Hungary pays much more for Russian gas than for gas from elsewhere

January was the fourth month in a row in which Hungary received the most expensive Russian gas among the EU countries. At the end of 2022, there was a month when the average price of Russian imported gas was more than double the average price of gas imported from other countries, G7 reports.

Much more expensive Russian gas

Within Hungarian imports, Russian natural gas is visibly more expensive than gas from other sources, the G7 article says. At the end of last year, there was a month when the average price of Russian gas imports was more than double the average price of gas imported from other countries. In October and November, Russian gas arrived in Hungary at an average price of more than HUF 1,000/cubic metre (EUR 2.65), while imports from other sources were around HUF 500 (EUR 1.33).

The discrepancy can be explained mainly by differences in procurement contracts, G7 writes. Russian gas purchases are largely attributable to Hungarian state actors. Thus, the average import price is also determined by the contracts of these actors. The biggest buyer is the state energy giant MVM. It buys 4.5 billion cubic metres of gas a year from Gazprom.

In their contract, the purchase price follows the stock exchange listing, with a two-month lag. This partly explains the price difference between Russian and other imported energy sources. The gas imported from other sources does not seem to be priced in such a shifted way, but more often at the current exchange price.

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The Russians decide when and how much to import

The difference resulting from the shift in pricing also means that although gas from other sources is now much cheaper than Russian gas, there are periods when this is reversed. For example, from the summer of 2021 until the outbreak of the war in February 2022, Russian imports were cheaper.

G7 looked at the full year 2022: Russian gas was 16 percent more expensive than gas from other sources. And since the new long-term contract was signed in October 2021, the difference has been even greater, at 20 percent. This is probably partly explained by the fact that while other market agreements can be concluded when the price is lower, MVM has no or very limited possibilities to do so. It seems to be the Russians who decide when and how much gas arrives. At least at the end of last year, G7 concludes, imports were higher in the more expensive periods. Meanwhile, imports fell as prices fell. This clearly favoured Gazprom.

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