Hungarian Minister for National Economy Márton Nagy recently visited Bulgaria, where he signed multiple cooperation agreements and met with President Rumen Radev, Deputy Prime Minister and Minister of Transport and Communications Grozdan Karadjov, Minister of Economy and Industry Peter Dilov, and Minister of Tourism Miroslav Borshosh. These agreements mark a significant step forward in bilateral relations, particularly in the fields of logistics, energy, and defence.

As part of the economic and defence agreements, Hungary and Bulgaria will establish a streamlined logistics and transport corridor, linking Hungarian businesses with Bulgarian ports. This initiative grants Hungary another strategically important maritime outlet, enhancing its trade capabilities. Additionally, both countries aim to develop a long-term defence industry partnership to improve manufacturing and supply chain efficiency, bolstering regional security.

Energy Security and Schengen Accession

Following the escalation of the Russia–Ukraine war, Bulgaria has emerged as Hungary’s key energy security partner. In 2023 Hungary imported 5.6 billion cubic metres of natural gas via Bulgaria, increasing to 7 billion cubic metres in 2024—a substantial portion of Hungary’s annual consumption of 9 billion cubic metres. Furthermore, Bulgaria plays a crucial role in supplying nuclear fuel to Hungary, as the Ukrainian transit route is no longer viable. Against this backdrop, Bulgaria’s recent accession to the Schengen Area not only enhances regional cooperation but also strengthens Hungary’s energy security by ensuring the seamless movement of essential resources.

‘As the only EU-based bidder, MOL has a strong chance of acquiring the facility’

Another significant development in Hungarian–Bulgarian economic relations is the participation of MOL, Hungary’s leading oil and gas company, in the tender for Lukoil’s Bulgarian oil refinery. As the only EU-based bidder, MOL has a strong chance of acquiring the facility. However, experts caution that the company may require additional capital for the acquisition. Furthermore, since Russian interests are involved in the transaction, an EU regulatory investigation could potentially delay the deal.

Economic Impacts of Schengen Expansion

Nagy’s visit followed Bulgaria’s official accession to the Schengen Area and the formation of a new centre-right government led by Prime Minister Rosen Zhelyazkov after months of coalition negotiations. This ‘grand coalition’ aims to resolve Bulgaria’s nearly four-year political crisis, resulting in seven parliamentary elections since 2021. A stable Bulgarian government could enhance economic cooperation with Hungary and attract further investments.

Bulgaria’s full Schengen membership carries substantial benefits for both Hungary and the broader European Union. The extension of the external borders of the Schengen Area strengthens border controls while eliminating internal checks and facilitates the smooth movement of goods, products, and labour. Reduced border waiting times alleviate economic burdens and promote regional growth. New job opportunities may also emerge, reducing unemployment and increasing the EU’s overall competitiveness.

‘This shift reduces dependency on traditional export destinations like Germany’

Hungary and Bulgaria share key trading partners, including Germany, Italy, and Romania. Over the past few years, Germany’s share as a top export destination has decreased for both countries, while trade with Romania and Italy has increased. If this trend persists, a new regional trade cooperation could emerge. Furthermore, major economic centres in Hungary, Romania, and Bulgaria have recorded Economic Development Index (EDI) growth rates above the EU average, signalling the region’s increasing economic strength.

The EDI measures a country’s economic performance based on factors such as:

• GDP growth rates
• Investment levels
• Labour market conditions
• Infrastructure development
• Innovation and technological advancement
• Business climate and regulatory environment

This shift reduces dependency on traditional export destinations like Germany while fostering a more integrated supply chain within Central and Eastern Europe. Hungary, Bulgaria, and Romania are well-positioned to increase their influence within the EU while diversifying their economic partnerships, making them key players in a more competitive regional economic bloc.

As economic centres in these countries grow, they attract higher levels of foreign direct investment (FDI), encourage business expansion, and drive the development of high-value industries. Central and Eastern Europe presents an attractive alternative to Western European markets due to its lower costs, with land and labour expenses amounting to only 44 per cent of the Western European average.

Geopolitical Interests in the Region

Geopolitical factors have also contributed to the influx of FDI in the region. Firstly, the EU’s push for climate neutrality has increased demand for the production of wind turbines, batteries, and heat pumps. Hungary, Bulgaria, and Romania benefit from their proximity to Serbian rare metal deposits, which are essential for green energy technologies.

Secondly, as China shifts its focus toward high-value-added industries to remain competitive against the US, European manufacturers face growing competition from Chinese electric vehicle (EV) imports. This dynamic is pushing companies to relocate production to lower-cost regions in Central and Eastern Europe. Additionally, German car manufacturers want to cooperate with Chinese companies in the EU to counter the competitive pressure from low-cost Chinese EV imports, which benefit from substantial state subsidies. By establishing joint ventures or allowing Chinese companies to set up factories in Central and Eastern Europe, they can reduce production costs while maintaining access to advanced Chinese EV technology. This strategy would also help German automakers avoid high EU tariffs on Chinese imports while securing a presence in China’s lucrative market, where their sales have been declining.

The US continues to view the region as strategically important. Romania hosts one of NATO’s largest bases, and Hungary maintains strong diplomatic relations with the US. American policymakers are likely to encourage European countries to increase energy imports from the US. Thus, they will likely foster cooperation within the Three Seas Initiative and use Romanian and Bulgarian ports to do so. The Three Seas Initiative (3SI), established in 2015, is a collaborative effort among twelve Central and Eastern European countries—namely Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Slovenia, Austria, Croatia, Romania, and Bulgaria. Its primary objective is to enhance regional infrastructure, economic development, digital integration, transportation, and energy security along a north-south axis connecting the Baltic, Adriatic, and Black Seas. Its core aim is to link these countries horizontally through a highway system.

‘Strengthened Hungarian–Bulgarian relations could play a key role in shaping the future of Central and Eastern Europe’

 The 3SI has achieved notable successes, highlighting the critical need for north-south infrastructure investment and attracting global attention. The recent inclusion of Greece as a partner nation and the interest shown by Indo-Pacific countries, such as Japan and South Korea, underscore its growing geopolitical significance. In July 2017, US President Donald Trump attended the 3SI Warsaw Summit and called the event ‘incredibly successful’. The Biden Administration didn’t focus on this project since it preferred collaborating with EU institutions, but this way of dealing has ended. Furthermore, the ongoing conflict in Ukraine has emphasized the importance of diversifying energy supplies and strengthening regional connectivity, potentially reinvigorating the initiative’s momentum.

Strengthened Hungarian–Bulgarian relations, bolstered by strategic investments and shared geopolitical interests, could play a key role in shaping the future of Central and Eastern Europe. Establishing efficient transport corridors, increased regional trade, and growing industrial capacity position Hungary and Bulgaria as critical players in the EU’s evolving economic landscape. If these trends continue, the region could emerge as a dynamic economic powerhouse, reducing reliance on traditional Western European markets and fostering sustainable growth.

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