Key findings

  • Russia’s strategic goal is to gain deeper political influence in former communist countries through economic expansion.
  • Russia’s political and economic influence in Hungary significantly rose after Surgutneftegaz unexpectedly bought a 21% stake in Mol, Hungary’s national oil company.
  • Russia is testing the reactions in order to prepare for further acquisitions in the region despite the country’s own economic problems.
  • Acquiring the Hungarian pipeline system and gas reservoirs would give a boost to the South Stream project and put significant obstacles to the Nabucco project.
  • More acquisitions are expected in Hungary. Among the possible targets are Főgáz, Budapest’s main gas distribution company and OTP Bank, Hungary’s largest bank with strong positions in the region.



Surgutneftegaz, the fourth largest Russian oil producer company unexpectedly bought a 21% stake in the national Hungarian energy company, MOL Nyrt for €1.4bn ($1.8bn), more than double the current stock market value. The seller was OMV, the Austrian gas company. Surgutneftegaz, which allegedly has close links to the Kremlin produces 13% of the total Russian oil production. The company is the least transparent firm in the Russian energy sector: 40% of its shares’ owners are absolutely unknown (according to unnamed intelligence sources 37% of the company is owned by Russian PM Vladimir Putin). The company is run by Vladimir Bogdanov, a close ally of Mr. Putin.



Russian economic expansion plans

Russia is among the countries that are hit hardest by the crisis. The majority of the country’s revenues comes from the oil and gas export. Because of the falling gas and oil prices the outlook for the Russian economy has become gloomy, with approximately 5% recession in 2009, though Political Capital estimates a deeper recession.






In the shadow of these perspectives the possibility of losing the European markets looks even more frightening than before.


To tighten its control over the energy supply of Europe, state-controlled Russian energy companies will try to get greater influence in the energy sector in Central Eastern Europe.

Russia has four main goals in the region:

  1. to expand its political influence through economic expansion;
  2. to build gas reservoirs;
  3. to accelerate the building of the South Stream pipeline that would “kill” Nabucco and;
  4. (with Nord Stream) to maintain or even increase its control over the European energy market.


Hungary: an easy target

With the leadership of Ferenc Gyurcsány Hungary was the country in the region (besides Slovakia) that had the best diplomatic and economic relations with Russia. Several projects are being prepared in the energy sector such as building joint gas reservoirs by Mol and Gazprom, or the state-owned Hungarian Development Bank’s participation in the financing of the South Stream. The importance of Hungary lies in

  • developed gas pipeline system,
  • geopolitical position (centrally located, the country is an important route for gas transport) and
  • geological features (Hungary is an excellent location for building underground gas reservoirs).

The reason behind Surgutneftegaz’s unexpected move to buy a stake in Mol can be the fear of the fall of the current government, since a new government may be less friendly with Russia. On the other hand, the political paralysis of Hungary after the resignation of the Russian-friendly Prime Minister brought an excellent opportunity to go ahead with the transaction and avoid political barriers.


According to the main opposition party, Ferenc Gyurcsány and the government were aware of the transaction and helped Surgutneftegaz to buy up the shares of Mol. The main argument against this accusation is that passing the “Lex Mol” in October 2007 (the bill that prevented OMV from buying up MOL) was a consensual decision in the Hungarian parliament that was supported by the whole government and the Socialist faction. According to some well-grounded assumptions, Moscow was behind OMV’s plans to buy up Mol, and the bill itself can be an obstacle to Surgutneftegaz to increase its stake in Mol. Thus the decision on Lex Mol supported by the Socialists was against the Kremlin’s interests.



The possible risks and consequences of the Surgutneftegaz transaction:

  • Further dependence on Russia. It is likely that Surgutneftegaz will give an attractive offer to other shareholders in order to gain decisive stake in the company. Though there is low chance at the moment that Surgutneftgaz is able to acquire the majority, Hungary’s dependence on Russian energy supply will increase further.
  • Taking control of the pipelines. For Russia the gas pipelines are the most valuable part of Mol (the volume of Mol’s oil production is negligible compared to that of Surgutneftegaz). Acquiring them would boost the chances of the South Stream project.
  • Testing the region. The relation between the Hungarian management and the Russian owner will determine the further acquisition outlooks in the region. If Surgutneftegaz is successful, Russian firms can expand their activities and find other acquisition targets in the region.
  • More acquisitions. Mol is only the first step by Russia to have greater influence in Hungary. It is very likely that state-owned Russian companies will initiate further transactions in the country. The most likely targets are Főgáz, Budapest’s main gas distribution company and OTP Bank, Hungary’s largest bank with strong positions in the region. The latter has already prepared for a possible hostile takeover when the company put a 10% limit on the voting rights of each individual shareholder a couple of weeks ago.





South Stream vs. Nabucco

The transaction is a further step by Russia to expand its influence in Central Eastern Europe. As Political Capital noted in a previous risk warning issued after the Georgian-Russian war1, Russia tries to hinder any oil or gas supply plan that bypasses Russia. The EU is Russia’s biggest energy export partner, so the source-diversification and growing independence would lead to significant losses of revenues in Russia. That is why, in the last years Russian diplomacy has tried to cut the Nabucco project from potential oil and gas resources by cementing long term contracts with oil and gas producers. With the war against Georgia Russia made it clear that it has the capacity and political will to destroy the planned transportation facilities, pushing the CEE countries towards rethinking their long-term energy strategies and the prospects of the Nabucco project.




Later the Russian-Ukrainian gas conflict turned gas dependence into an acute problem and accelerated political efforts to decrease the “addiction” to Russian gas-even in those countries that formerly have kept relatively good relations with Moscow (e.g. Slovakia, Serbia, and Hungary)2.


Fears of Nabucco led Russia to take steps to hinder the project, which is the main rival to South Stream:

  • Depriving the Nabucco pipelines of gas: Last week Gazprom made a long-term contract with the state gas company of Azerbaijan to supply Russia with gas. Since Azerbaijan was planned to be a possible supplier of Nabucco, this move significantly deteriorated the outlook of the project. At the same time, Turkmenistan and Kazakhstan seem to realize that EU can be a reliable partner for energy export, which also raises fears among Russian gas companies.
  • Distancing Ukraine from the West: The state-controlled company Gazprom advised Ukraine not to accept European Union’s support for modernizing its gas-pipeline system, warning that this move would require an approval from Gazprom.
  • Buying up companies connected to the Nabucco project: The Surgutneftegaz transaction with Mol is a logical move as Mol is a part of the Nabucco-consortium. Thus Kremlin can get a greater control and a chance to block the whole project. Mol can be an important partner for building the South Stream.