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Feb 13, 2018

Prime Minister Viktor Orbán’s speech at the Energy Forum following a joint meeting of the Serbian and Hungarian cabinets

9 February 2018, Budapest

Good afternoon Madam Prime Minister, dear guests from Serbia.

When I asked Péter [Szijjártó] what I should talk about, he said there should be an overall vision. In such troubled times it’s no easy task to present visions, but before we talk about energy issues, I would like to devote a few words to this.

When NATO was established, a bon mot came in to being which described the goals and visions of NATO, and which could be detected in various diplomatic efforts. It went like this: “Keep the Russians out, keep the Americans in, and keep the Germans down”. Taking this slogan as inspiration for the current situation, then I can state that from Europe’s perspective the future which lies ahead of us looks like this: “The British out, the Balkans in, and Central Europe up”. This is the vision, Ladies and Gentlemen, together with all its associated consequences. This means that we may be sad that the British are leaving the European Union, but this is something over which we have no influence. We must definitely integrate the Balkans into the European Union; and this is something that the European Union has now also accepted. Indeed it has provided a date for this: 2025. We are not happy with this date: we believe it is modest and too distant. We need a more ambitious date, but 2025 is more than we have had until now – because until recently they had not said anything. So although we appreciate 2025, Hungary will strive to accelerate Serbia’s EU accession as much as we can. From here it’s not difficult to imagine the consequences for Europe if it’s the British out and Serbia in – and after Serbia a few other smaller Balkan countries entering the EU. If you take a quick look at the numbers, then you’ll see that already the volume of trade between the countries of the V4 and Germany is 55 per cent higher than that between Germany and France. And if we look at the figures for trade between Germany and Italy, then we can see that trade between the V4 and Germany is three times higher than German-Italian trade. Imagine if we get Serbia as another Central European country – because as I’ve said, Serbia may have one foot in the Balkans, but we are after all talking about a Central European country. So imagine if Serbia and a few smaller Balkan countries also become part of the European Union. The consequence of this will be that Europe’s economic balance will change: the centre of gravity of the European economy will shift from West to East, and this process will determine our next ten to fifteen years. This will not be a spectacular process: we won’t be hearing reports about it every day on the radio, and We won’t be holding debates on it every day; but as is often the case in the economy, slowly but surely, year-by-year, the figures will show that the centre of Europe’s economic performance is increasingly in Central Europe.

Ladies and Gentlemen,

Minister Szijjártó was right to say that energy is a key issue for the economy. We have achieved excellent results with the Serbs. It is an important step forward that the Hungarian and Serbian electricity exchanges have been integrated; this is the result of many years of concerted effort. The people here with us today understand Serbian-Hungarian relations, and are obviously also fully aware of the historical dimensions of these relations. The amount of work that needed to be invested to overcome our historical past is reflected in the fact that today Serbia and Hungary can state that our relations have never been as good as they are now. That work was also carried out by you personally from the business sphere, and so I thank you personally and also on behalf of us politicians – including the President of Serbia, Madam Prime Minister, and the members of the Serbian and Hungarian governments. We have made a huge effort to ensure that Serbian-Hungarian relations are not determined by the past, but by the future. We shouldn’t be arguing about the past, but need to make joint plans for the future. And as I’ve stated previously, what history teaches us – and I think the Serbians also understand this – is that we cannot be successful to the detriment of each other. If we want to be successful, then we Serbs and Hungarians can – and must – be successful together. For this we must find the paths and methods. I can safely say that we have already completed most of the political work: the doors, the gates are wide open, and businesspeople must pass through them. Everything depends on Serbian and Hungarian businesspeople creating the fabric, the thickly-woven fabric, the basis for the economy, which will then hold Serbian-Hungarian political cooperation together.

Ladies and Gentlemen,

With regard to energy, what will the world look like in the field of energy? It seems that there are a few countries in the world that are lucky, because they have significant energy resources – primarily fossil fuel reserves. Hungary is not one of these countries – indeed not only are we not one of these countries, but there are very few countries in our immediate environment that have major of fossil fuel reserves. And if there are such countries which find resources – such as Romania with its Black Sea reserves which we have heard about recently – then the interconnectors required to bring that energy here have yet to be constructed. This is not a Hungarian-Romanian forum today, but please allow me to mention the fact that Hungary has come to an agreement with Romania on a development project required to enable the two-way flow of natural gas. Péter, in around 2010 we handed over the Hungarian side of the project, but it is still not complete on the other side. If it were complete, the transport of gas from Romania could begin within minutes; but as it is, we will only be able to open the flow of gas in 2022. But at least this exists. In recent times we were under a similar blockade from the Croatian side – and perhaps we still are. We have completed the Hungarian section of the Hungarian-Croatian interconnector, but it is not yet finished on the other side of the border. I would like to note that in relation to energy resources Hungary is one of those countries that does not have its own. There are insufficient resources in this region, and we are unable to transport the few resources that exist into Hungary, because the required connections are not in place.

Ladies and Gentlemen,

However, technological developments are bringing shipments of liquefied natural gas to Europe’s shores from increasingly far afield. We are waiting to see what will become of these projects. We know about the Polish project, and are aware of the Croatians’ plans. And as I have mentioned, excellent opportunities have also opened up with Romania, from whom we have secured – or will secure – supplies of over four billion cubic metres of natural gas every year for fifteen years. Three companies which are 100 per cent Hungarian-owned have won the opportunity to purchase this gas, and the contracts will have to be concluded with them. But the point is that the natural gas extracted by Americans in Romania will be arriving in Hungary, and that will mean the end of the Russian gas supply monopoly in Hungary, once and for all. We will be able to bring into Hungary half, or more than half, of our required natural gas imports from non-Russian sources. This will be a great moment in Hungary’s history. We are in the process of negotiating the contracts, and the related investment projects are ongoing. This moment will also arrive after 2022.

