Indian Council of World Affairs

Given the tensions simmering between Russia and Europe¹ and the tensions within the continent, visit of the Russian President Vladimir Putin to Hungary on February 2, 2017 might have created some uneasiness amongst some of the European countries.

Putin’s visit to the country on February 2017 was the second time since the sanctions were imposed on Russia. The first one was on February 17, 2015, which was met with protest by the Hungarian public (not supported by the government) because of Russia’s involvement in the annexation of Crimea. However, the bilateral relationship continued to strengthen due to the high level visits between the head of the states as well as their diplomatic willingness to work on the relationship. In February 2016, Hungary’s Prime Minister Viktor Orban visited Russia. The sanctions imposed on Russia by the EU have not discouraged Hungary from strengthening its bilateral relationship with Moscow.

Putin’s visit to Hungary in 2017 was not preceded by protests². In fact, Putin was quite warmly welcomed this time with a 5 metre memorial being erected in Esztergom, a historic town on the Danube river, in memory of the Russian soldiers who fought in both World Wars there. The visit this year was focused on strengthening economic cooperation between Russia and Hungary and specific steps to boost trade and investment. The two sides discussed expanding cooperation in high-tech industries and developing cultural and humanitarian contacts. Particular attention was paid to cooperation in the energy sector. They also discussed on the international agenda, the situation in Ukraine and West Asia including the Syrian crisis.³

Hungary has been critically vocal against the sanctions on Russia since 2014 for which Orban has met criticism from the EU members. On imposing sanctions on Russia, in August 2014, Orban said that the EU has harmed itself economically with the sanctions it has imposed on Russia over Ukraine. He called it as, “In politics, this is called shooting oneself in the foot.” Orban’s opposition to the sanctions stems from the fact that the Hungarian economy is heavily dependent on energy imports from Russia and hence he has been trying to gather support amongst the EU countries to lift the sanctions on Russia.⁴

Hungary is dependent on Russia for its energy imports. In a report prepared by the Hungarian Ministry of National Development in 2013, it pointed out that Russia is Hungary’s most important energy partner. Since Russia will remain the most important source of import on the long term, a balanced partnership between Russia and Hungary is an indispensable element of the security of supply. During recent years, the Russian-Ukrainian gas debate has repeatedly given trouble in the gas supply of Hungary and the EU, shedding light on the high risks of unilateral dependency on energy import. Since the crisis, however, energy security has become a priority issue within the EU.⁵ As per latest trade statistics, though the lion’s share of export trade is with the countries of the EU, Russia supplies more than two thirds of Hungary’s hydrocarbon energy needs—75 percent of oil needs and 65 percent of demand for natural gas.⁶

Economically, the annual trade volume between the two countries has not been high, due to the sanctions and counter sanctions between Russia and the EU. During the February 2017 bilateral visit, Orban expressed his disappointment as the annual trade volume between the two countries stood at $6.5 billion. He blamed the sanctions and the anti-Russian rhetoric of West Europe. Putin also supported the view and said that there has been a drop in the trade between the two countries.⁷ Since, 2014, the export and import between the two countries have been low. The table below shows the export and import between Russia and Hungary in the last five years:

  Table 1: Russian federation Exports to and Imports from Hungary from 2010-2015 (in US $ Thousands)

Source: World Integrated Trade Solution⁸

Putin in 2016, after their bilateral visit, said that Russia and Hungary have built up considerable experience in investment cooperation. Russian companies’ capital investment in the Hungarian economy exceeds $1.5 billion, and Hungarian investment in Russia’s economy comes to more than $2 billion. He said that both the countries were developing their cooperation in industrial production and transport machinery, construction, and mining. The two countries have carried out large-scale projects in high-tech sectors, including in the pharmaceuticals sector.⁹ 

