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Viktor Katona

RIAC Expert

President Putin’s short working visit to Budapest on February 17, 2015, which lasted just 5-6 hours, has caused the majority of experts to indulge in all sorts of speculations. The main declared purpose of the trip – the need to revise and renew the agreement of 1996 on Russian gas supplies to Hungary – had, apparently, been stipulated and agreed upon well in advance, and therefore it was expected that some new initiatives would be discussed during the visit. Viktor Orban and Vladimir Putin held a two-hour conversation tête-à-tête, but the details of the discussion between the Heads of State failed to leak to the public.

President Putin’s short working visit to Budapest on February 17, 2015, which lasted just 5-6 hours, has caused the majority of experts to indulge in all sorts of speculations. The main declared purpose of the trip – the need to revise and renew the agreement of 1996 on Russian gas supplies to Hungary – had, apparently, been stipulated and agreed upon well in advance, and therefore it was expected that some new initiatives would be discussed during the visit. Viktor Orban and Vladimir Putin held a two-hour conversation tête-à-tête, but the details of the discussion between the Heads of State failed to leak to the public.

Vladimir Putin’s visit took place against the backdrop of an extremely tense international situation. Two weeks earlier, German Chancellor Angela Merkel warned Budapest against attempts to go beyond the framework of the EU common foreign policy [1], thus considerably narrowing down the options of the Hungarian Prime Minister in carrying on a dialogue with Russia (at least publicly). On February 12, 2015, the Minsk-2 agreement was signed, and the world's attention was focused on the subsequent observance of the agreement’s provisions. Given the problems of sanctions and counter-sanctions, the policy of import substitution, as well as the drop in the exchange rate of the ruble and a number of other factors, it might seem that the Russian President's visit to Hungary was inopportune. However, it was not quite so: both countries conduct a number of similar approaches that can make the expansion of political cooperation between Moscow and Budapest advantageous.

Both countries conduct a number of similar approaches that can make the expansion of political cooperation between Moscow and Budapest advantageous.

First, the discussion of the Crimea’s reunification with Russia continues to stir interest in Hungary, still suffering from the post-Trianon syndrome. Its neighboring countries (Romania, Slovakia, Serbia, Austria, and Croatia) are home to over 2.1 million ethnic Hungarians, who often seek complete socio-cultural autonomy. Although the Hungarian establishment regards the reunification of the territories as “impossible” [2], this idea enjoys great support among society. It is worth noting that nationalist sentiments are fueled by government policies as well (the granting of Hungarian citizenship, the right to participate in elections, the “foreign Hungarian” certificate and so forth.).

Due to the fact that the Transcarpathian region is home to a large diaspora of Hungarians, Viktor Orban emphasized in one of his recent speeches that “Hungary has 200,000 more arguments in favor of peace in Ukraine.” [3] Perhaps, Vladimir Putin took advantage of this psychological aspect to clarify the Russian position in the most suitable way for this country. It is noteworthy that the former leader of the Socialist Party Attila Mesterhazy criticized the Prime Minister of Hungary for letting President Putin highlight the position of Russia, as well as speak of the Debaltseve “Kettle” and a number of other issues, while on the territory of the European Union [4].

gazprom.com
Working meeting between Alexey Miller,
Chairman of the Company's Management
Committee and Peter Szijjarto, Hungarian State
Secretary for Foreign Affairs and External
Economic Relations

Second, over the past few years, Hungary has carried out a number of significant reforms, resulting in domination of the right forces and ideas in the political life of the country, largely due to the country’s weak economic development (even in comparison with its Visegrad group neighbors). For example, Fidesz used to be a center-right party, but has now shifted to the right due to the growing popularity of radical right-wing forces. The prestige of the Hungarian Socialist Party (HSP), which had been in power for eight years, hit rock bottom and has only slightly improved its position since then (in February 2015, the HSP enjoyed the support of only 14.8 per cent of voters [5] ). Judging by the coincidence of the dominant political narrative both in Hungary and in Russia, not only tactical interests of the two states but also strategic interests appear to intersect. Studies inevitably emerged on possible funding by the Kremlin of the Jobbik political party (the latter’s member Bela Kovacs was accused of spying for the Russian Federation), and allegations even appeared that Viktor Orban was a “Hungarian Putin.” [6]