Ladies and Gentlemen,

What do we have? I have been talking about what we don’t have, but what do we have? We have an extremely well-developed infrastructure, which we class as sensitive: pipelines and storage facilities; and energy companies with excellent management capabilities, which were mostly in foreign ownership for many years. I won’t list them all now, because that would take up all my time, but after 2010 Hungary repurchased a great many of this sensitive infrastructure, starting with 20 per cent of MOL’s shares, then E.ON’s gas storage facility among others, and most recently RWE’s lignite-fired Mátra Power Plant. So not only do we have well-developed and sophisticated infrastructure, but the majority of it is in state hands, meaning that we are able to use these elements as part of a state energy strategy. And then we also have a well-functioning nuclear power station in Paks, the capacity of which we will now significantly expand. And if the interconnectors are constructed, then our geographical location will also be an asset, because the current blockade from Romania and Croatia will be at an end. And in fact last week the Cabinet decided to connect our pipeline system from the South to our northern pipeline system; to all intents and purposes this will mean that natural gas can be transported from the South to Poland and from Poland to the South. This project will be completed by the Hungarian state, and a decision has been made on this intention.

Ladies and Gentlemen,

What does all this mean? What it means is that Hungary can become a country in which industry, which provides a major proportion of economic growth, has a good chance of preserving its competitiveness. In the modern era, the price and availability of energy – the secure availability and price of energy – is a determining factor in the competitiveness of industry. So I can tell you that in terms of energy Hungary is capable of making its industry competitive on an international scale. It is no accident that industry likes Hungary. It is not only liked by Hungarian-owned industry, but also by foreign-owned industry, because here it has access to secure and dependable energy at an affordable price.

Ladies and Gentlemen,

This requires the Central European region becoming integrated with Serbia in the period ahead; and we can be sure that Serbia will not be able to integrate with Central Europe unless its energy system also becomes interconnected. So I am convinced that the development and expansion of the energy system and its increase in capacity from Serbia to Hungary and from Hungary towards Serbia is a key issue for the competitiveness of the whole region.

What challenges should we prepare for? The first is that global demand for energy will not decrease. In fact according to all forecasts it is expected to increase, and in our region in the medium term we are expecting an increase of three to five per cent; so demand for energy will also increase here. The second challenge we must prepare for is that global competition in energy prices will also increase. We would not have thought it possible a few years ago, but in this competition the United States is currently in the lead. This is because the United States is consciously striving to introduce new production technologies, and thus produce energy which is around twenty per cent cheaper than European prices. By producing cheaper energy they are so far ahead of us Europeans in the race for industrial competitiveness that they are lapping us. Under these circumstances we cannot win this race: this energy race cannot be won with such figures. So the countries of Europe must eventually come to a compromise with each other on how we can take on the United States in this energy price competition. The third challenge we must reckon with is what I’ve already mentioned: that the centre of gravity will shift towards Central Europe, meaning that the greatest demand for energy, new energy consumption capacities and industrial capacities must emerge here in Hungary and Central Europe. So in Central Europe we must reckon on a hunger for energy, increasingly tough price competition and an increasing demand for energy.

Ladies and Gentlemen,

A competition can only be won if you enter it. If you don’t enter the competition, you cannot win. And if you do enter it, then you mustn’t get cold feet: you must leave the changing room and enter the arena, or go onto the track, because a race cannot be won from inside the changing room. So we will need courage and we will need visions and long-term thinking – something that we are now trying to jointly achieve with our Serbian friends: we must imagine and draft the new, competitive Central Europe. And here, as shown by the example of the Serbs and Hungarians, we must put the past behind us and forge an alliance with each other for the sake of the future. We must connect our systems. We need a common energy network, and both Serbia and Hungary are equally keen to achieve this. We must also prepare for the fact that Hungary will have the opportunity to become a gas exporter. Péter has said that for many decades Hungary’s thoughts always revolved around the issue of how to acquire energy resources and how to access energy. But if everything goes as planned, if the vision I am talking about doesn’t remain a dream but is realised – when Paks is expanded, new sources are introduced, and we diversify routes and sources – then Hungary will be a country primarily concerned with energy trade issues. It will not only be concerned with questions of energy procurement and energy capacities, but, because we could have a surplus, we will also be able to trade in energy – to buy and sell. And in addition, since we also have nuclear energy, the most reliable form of energy, we will also be able to contribute to the region’s energy security. So our Serbian friends will also be able to count on us in the energy field.

Ladies and Gentlemen,

Providing a secure energy supply serving as a background for industry is one of the most complicated economic policy questions. If in a regional context we are able to organise cheap energy that is available in large quantities, that can be acquired rationally and in large enough quantities to sell, and if we realise the required infrastructure development projects and conclude the required agreements, then we will have solved the most complicated economic question of all. In comparison, the construction of the industrial capacity that will use this energy is a less demanding and less complicated issue, because over the next twenty years energy will not be going to where industry is, but instead the pattern will be for industry to go to where there is cheap and secure energy. And accordingly Central Europe, together with Serbia, will have fantastic opportunities.

Thank you for your kind attention.