Hungary has also increased its nuclear energy cooperation with Russia. A substantial amount of Hungary’s electricity up to 40 percent is generated from the Paks Nuclear Power Plant.¹⁰ In December 2014, Hungary awarded nuclear energy contracts worth at least €6bn to a Russian state owned company to build and maintain two 1,200MW reactors in Paks, a town 75 miles south of Budapest, without a public tender. The deal has been seen as controversial because the government passed a bill removing the need to hold a public competition and extending official secrecy on the project’s terms to 15 years, prompting criticism of so-called “secret deals” with Russia from opposition MPs. The deal can also been seen in the light of Putin axing the South Stream gas pipeline that put Hungary in a vulnerable position. Orban was a vocal supporter of the project because of the expectations out of the project of generating employment for the Hungarians and also plentiful gas supply from Russia.¹¹ Hungary suffered during the 2009 crisis when Russia stopped the supply of energy to Ukraine. Hence, to ensure an uninterrupted supply of energy, the Hungarian government has been having a conciliatory approach with Russia unlike other EU members such as Poland etc.

Hungary has been critical against the US which has expressed uneasiness at the growing Hungary-Russia rapprochement. During an address at the Hanns Seidel Foundation, Orban on November 4, 2014 publicly denounced the US and said that America was putting Hungary under great pressure due to its objections to the Russian-backed South Stream pipeline and the expansion of the Paks nuclear power station. He said that the pipeline and expansion project were primarily economic issues, but they had become entangled in “geopolitical, military-policy and security-policy issues” due to the Ukraine-Russia conflict. He also said during the address that he was not pursuing a “Russia-friendly policy” but a “Hungary-friendly” policy.¹²

Orban’s statement on not wanting the US to pressure also comes from the adaptation of Hungary’s foreign policy objective. In 2015, Orban’s main foreign policy goal was of maintaining good ties with Russia and Germany, adding that the US was an important partner but not the central focus of foreign policy.¹³

Hungary has been making clear its multi-vector foreign policy based on “Hungary first” approach by balancing its relationship with all the major powers such as Russia, Germany and the US. It is because Orban understands the interlinkage between Russia’s relationship and position in Europe and Hungary’s own relationship with Russia as well as with Europe.

Two days after the visit of German Chancellor Angela Merkel to Hungary, Orban on February 4, 2015 said to a TV new channel Hir TV that “If we want sustained security, calm and peace for Hungary, then we have to calculate with two powers that are present in Central Europe forcefully and on the long run, Germany and Russia.”¹⁴ To balance between its own membership as an EU member and its bilateral relationship with Russia, Hungary has been vocal against the sanctions against Russia and has been strengthening its bilateral ties with the country and at the same time, to maintain the unity within the EU, it has gone ahead and abstained from vetoing the sanctions been imposed to Russia. The Hungarian Foreign Minister Péter Szijjártó said that Hungary did not wanted to disrupt the unity with the EU hence went ahead with  the  sanctions.¹⁵

Hungary has been maintaining its balance with Russia as well as its responsibility as an EU and NATO member.

Orban in 2015 had argued that US is losing interest and influence in Central Europe for which the focus goes to Germany and Russia¹⁶, both big powers and neighbours. Hungary is cautious and trying to balancing its relationship with Russia and Germany. For some time, Hungary and Germany have been going through little rough phase.

In the transition years after the fall of the Iron Curtain, Germany turned into Hungary's most important economic partner. Since Orbán took up office in 2010, however, the German government has found it increasingly difficult to cement these economic ties on the political level. A controversial media law, constitutional revisions and Orbán's public statements against what he sees as failed liberal democracy have been deepening the gap between Budapest and Berlin. The unease between the countries has been growing for some time due to what Germany regards as Orban’s growing style of authoritative rule. Domestically, Hungary is been witnessing a deterioration in governance, electoral process, media freedom, civil society, judicial independence and corruption.  In 2014, critics of Orban had accused the prime minister of becoming a "little Putin", alleging he was mirroring the Russian leader by harassing civil liberty groups, clamping down on the press and entrenching his grip on power through his conservative Fidesz party¹⁷, which dominates the Hungarian parliament¹⁸. In 2014, Orban had remarked that “I don’t think that our European Union membership precludes us from building an illiberal new state based on national foundations.” He listed Russia, Turkey and China as examples of “successful” nations, “none of which is liberal and some of which aren’t even democracies.”¹⁹ On the other hand, Orban’s anti-Muslim and anti-minority stance has found sympathy in Putin’s consideration who hailed Hungary as a significant and reliable European partner for Russia.²⁰

However, Hungary and Germany would not want to sever their relationship because both the countries are EU and NATO members and strong economic partners (in 2014, the statistics of Germany’s investment in Hungary was around €18 billion).²¹ At the same time, Hungary and Russia too would work on their bilateral relationship.

