Hungary deepens energy cooperation with Russia and remains Moscow’s Trojan horse in the European Union

Timotej Kováčik

Hungarian Minister of Foreign Affairs Szijjártó revisited Moscow, where on April 11, he signed a new contract on energy supplies, especially gas, from Russia. Then the US ambassador to Hungary announced the inclusion of three Russian-controlled International Investment Bank officials on the US sanctions list, followed by the reluctant termination of Hungary’s membership as the last European country in the institution. Both events point to the still very good relations between Moscow and Budapest. Hungary does not hesitate to fill the Russian budget with forints and thus indirectly finance the Russian invasion of Ukraine thanks to what continues to be Russia’s Trojan horse in the European Union (EU).

“Moscow’s energy exports might be cheap, but they cost Ukrainian lives.” This is a comment of the Ukrainian president’s adviser, Oleg Ustenko, on the new energy agreement concluded by Hungarian Foreign Minister Péter Szijjártó during his other visit to Russia. It took place on Tuesday, April 11, 2023, when Szijjártó met in Moscow with Russian Deputy Prime Minister Alexander Novak and the management of Gazprom and Rosatom. At the meeting, they signed new contracts, thanks to which Hungary secured the possibility of buying natural gas from Russia beyond the currently agreed supplies, with the gas price cap at €150 per megawatt hour. If the gas price rises above the limit, Hungary can pay for gas later. Russia has also pledged to transit gas through the Turkstream pipeline, which bypasses the territory of Ukraine and does not have to pay transit fees to the country it has militarily invaded. The agreement also includes changes to the provisions on the financing and construction of the Paks II nuclear power plant between the Hungarian government and Russia’s state-owned Rosatom. However, these changes will still have to be approved by the European Commission (EC).

Further Hungarian controversy is imposing of US sanctions on three senior Budapest-based International Investment Bank (IIB) officials. The bank was founded in 1970 in the era of the Soviet Union, and its goal is to improve economic relations between the member countries, which are Russia, Vietnam and Mongolia. IIB moved its headquarters to the Hungarian capital from Moscow in 2019. Even then, there were concerns that Russia could use the bank to develop its intelligence network of agents in the EU and to obtain sensitive information. IIB is registered as an official part of the Russian state authorities. Historically, Russia has always been its major shareholder, thanks to which it has a decisive influence. This argument was also used by the American ambassador to Hungary, David Pressman, who announced the placement of three persons on the sanctions list of the United States of America. Specifically, it concerns two persons from Russia and one Hungarian citizen, a member of the IIB executive board. Pressman also stated that Hungary did not respond to American concerns, and Prime Minister Orbán had no problem hosting the organization’s headquarters and remaining a member. After the Russian invasion of Ukraine started, countries such as Slovakia and the Czech Republic terminated their membership in the IIB. Despite the Hungarian government officials’ initial criticism of the US administration’s actions, Hungary decided to withdraw from this international financial institution on April 13, 2023, i.e. the day after the US announced the sanctions. The only question remains whether the bank will move back to Moscow or head to Havana or Ulaanbaatar this time.

New contracts between Hungary and Russia show that Budapest plans to maintain close ties with Moscow, despite Russian aggression against Ukraine. This position is officially justified by the need to secure diversified energy sources. Hungarian Minister of Foreign Affairs Szijjártó commented on the whole matter: “As long as the issue of energy supply is a physical and not a political or ideological one, like it or not, Russia and cooperation with Russia will remain crucial for Hungary’s energy security.” It only confirms that Hungary is not interested in changing relations with Russia and continues to consider it a legitimate business partner. It is also not afraid to entrust the safety of the construction and operation of nuclear power plants to the hands of Russian state companies. On the contrary, the Hungarian government is more concerned with the right of the EC to approve the changes that Hungary signed with Rosatom in the contracts on the completion of Paks II.

It is likely that Budapest’s problematic attitude towards Brussels in the context of the war in Ukraine will not change either. In practice, this means the continuation of populist and Eurosceptic rhetoric and critique of European institutions and also Ukraine. An example is the recent criticism of Viktor Orbán, who said that if the West stopped massive financial support for Ukraine, the war would end because “Ukraine is a financially non-existent state.” Behind the scenes, Hungary will, albeit reluctantly, continue cooperation with the EU on almost all fronts, such as approving sanctions against Russia. A similar pattern of behaviour can also be observed in light of US sanctions against IIB officials. At first, Hungary refused to sever its relations with the institution controlled by the Kremlin, but finally, after harsher rhetoric from the United States, it reconsidered its steps and ended its membership. In times of war in Ukraine, however, such a purely pragmatic form of foreign policy without moral obligations deepens Brussels and Washington’s mistrust of Hungary and strengthens the belief that Budapest remains Russia’s Trojan horse in the EU.

Photo credit: Flickr.com_EU2017EE Estonian Presidency

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