Putin is on his way to an EU country to talk gas

Putin orbanYuri Kochetkov/APRussian President Vladimir Putin, left, and Hungarian Prime Minister Viktor Orban arrive for a signing ceremony of the agreement at the Novo-Ogaryovo residence outside Moscow, Russia, Tuesday, Jan. 14, 2014.

Vladimir Putin will discuss Russian gas supplies to Hungary when he visits Budapest on Tuesday, an adviser to the Russian president said on Monday.

The trip will be Putin’s first bilateral visit to a European Union country since June 2014, reflecting a warming in ties that has irked some of Hungary’s allies in the EU and NATO.

While these have distanced themselves from the Kremlin over the Ukraine crisis, Prime Minister Viktor Orban has said Hungary cannot turn its back on its main energy supplier.

In December, Russia scrapped the $US40 billion South Stream pipeline project, which was designed to supply gas to southern Europe without crossing Ukraine, citing EU objections. Hungary had firmly backed the project.

“An exchange of opinions will take place in this light. Hungary still means a lot as a market for our hydrocarbons and as a potential transit country,” Yuri Ushakov, an adviser to Putin, told reporters in Moscow.

Also on the agenda will be the deal under which Russia’s Gazprom supplies gas to Hungary, which expires this year.

“It’s not known yet whether it will be an extension of the existing deal or an agreement on a new deal,” Ushakov said.

Gazprom has supplied the lion’s share of Hungary’s gas for the past 20 years. But when the arrangement was conceived, gas consumption was far higher and Gazprom had far less competition.

Orban has said he wants a new, shorter-term contract with more flexibility, allowing Hungary the option to take less Russian gas or pay lower prices if the market price falls.

Russian negotiators have additional leverage, however, because Hungary consumed less gas than it was contracted to pay for under the current “take-or-pay” arrangement.

Orban told public radio on Friday: “There is always a peculiar psychological tension in the relationship with Russia, but we need to overcome that and I also strive for that.

“We need to serve our country’s interests, and therefore seek orderly ties with the Russians as well”.

(Additional reporting by Gergely Szakacs)

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