Understanding between Russia and Hungary

For Russia, the high level visits from both the sides since 2015 holds significance given the relationship Moscow has with the EU and the US. Tensions between Russia and the West reached a high level since 2014. Russia blamed the Obama administration and the EU of pressurising most of the European countries (against their will) to go against Moscow.  At a meeting with Orban on February 2016, Putin said that he empathized with Hungary’s position as a member of the European Union in the country’s relations with Russia and called to boost confidence.²² Moreover, Hungary’s support and the pro-Russian sentiments that are going around in Europe except in some countries such as Poland and Ukraine, helps Moscow to counter the security threats it feels from the bolstering of NATO in its neighbours as well as integration process of the EU.

For Hungary, Russia’s partnership is vital for maintaining its business ties with Moscow as well as for acting as a platform to bridge ties with the EU. Since 1986, relations between Hungary and Soviet Union had been warming up considerably. Significant scientific and technological cooperation between them around the same time further laid the base for establishment of cordial relations between Russia and Hungary. Over the years, the relationship has been strengthened with due focus on trade, nuclear deal and by the necessity of strengthening cultural ties.

Orban’s statements during the joint news conference with Putin showed the disappointment he harbours regarding EU’s decisions on the sanctions on Russia. He stated, “We know very well that open discussions are ongoing in the European Union on a wide range of foreign policy issues. We also discussed them. We sought to preserve and save everything from Russian-Hungary contacts that we could, and when the world returns to the sound logic of cooperation, the Hungarian economy will have a head start in developing the Russian market.” The statements indicate that he shares similar views like that of Putin. It was not only the government, but also the people who expressed disapproval for the sanctions on Russia.²³ According to a poll organized by Nézőpont Intézet on February 1, 2017, 47% of the Hungarians were against the anti-Russian sanctions, with only 33% of them supporting it.²⁴ It wouldn’t be very wrong to say that the Hungarian government, by expressing support to Putin’s view of world order, is trying to gain a foothold in Russia’s economy.

Putin, on the other hand, has opened the doors of investment to interesting parties in the recent times. During his statements at the Eastern Economic Forum held in Vladivostok on September 4, 2015, Putin pitched for greater investment in his country’s resource-rich Far East region. He said that the Russian government would create the “best conditions for domestic and foreign investors to conduct business—so that in performance and return on capital, the Russian Far East can successfully compete with leading business centers."²⁵ In this regard, it will be worthwhile to mention that Hungarian energy company MOL is developing oil fields in Western Siberia and plans to increase production. MOL’s subsidiary is already producing 590,000 tonnes of oil a year in Russia.²⁶ The possibility of Hungarian interests in investing in Russia’s Far East considering that the region has the potential of developing into a manufacturing hub in the future cannot be ruled out altogether. 

Conclusion

For both Russia and Hungary, close cooperation has been beneficial over the years. Russia has been able to influence its way inside Europe. The Kremlin says that they do not expect the sanctions to be lifted even with the new US president. But with Hungary and many other EU members such as Germany, France, Slovakia, Czech Republic, Luxembourg, Austria, Greece, Italy, Hungary, Cyprus and Bulgaria who have been in support of lifting sanctions against Russia, it reiterates the country’s importance as well as its influence for the greater Eurasian region.

