Hungary has declared a state of emergency in the energy sector and adopted a seven-step plan that includes banning exports to Europe.
According to that strategy, which Hungarian officials announced on Wednesday on social networks, the government intends to suspend energy exports to neighboring countries. The plan does not specify whether the ban applies to both electricity and gas, but states that gas shipments from storage will still be allowed.
Although Hungary is a medium-sized consumer of electricity and gas, its market is connected to the market of Central and Eastern Europe, including Germany, while its gas market is connected to five neighboring countries.
Any restrictions on exports would affect regional flows.
It is unclear when the ban will take effect, but traders have reacted strongly to the announcement.
If Hungary bans the export of electricity and gas, it will set a very dangerous precedent in the EU, said a regional energy trader.
Hungary will be the last EU country to be cut off by Russia, the Balkan electricity trader added, talking about how Hungary’s energy plan could be implemented.
An Italian trader active in several European gas markets said the announcement further supported European gas prices on Wednesday, but that the main price drivers were persistent outages limiting supply from Norway.
The strategy also includes plans to remove restrictions on electricity and gas prices and align them with market prices, increase local gas production and extend the operational life of the Paks nuclear power plant while increasing lignite production for coal-fired generation.
Electricity and gas tariffs for households are 20% below current market prices.
Hungary currently imports Russian gas via Serbia and Romania in an effort to replenish its storage facilities, which are currently only 44% full, which is about 15 percentage points below the European average.
The country currently imports most of its gas from Russia, and deliveries come via Serbia and Romania.