Donald Trump has taken an unexpected and consequential step toward aligning energy and foreign-policy goals, according to a White House official, by offering Viktor Orban’s Hungary an exemption from U.S. sanctions targeting Russian oil and gas resources for one year, according to Euronews, The Guardian and Reuters reports.
Hungary was granted an exemption that allows them to continue importing oil and gas from Russia via Druzhba pipeline and TurkStream without invoking secondary U.S. sanctions recently imposed against energy companies based out of Russia. Al Jazeera +3, Sky News +3 as well as Ndtv are reporting this development.
What it Covers
US sanctions announced in late October were targeted against several major Russian energy firms such as Lukoil and Rosneft, with secondary sanctions threatened against any country or entity purchasing from these firms. Our Analysis, by S&P Global.
As part of their agreement with Hungary, Russia granted an exemption for oil entering via Druzhba pipeline and gas entering via TurkStream–both vital supply routes for landlocked Hungary. Al Jazeera reported on this development.
Hungary has pledged to purchase approximately US $600 million worth of U.S. LNG and work more closely with Washington on nuclear-energy projects, potentially including purchasing U.S.-made nuclear fuel or small modular reactor technology from U.S. suppliers.
Reuters

Strategic and political implications have to be carefully considered.

Hungary welcomes Russia’s withdrawal as it sources approximately 74% of its natural gas and 86% of its oil needs, according to Hungarian government statistics.
Reuters
As Hungary is landlocked and heavily dependent upon pipeline access for energy transport, its ability to quickly diversify energy supplies away from Russia is severely limited. Therefore, this exemption protects Hungary’s short-term energy security.

U.S. policy makers appear more flexible under President Trump, accepting Hungary’s arguments about physical reality and supply constraints as justifications. When publicly pressuring European nations to reduce dependence on Russian energy sources, he understood Hungary’s argument about their lack of an access to water as “physical reality”. As Trump put it: “They don’t have access to sea. […] They’re stuck.” The Guardian. +1
Tensions and contradictions exist within relationships.

However, Hungary’s exemption stands as an outlier among EU members committed to gradually withdrawing from Russian oil and gas supplies as war funding sources. This puts at odds with European Union and NATO strategies which seek to wean Europe off Russian energy to decrease Moscow’s funding of wars against other states in Europe.
White House official John Kerry confirmed the exemption lasts only one year; Hungarian Foreign Minister Peter Szijjarto suggested it is “full and unlimited” creating further confusion and potential diplomatic friction. (Reuters +1).
What to Expect In 2019, Hungary must fulfill its pledges for U.S. LNG purchases and nuclear cooperation while simultaneously responding to pressure from Ukraine: its continued ties with Russian energy can open it up to EU criticism, making its role more difficult when participating in collective sanctions mechanisms.

For the U.S., an exemption shows a willingness to accommodate close allies but could send mixed signals about how serious its sanctions regime targeting Russia’s energy sector truly are.

Conclusion
Hungary’s exemption demonstrates how closely intertwined geopolitics, energy security and personal diplomacy are. Although the exemption provides relief to Hungary from immediate energy supply anxiety while strengthening ties with the U.S. and increasing cooperation, it simultaneously challenges coherence of Western sanctions policy towards Russia. This year will test whether Hungary can use this bridge with America to diversify its energy sources while testing whether Washington can balance strategic flexibility against maintaining credibility of sanctions regime.