GAS PRIORITIES AND NON-GAS PROSPECTS

Hungarian Foreign Minister Mrs. Kinga Goencz paid her first visit to Baku in the middle of May. The visit took place at the invitation of Azerbaijani Foreign Minister Elmar Mammadyarov and was regarded by both sides as an important step towards the further development of Azerbaijani-Hungarian relations.

We have to point out that the modern agenda of Azerbaijani-Hungarian relations is quite extensive - it concerns trade-economic and investment cooperation, political dialogue and cooperation between the two countries' parliaments, humanitarian issues, specifically the fate of Azerbaijani officer Ramil Safarov who was sentenced to life imprisonment by a Hungarian court, as well as interaction in international organizations. However, priority on this agenda is given to issues related to the two countries' participation in ensuring Europe's energy security.

Azerbaijan has always looked on Hungary as an important partner in central Europe. The importance of this cooperation increased after the oil companies of five European countries - Austria, Hungary, Bulgaria, Romania and Turkey - signed, on 11 October 2002, an agreement to study the possibility of building a gas pipeline to deliver Caspian gas to Europe. In order to implement the agreement, on 26 June 2006 the governments of these countries signed a declaration in which they supported the idea of building a gas pipeline, called Nabucco, through their territories, which can be seen as political support for the project (the length of the pipeline is 3,300 km and its cost is 5bn euros). It is planned to bring it into operation no earlier than 2011 and its throughput capacity will total at least 30bn cu.m. of gas per year. At present, more than 25 per cent of the "blue fuel" (150bn cu.m.) annually consumed by EU member countries is imported from Russia.

Just like the European Union, Azerbaijan wants Hungary to join this project, give it political support and ensure its investment. However, the Hungarian government, led by socialist Ferenc Gyurcsany, is very careful in its assessments of its prospects and prefers more active cooperation with Russian President Vladimir Putin, supporting Gazprom's strategy of expanding the company's influence in central and south-eastern Europe. At the same time, the Hungarian Ministry of the Economy thinks that the country has ambitions to become the largest energy hub in central Europe and the Blue Stream project which provides access to large amounts of Russian gas is bringing this goal closer. Earlier, Gyurcsany said in an interview that the European project Nabucco is considerably behind schedule and might encounter new problems. According to his estimates, the Russian plan is more realistic. The Blue Stream is already going to Turkey through the Black Sea. Nabucco is an old dream and an old plan. We do not need dreams, we need projects… The only problem with Nabucco is that we don't know when we will get gas out of it. If anyone could confidently tell me: "You will get your gas by this time" - it would be excellent, but you can only heat your flat with gas, not with dreams. I would be grateful if we could diversify our supplies. I could be exaggerating the risk that threatens Hungary. The prime minister would be stupid if he did not want this and linked himself to only one supplier. But it is also stupid to chase a dream and not to rely on reality," Gyurcsany said, stressing that Hungary will support Russia's plans to extend the Blue Stream to central Europe despite its membership of the Nabucco consortium. The Blue Stream is backed up by a very strong will and very strong organizational power. There is a force behind it," the Hungarian prime minister is confident. According to the Hungarian Ministry of the Economy, the extension of the Blue Stream to Hungary will cost 5bn euros. Another member of the Hungarian cabinet, Minister of the Economy Janos Koka said in an interview that he did not see any inconsistency in Hungary's position because this position leads to competition. "We also want to diversify our energy supplies. More than 80 per cent of our gas comes from Russia. There are two competing projects. But Nabucco is more imaginary than realistic. I would like Nabucco to be stronger," Koka said.

Although the USA and the EU seriously intend to expedite the implementation of the Nabucco project and keep urging Hungary to consider it to be a priority, Budapest has not changed its pragmatic position. The arguments of the Hungarian government were also backed up by the fact that the pipeline has encountered many obstacles, the most important of which is Washington's strong opposition to any plans or even attempts to involve Iran in this project. There are also problems in financing the project. And of course, it was greatly undermined by the recently-signed declaration on the construction of the Caspian gas transport system between Russia, Kazakhstan and Turkmenistan and on the modernization of the old Central Asia - Centre pipeline (with an extension to Uzbekistan) between those countries and Uzbekistan.

The Hungarian delegation led by Foreign Minister Kinga Goencz visited Baku against such a volatile background. Incidentally, she is a member of the ruling Socialist Party and has the same stance as Prime Minister Gyurcsany. In this regard, it is important to point out that during her meetings and talks in Baku, Mrs. Goencz confirmed the pragmatic policy of the Hungarian government on this issue, pointing out that due to its strong dependence on gas imports, Hungary is interested in diversifying both energy resources and pipelines. She also said that it does not matter what this or other pipelines are called - what is important is diversification and the joint participation of our countries in ensuring Europe's energy security. We think that such a stance could serve as a good basis for the development of cooperation between our countries in the energy sphere.

We should point out that the schedule of the Hungarian delegation's visit to Baku was extremely busy - six high-level meetings (the president, prime minister, four ministers and SOCAR president) and the signing of two agreements. And this was done in one day. As for the agreements that were signed - on the mutual protection and encouragement of investments (intergovernmental) and on cooperation between the Hungarian Ministry of the Economy and Transport and the Azerbaijani Ministry of Economic Development, both sides see them as an important step towards the formation of a steady legal basis for the development of trade-economic and investment cooperation between the two countries. We have to point out here that the state of affairs in this sphere is not good at all. The volume of mutual commodity turnover is about 35m dollars, which does not really reflect the potential possibilities of our growing economies. In this regard, as was mentioned during a news conference at the Azerbaijani Foreign Ministry, the Hungarian side offered to establish bilateral cooperation with Azerbaijan in the agro-industrial sector, in the food industry, in the IT sphere and pharmaceuticals, in the development of transport infrastructure and in other sectors where it has experience and investment possibilities. We think that the positive reaction of the Azerbaijani government and private companies to these initiatives could considerably increase the volume of mutual trade between the two countries and increase the influx of investments to the Azerbaijani economy.

On the whole, the Hungarian delegation's visit to Baku and the results of its negotiations showed that Azerbaijani-Hungarian relations have tremendous potential and prospects. It would be wrong to limit these relations only to cooperation in the energy sphere, specifically to the implementation of the Nabucco project. Of course, this subject is very important and topical, but it should not block prospects for cooperation in other spheres. Bilateral relations are much broader and consist of a much higher number of elements of mutual interest. The meetings and talks held in Baku proved this obvious fact once again, and, most importantly, created the prerequisites for serious cooperation between our countries, both in the energy sphere and in other fields of cooperation.