It is necessary to view Russia-Hungary relations in the view of recent changes to the geopolitical climate and Trump’s  election  as  the  President  of  the  US.  Szijjarto  said  that  he expected a "massive improvement" in US-Hungarian relations following Trump's pledge to tone down the "export of democracy".²⁷ Viktor Orban has also been hailing Trump’s populist policies and particularly emphasising the nationalistic stand adopted by him.  Orban in a speech in January 2017 had said that “The era of multilateralism is at an end, and the era of bilateral relations is upon us.” The world, according to him, is entering a “new paradigm” of “multiple centres of power.” For the prime minister, this new paradigm could also mean that European countries are now free to pursue their own paths when it comes to building relations with Moscow. It is “unreasonable — and particularly unreasonable in Europe — to ignore the power and the opportunity that Russia represents,” he said.²⁸ For Orban, Russia thus represents an opportunity that must not be neglected or ignored.

The geopolitical developments like international terrorism threatening the security and stability in Europe, refugee crisis due to the conflict in West Asia along with Trump talking about NATO as ‘obsolete’, Orban trying to mend his country’s relations with Russia and showing his support to Brexit, the European countries including Hungary are reassessing their equation with Russia. The Kremlin has been able to prove its power through the use of heavy metal diplomacy.  In the ‘era of bilateralism’, the Russia-Hungary bonhomie is definitely becoming strong. In the future too, the bilateral relation between the two countries would grow, given the economic stakes both of them have in each other.  What needs to be seen is whether the relationship between Hungary and the EU would have an impact on the bilateral relations between Hungary and Russia or not. How far Hungary would be able to be the pillar for a reestablishment of EU-Russia rapprochement needs to be observed.   The bilateral visits between Russia and Hungary, over the years, have been more than just symbolic. It projects the coming together of sharing common views on political, economic and social sectors both at the individual level as well as regional level.

***

* The Authors are Research Fellow at the Indian Council of World Affairs, New Delhi.

Disclaimer: Views expressed are of authors and do not reflect the views of the Council.

ENDNOTES

1 Russia annexed Crimea in 2014 which has led to more complications between Moscow and Europe. The European Union (EU) along with the US has imposed sanctions on Russia since 2014.

2 Hungary being an EU member has been quite critical of the EU. Viktor Orban has been very vocal regarding his dislike for the functioning of the EU, which he regards as one which is run by the ‘western elites.’ Foy, Henry and Andrew Byrne, “Viktor Orban of Hungary lashes out at ‘western elites’ running EU”, The Financial Times, June 8, 2016, https://www.ft.com/content/46a04494-2d8f-11e6-bf8d-26294ad519fc  accessed February 15, 2017. Despite calls for unity from the core EU leadership, Hungary has been very open on its criticism of the EU. Meanwhile, Hungary’s approach to the migrant crisis and Orban’s style of functioning has drawn scathing criticism from EU leaders in the past.

3 “Russian-Hungarian talks”, President of Russia, February 2, 2017. http://en.kremlin.ru/events/president/news/53805 (Accessed on February 3, 2017).

4 Gergely Szakacs , “Europe 'shot itself in foot' with Russia sanctions: Hungary PM”, Reuters, August 15, 2014. http://www.reuters.com/article/us-ukraine-crisis-sanctions-hungary-idUSKBN0GF0ES20140815 (Accessed on March 16 2017). 

5 “National Energy Strategy: 2030”, Ministry of National Development, 2012, pg. 27. http://2010-2014.kormany.hu/download/7/d7/70000/Hungarian%20Energy%20Strategy%202030.pdf (Accessed on March 17, 2017).

6 “News conference following Russian-Hungarian talks”, President of Russia, February 17, 2016. http://en.special.kremlin.ru/events/president/transcripts/51352  (Accessed on March 17, 2017).

7 “Russian-Hungarian talks”, President of Russia, February 2, 2017. http://en.kremlin.ru/events/president/news/53805 (Accessed on February 3, 2017).

8 “World Integrated Trade Solutions”, World Bank. http://wits.worldbank.org/CountryProfile/en/Country/RUS/Year/2010/TradeFlow/Import  (Accessed March 14, 2017).

9 “News conference following Russian-Hungarian talks”, President of Russia, op.cit.

