Hungary Turns East as Europe Fades
With the EU weakening, Budapest turns to a more balanced approach.
“We have a saying about ourselves: if you have a Hungarian friend, you do not need an enemy”, stated Hungary’s prime minister, Viktor Orbán, in a late 2013 speech at London’s Chatham House. The quip was meant to illustrate Hungarians’ propensity for self-irony and self-reflection but, looking at Hungary’s politics, this mantra reveals another national trait: staunch realism.
Indeed, Budapest has shown its calculated independence from a fixed set of allegiances on many occasions, always aligning and realigning its stances in accordance with its national interest. Hungary is now seeking closer ties with Russia, after signing a 10 billion euro agreement with Moscow to prop up its sole atomic power plant in Paks.
For some, this might be shocking. How can Orbán, a former anti-communist activist, choose to shift his country away from Brussels and closer to Moscow? He can, because he is a realist who fully comprehends that the current geopolitical complexities of Europe cannot be assuaged simply by relying on the European Union.
So why Russia? Obama’s pivot to Asia and subsequent disengagement from the Old Continent, coupled with the slow disintegration of Europe at the hand of self-imposed austerity and nationalism have managed to create a power vacuum. A renascent Russia only had to step in, using its gas resources as leverage, to occupy the space. Central and Eastern European countries have thus become the geopolitical battleground between a waning supranational organization and a resurgent global power. This tug-of-war has recently been on display in Ukraine, where the two antagonists have been pulling from all sides to gain political and economic sway over Kiev.
Understanding Hungary means understanding the political chess game between two opposing worldviews. Like all ex-Soviet states, Hungary shares a troubled history with Russia. After 1989, not knowing what to do with its newfound sovereignty, Budapest moved instinctively towards the West in the hope of keeping Moscow at bay. It joined NATO in 1999, followed by the European Union in 2004. For a while, it seemed that Russia’s influence had waned over the region. As the financial crisis deepened, however, the Union’s attention became increasingly focused on solving the problems plaguing the core Eurozone countries, leaving the other member states in the cold to fend for themselves.
This moment can be seen as a turning point in the dynamics of the European continent. The emergence of this two-speed Europe has marked the reversal of federalist sentiments in many member states. Some have fallen prey to nationalistic temptations, while others have tried to seek out alternatives to their economic woes, either by increasing regional ties or leaning back on Russia. Hungary is a very interesting case in point, being a member of both these camps. On one hand, it is one of the founding members of the Visegrad group of Four (the other three being Poland, the Czech Republic, and Slovakia), which has coalesced in an effort to create a close-knit security and economic community, operating inside the European Union. On the other hand, Hungary has warmed to Moscow, even advocating an EU-Russia reset over energy-security concerns.
A landlocked country, Hungary has few natural resources and has long been reliant on Russia to provide more than half its energy needs. Despite intense criticism from the opposition over the handling of the nuclear deal, the arguments underpinning the loan are economically sensible. Increasing the capacity of its sole nuclear power plant means lowering manufacturing costs for its industry and a significant increase in national competitiveness, which is something even the Germans can relate to. When finished in 2023, Paks is expected to supply
This is just the tip of the iceberg, for in reality the stakes are much higher. Hungary has been increasing its control over certain strategic sectors in an effort to bolster its negotiation tactics with the Kremlin. In 2012, the Parliament passed a law that would allow the state to buy strategic oil and gas reserves owned by its national energy company, MOL Group. The bill does not entail the automatic nationalization of all gas reserves, but instead gives the state the option to do so if necessary. Last year, the government bought important gas storage facilities from both domestic and international companies in order to increase its strategic storage reserves and enhance Hungary’s energy security.
Hungary’s most significant move has probably been the commercial war between MOL and its Croatian equivalent, INA. The two companies, worth around $7 billion each, have been struggling over management rights. In 2002, MOL bought an initial stake in INA, which was subsequently increased through a controversial deal that landed the Croatian PM a 10-year jail sentence. Full control of INA would turn Hungary into a regional energy hub, enabling Budapest to use this asset as a bargaining chip with either the Kremlin or the European Union. It may even challenge Russia’s dominance over Eastern Europe in oil and gas by offering an alternative to Gazprom’s infrastructure.
It goes to show how the internal crisis of the European Union has pushed Hungary into a delicate negotiating act with the Kremlin in order to obtain concrete financial and security guarantees that the West seems no longer able to offer. Orbán has agreed to support the South Stream pipeline, which will connect Russia to south-central Europe. His support for this project meant turning down its European alternative, Nabucco.
With parliamentary elections coming up in early April, the popularity of Orbán’s policies will be put to a vote. Initial polls indicate that the ruling FIDESZ-KDNP coalition enjoys the support of 40 percent of voters. Meanwhile, the Hungarian Socialist Party lags far behind with 12 percent. Együtt comes in at 7 percent and DK slipped to 4 points. Even if the opposition parties agreed to support a single candidate in the forthcoming election, it seems that their popular support has not grown. The Prime Minister is therefore positioned to become one of the few European leaders re-elected in the wake of the economic crisis.
It remains to be seen whether other European countries will follow suit and cave under Russia’s (or perhaps even China’s) influence. For these states, it became clear a long time ago that their geographical position and size are insufficient to ensure their survival. They need to cater to other powerful ‘friends’, as the EU no longer seems capable of defending their interests.
In Hungary’s case, this rapprochement with Russia is merely a marriage of interest, dictated by hard geopolitical realities. Moscow has the money and natural resources, and lacks Brussels’ often patronizing engagement with its Eastern member states. The European elite, through its rigidity and inwardness, has forced Budapest to embrace realpolitik plays in order to protect its interests, relinquishing any false hopes it may have had for Europe. As for Russia, never shy to offer capital or oil to its smaller neighbors in exchange for political favors, a friend in need is a friend indeed.
Mark Varga is a Hungarian-American political consultant based in Budapest.