Hungary has approved a new gas supply contract between Russian monopoly Gazprom and a trading arm of state-run energy holding MVM Group to manage more than half of Russian gas pipeline supplies to the country for a period of the next 15 years.

The deal between MVM Ceenergy and Gazprom’s export subsidiary streamlines a web of intermediary trading firms established in the past by Gazprom, and also by Russian individuals with reported business ties to the gas monopoly, in order to distribute Russian gas in Hungary.

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According to a statement from Gazprom, the contract signed in Budapest on Monday, calls for the supply of 4.5 billion cubic metres of gas per annum to the country per year.

Out of this amount, 3.5 Bcm will be delivered via recently commissioned TurkStream pipeline, running across the Black Sea to Turkey, with an onshore pipeline link then reaching Hungary via Bulgaria and Serbia.

The remaining 1 Bcm is to be supplied to the country from a gas trading hub in Baumgarten in Austria.

The new agreement reduces the role of a joint venture between Gazprom and MVM Group, known under the name of Panrusgaz that had been handling all long-term Russian gas supplies to Hungary since 1996 via a web of three traders.

Panrusgaz has never been a direct seller of Russian gas to customers in the country, with its marketing being handled by MVM-linked Hungarian Gas Trade, Austria’s Centrex Europe Energy & Gas and Swiss-registered MET Holding.

According to the Russian gas monopoly, in addition to a delivery route via Panrusgaz, Gazprom has also been selling gas in Hungary directly under short-term spot arrangements via its local affiliate, WIEE Hungary.

The monopoly said that it supplied just over 3.9 Bcm of gas to Hungary between January and June this year. Last year, total deliveries amounted to 8.6 Bcm against 10.5 Bcm in 2019.

Hungary enjoys better relations with the Kremlin than any other European Union nation, and economic ties between the two countries have grown stronger in recent years.

Protests from Ukraine

The signing of the new gas supply contract have caused a wave of protests in Ukraine.

Kiev is bracing itself for another factor causing decline in gas transit volumes in the country’s pipeline network, due to diversion of Russian shipments through Gazprom's new export pipelines, TurkStream and Nord Stream 2.

Ukraine’s Foreign Minister Dmitry Kuleba has warned Budapest that the contract undermines efforts to ensure the security of gas supplies in Europe. He says the country will request that the European Commission scrutinise whether the latest agreement infringes gas market regulations on the continent.

Authorities in Hungary have rejected accusations from Kiev, with country’s Foreign Affairs and Trade Minister Peter Szijjarto saying that Ukraine is “meddling in its internal affairs”.

"[European] gas consumption will not decline, and Gazprom's role will not decline either," Szijjarto said on Monday after representatives of Gazprom Exports and MVM Ceenergy signed the contract.

"For Hungary, energy safety is a matter of security, sovereignty and economy rather than a political matter," he continued. "You cannot heat homes with political statements."