10 Ibid.

11 Andrew Byrne, “Hungary and Russia Confirms Nuclear Deal”, Financial Times, December 9, 2014. https://www.ft.com/content/48dae3d0-7fc7-11e4-adff-00144feabdc0 (Accessed on March 16, 2017).

12 “Orbán: Hungary under US pressure due to South Stream, Paks”, Politics. Hu, November 6, 2014. http://www.politics.hu/20141106/orban-hungary-under-us-pressure-due-to-south-stream-paks/ (Accessed on March 15, 2017).  

13 “Hungary PM: Strong Diplomatic Ties with Russia, Germany a Priority”, VOA News, February 4, 2015. http://www.voanews.com/a/hungary-pm-strong-diplomatic-ties-with-russia-german-a-priority/2629725.html (Accessed on March 17, 2017).

14 Ibid. 

15 “Foreign Minister Admits Hungary Suffered USD 6.5 billion Loss Due to Russia Sanctions”, Hungary Today, January 24, 2017. http://hungarytoday.hu/news/foreign-minister-admits-hungary-suffered-usd-6-5-billion-loss-due-russia-sancitons-72419 (Accessed on March 20, 2017). 

16 “The Viktor and Vladimir show “, The Economist, February 12, 2015. http://www.economist.com/news/europe/21643194-germany-and-other-european-countries-worry-about-hungarys-ties-russia-viktor-and-vladimir (Accessed on March 20, 2017).

17 He controls the mass media and has amended the electoral laws in line with his party’s interests. Ibid.

18 There was a protest rally against Putin’s visit of 2015 but visit went ahead.  

19 Zoltan Simon, “Orban Says He Seeks to End Liberal Democracy in Hungary”, Bloomberg, July 28, 2014. https://www.bloomberg.com/news/articles/2014-07-28/orban-says-he-seeks-to-end-liberal-democracy-in-hungary (Accessed on February 1, 2017). 

20 “Hungary, Russia to start gas supply talks”, Press tv, February 2, 2017, http://www.presstv.ir/Detail/2017/02/02/508866/Hungary-EU-Russia-Gas-Sanctions  accessed February 13, 2017.

21 Daniela Neubacher, “German-Hungarian Friendship Standing on Shaky Ground”, Nouvelle Europe, November 2, 2015. http://www.nouvelle-europe.eu/en/german-hungarian-friendship-standing-shaky-ground (Accessed on March 20, 2017).

22 “Putin pleased with Russia-Hungary relations despite slump in economic contacts”, TASS, February 17, 2016. http://tass.com/economy/857302 (Accessed on February 8, 2017).

23 “Vladimir Putin’s visit to Hungary: deja vu effect”, Eurasia Daily, February 3, 2017. https://eadaily.com/en/news/2017/02/03/vladimir-putins-visit-to-hungary-deja-vu-effect  (Accessed on February 8, 2017).  

24 “Sanctions against Some Hungary”, Nézőpont Intézet, February 1, 2017. http://nezopontintezet.hu/analysis/szankcioellenesek-magyarok_nezopont/ (Google Translation. Accessed on March 24, 2017).

25 Nathan Hodge, “Putin Pitches for Foreign Investment in Russia’s Far East”, The Wall Street Journal, September 4, 2015. https://www.wsj.com/articles/putin-pitches-for-foreign-investment-in-russias-far-east-1441354851 (Accessed on February 7, 2017).

26 “Putin pleased with Russia-Hungary relations despite slump in economic contacts”, TASS, February 17, 2016. http://tass.com/economy/857302 (Accessed on February 8, 2017).

27 Marton Dunai, “Hungary tests EU nerves frayed by Russia as Putin visits Budapest”, Reuters, February 1, 2017. http://www.reuters.com/article/us-russia-hungary-idUSKBN15G4XW (Accessed on February 8, 2017).

28 Lily Bayer, “Why Putin Needs Orban”, Politico, January 2, 2017. http://www.politico.eu/article/why-vladimir-putin-needs-viktor-orban-russia-hungary/ (Accessed on February 8, 2017).