Despite his “demonization” by the media [7], Viktor Orban is a politician guided by purely domestic political considerations. He has repeatedly stated his willingness to sign a long-term contract with Russia on gas supplies or the construction of additional nuclear power units, since these were in the national interests of Hungary. However, who and how defines these national interests is a separate issue. For example, it is doubtful that a bill to tax Internet traffic matches the interests of the Hungarian population.

Due to the fact that the Transcarpathian region is home to a large diaspora of Hungarians, Viktor Orban emphasized in one of his recent speeches that “Hungary has 200,000 more arguments in favor of peace in Ukraine.”

It is also worth noting that the US government has imposed sanctions against at least a dozen officials from the inner circle of Victor Orban [8]. It is not improbable that the Prime Minister himself is a persona non grata to the American authorities. In this situation, the fact of placing corrupt Hungarian officials on the US sanctions list is not as notable as the timing of the act. US authorities could have imposed sanctions right after the controversial judicial or constitutional reforms; however, they decided to apply restrictive measures amidst a global US-Russian confrontation. American discontent with Hungarian policies is illustrated by the fact that during Vladimir Putin's visit, the US Embassy in Hungary arranged a colloquium on security in Ukraine and in the region of Central and Eastern Europe [9].

wikipedia.org
Graphical depiction of Hungary's product exports

The vast majority of the Western media took the visit as an attempt by Vladimir Putin to demonstrate that the Kremlin was not facing isolation and was not being ostracized by Europe as well as the fact that Moscow-friendly countries still existed [10]. This argument does not seem unreasonable, given that in a week the Russian president will visit Cyprus. It is well known that Nicosia is one of Moscow’s traditional “friends.”

However that may be, the visit of Vladimir Putin produced tangible results: agreements were signed on interregional cooperation, on cooperation in education and health, as well as on the opening of the Consulate General of Hungary in Kazan [11]. At the same time, a Memorandum of Understanding was signed between the Rosatom State Corporation and the Ministry of Human Capacities of Hungary on personnel training in the field of nuclear energy and related fields. The two leaders have reached a preliminary agreement on gas supplies, according to which Gazprom is ready to transfer the unused amount of the gas contracted by its Hungarian partners to future periods, as well as to increase the volume of gas in storage in Hungary. Thanks to the position of Gazprom, the signing of the new agreement has been postponed for 3-4 years, as Hungary will pay for gas only after the supply cost amounts to 3 billion euros. Budapest is also exempted from payment for unused gas, i.e. “take-or-pay” principle has gone out of force. It should be noted that the price of gas in the new contract was not revealed, although both leaders were asked about it at a press conference.

The vast majority of the Western media took the visit as an attempt by Vladimir Putin to demonstrate that the Kremlin was not facing isolation and was not being ostracized by Europe as well as the fact that Moscow-friendly countries still existed.

The cost of two additional nuclear power units, which Rosatom State Corporation plans to build in the town of Paks, has gone up to 12 billion euros [12]. To finance the project Budapest will be granted a 10 billion euro loan for 30 years on “very advantageous terms.” This nuclear deal is beneficial to both sides: Rosatom strengthens its position in the Hungarian power market, while the Hungarian government can implement its project to reduce electricity tariffs that will no doubt have a positive impact on the popularity of the Prime Minister and the ruling party.

At the same time the visit failed to give a definitive answer regarding the future of South Stream. Viktor Orban said that “no matter what project replaces the South Stream, Hungary is interested in implementing it.” [13] Given that Turkey's participation in building a new gas pipeline is not subject to revision, the most probable route of the new Turkish Stream will be Turkey-Greece-Macedonia-Serbia-Hungary-Austria [14].

