russia will impact its decisions on gas supplies as the current long term gas supply treaty with Russia expires towards the end of the decade. The decision on the Paks nuclear power plant signals the desire of a closer energy relationship with Russia.
In Hungary, there is currently an expansion of the existing nuclear reactors. There is an agreement between the Russian government and the Hungarian government and between Rosatom, Russia’s state-owned nuclear energy corporation, and Hungarian companies to build two additional reactors of 1.200 Megawatt capacity, which would at least temporarily more than double the current nuclear capacity in Hungary. The almost complete lack of transparency makes it difficult to answer some of the questions about how much Russian influence the agreement could buy. Hungary will in any case be tied to purchasing Russian nuclear fuel for at least a decade.
TCB: Should this be of concern to the European Union (EU), especially given that the European Energy Union was largely created to diversify member states’ supplies away from Russia?
DK: It should be a concern. The European Energy Union strategy was never only about Russia. It is about market-based competition and cracking down on abuse of monopolistic power everywhere. Diversifying resources to increase competition is a critical component to that. If you look at Europe and oil and gas imports, you already have a external dependency on oil imports – up to 85 percent comes from outside. That number is about 65 percent for gas, but it’s going to go up in the next 10 or 15 years to 85 or even 90 percent, according to projections. That is a strategic concern for the EU as a whole. There is also the issue of how Europe is going to be able to get those resources in a safe and secure way.
Given the animosities between the West and Russia, and differences over Ukraine, at this point, many tend to view Russia as an unreliable supplier. The Russians have cut off gas on numerous occasions to various countries. The two major gas crises – in 2006 and 2009 – ended with some countries, including Bulgaria, Hungary, and many others, having weeks of no gas supplies coming from Russia, due to tensions between Russia and Ukraine (a country that the gas needs to flow through to be delivered).
The European Commission has never said that Russian natural gas is a bad thing. Indeed, it’s quite obvious that Russia is and will continue to be a supplier, because it’s close by and it’s relatively cheap. It’s only natural that there’s an energy relationship between Russia and the EU. But how transparent that relationship is and how much leverage Russia has over other issues from that relationship is a big concern, not only for Brussels, but also for the U.S. The fact that these countries are NATO allies and are supposed to have the ability and freedom to act in the interest of the alliance means the kind of influence Russia has over some of these countries, via their dependence on Russian energy, is not healthy.
TCB: Can you expand on that last point about why the U.S. should be concerned as well?
DK: There are two components to this. One is that a country that is excessively dependent on Moscow for energy can be blackmailed – that is, Moscow can threaten to turn off the gas tab or increase prices – into taking up a softer position on, for example, sanctions against Russia. We have seen this play out in the case of the annexation of Crimea. All EU countries did end up voting for sanctions, but in terms of adopting a stronger package of sanctions, those countries most dependent on Russian resources or due to other forms of Russian influence – like Hungary, Slovakia, Czech Republic, Greece, and Bulgaria – were very soft and opposed to a more serious package.
The second piece is that heavy Russian influence in the energy sector is usually coupled with corruption. The energy sector is often used by the Russians as an avenue for various political elites or players connected to these political elites – some in government positions – to buy influence that is not in the strategic interest of the United States.