There is little doubt that Vladimir Putin's benevolent attitude towards economic projects in Hungary is not an act of gratuitous aid, although experts are lost in conjectures about what the two leaders have agreed upon. It is assumed that the answer to this question will be given in the next few months, when the future of the Ukrainian crisis becomes clearer. The development of events is sure worth following, since both Vladimir Putin and Viktor Orban can very well spring a surprise.

1. Angela Merkel visits Hungary in bid to break EU nation's warm ties with Russia. // The Telegraph. 02.02.2015 http://www.telegraph.co.uk/news/worldnews/europe/hungary/11385354/Angela-Merkel-visits-Hungary-in-bid-to-break-EU-nations-warm-ties-with-Russia.html

2. Martonyi: Erdély visszacsatolása teljes képtelenség. // Origo.hu. 03.09.2013. http://www.origo.hu/nagyvilag/20130309-martonyi-erdely-visszacsatolasa-teljes-keptelenseg.html

3. Megerősítettük az együttműködést Oroszországgal. // Сайт Виктора Орбана. 17.02.2015. http://www.miniszterelnok.hu/beszed/megerositettuk_az_egyuttmukodest_
oroszorszaggal

4. Orbán megszolgálta és kiszolgálta „orosz medvét”! // Mandiner. 17.02.2015. http://mandiner.hu/cikk/20150217_mesterhazy_attila_orban_megszolgalta_es_kiszolgalta_
orosz_medvet

5. Közel kétharmados többséget szerezne a Fidesz-KDNP// Nézőpont Intézet. 16.02.2015. http://nezopontintezet.hu/analysis/kozel-ketharmados-tobbseget-szerezne-fidesz-kdnp/

6. Orenstein M., Krekó P., Juhász A. The Hungarian Putin? // Foreign Affairs. 08.02.2015. http://www.foreignaffairs.com/articles/143014/mitchell-a-orenstein-peter-kreko-and-attila-juhasz/the-hungarian-putin

7. See: Brouillette, The Autocrat Inside the EU. // Foreign Policy. 21.08.2014. http://foreignpolicy.com/2014/08/21/the-autocrat-inside-the-eu/

8. See: Hungary’s Dangerous Slide. // The New York Times. 06.11.2014. http://www.nytimes.com/2014/11/06/opinion/hungarys-dangerous-slide.html

9. Az amerikai nagykövet megvendégelte az ukrán ügyvivőt. // VS. 17.02.2015. http://vs.hu/kozelet/osszes/az-amerikai-nagykovet-megvendegelte-az-ukran-ugyvivot-0217

10. See: Hungary Keeps Visit by Putin Low-Key as It Seeks to Repair Relations With West.// The New York Times. 17.02.2015. http://www.nytimes.com/2015/02/18/world/hungary-keeps-visit-by-putin-low-key-as-it-seeks-to-repair-relations-with-west.html?_r=0

Orban defies EU to host Putin in Hungary.// Financial Times. 17.02.2015. http://www.ft.com/intl/cms/s/0/fc6c4590-b674-11e4-a5f2-00144feab7de.html#axzz3S5lILZFC

11. See: Documents signed following the Russian-Hungarian negotiations // President of Russia. February 17, 2015. http://news.kremlin.ru/ref_notes/4811

12. Van, amire Orbán és Putyin sem válaszolt. // Népszabadság. 18.02.2015. http://nol.hu/belfold/hazauzent-az-orosz-elnok-1516823

13. Megerősítettük az együttműködést Oroszországgal. // Virtor Orban’s site. February 17, 2015.

14. Press statements and answers to questions from journalists following Russian-Hungarian negotiations. // President of Russia. February 17, 2015. http://news.kremlin.ru/transcripts/47706

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