Vladimir Putin’s visit to Hungary: deja vu effect

The last Feb 2 visit of Russian President Vladimir Putin to Hungary has shown that Russian-Hungarian high-level contacts have become very regular: the previous visits took place on Feb 2, 2015, and Feb 17, 2016. But the problem is that not only the month but also the agenda are the same. As a result, we are having something like deja vu. It seems that Russian-Hungarian relations are going round in circles rather than moving upwards. The topics of the last visit were as follows:

- Rosatom-supported project to upgrade Paks Nuclear Power Plant;

- Russian gas supplies to Hungary on the basis of the contract prolonged till 2019;

- involvement of Russian companies in the project to reconstruct the Budapest subway;

- mechanisms to overcome the difficulties caused by the bankruptcy of Malev, Russia-owned Hungarian air carrier;

- development of trade and investments;

- cultural cooperation.

The delay in the Paks project was caused by the European Commission, which insisted on its compliance with the EU rules. Initially, the Russians were supposed to lend 10bn EUR for joint activities by Russian and Hungarian companies. But the Europeans ruled against this “illegal state-patronized monopoly” and insisted that European companies should also be involved in the project. The sides have accepted the EU’s requirements and, according to Hungarian sources, the European Commission will give the project the go-ahead this spring. During the visit, Putin said that according to the initial financial scheme, the Russians were supposed to provide 80% of 12bn EUR, but they are ready to provide the whole sum if the agreement is revised.

But now that the crisis in Ukraine is deepening, the Russians have no guarantees that the sanctions are lifted and that it will not just lose money. Though believed to be in opposition to the EU and its sanction policy, the Viktor Orban regime has an active role in the reverse supplies to Ukraine and was involved in the all-European campaign accusing Russia of supporting ultras.

One of the topics was the Ukrainian gas transit to Hungary. The Russians hope to leave the Ukrainians without it. During the visit, Putin told Orban that if the Hungarians faced problems with the Ukrainian transit, they could use the northern pipelines. He meant the Slovak pipeline, a link connecting Hungary with Poland. But Hungary was among the EU members voting against the Nord Stream 2 pipeline. During the visit, Putin pointed out that Nord Stream 2 was able to pump gas to Hungary. The same is true for Turkish Stream. In his turn, Orban noted that the alternative gas pipelines from Romania and Croatia were not ready and so his country was not going to replace Russian gas and oil for the time being.

Concerning Gazprom’s future in Hungary, now that oil and gas prices are falling, that company is considering reviewing its long-term contracts. The contract with Hungary may be made more dependent on spot prices. Today, Gazprom supplies Hungary with 4.2bn c m a year.

The plans to set up a new air company instead of Malev have not so far been realized. Malev’s heritage is two Russia-owned air service providers and debts to Vnesheconombank. During the visit the sides did not mention any plans to revive the company.

Over the last three years, the Russian-Hungarian commodity turnover has halved. The same is true for investments. As a result, Hungary’s share in its trade with Russia has shrunk.

According to Hungarian Foreign Minister Péter Szijjártó, because of the sanctions, Hungary has lost $6.5bn. In 2015, the Hungarian exports to Russia shrunk to 1.5bn EUR from 2.5bn EUR in 2015. So, it is not clear what $6.5bn Szijjártó is talking about. The greater part of the losses was caused by falling oil and gas prices and Russia’s shrinking external accounts. As a result, the Russians are not able to buy more goods from Hungary.

In 2013-2015, Hungary’s food exports to Russia dropped from 157mn EUR to 66mn EUR. But this is not much as compared with the country’s total food exports of 7.4bn EUR.

Besides, not all of Hungarian food products are indispensable in Russia. Now that the Russians are facing sanctions, they have learned to produce almost everything they imported from Hungary before. All they still need is technologies and investments.

Concerning investments, things are not very impressive either: old projects are underway, but new projects have either no or very insignificant investments. For example, the Russian investments in Dunaferr, Hungary’s leading mining company, make up just 20mn EUR. Among the big Hungarian investment projects in Russia are MOL in the oil sector and Gedeon Richter and Egis in pharmaceutics. MOL has invested $1.3bn and has extracted 590,000 tons of oil.

During the visit, Orban said that Hungary sought to have transparent and good contacts with Russia. As a gesture of good will, the Hungarian authorities have decided to reconstruct four Orthodox churches. They have already allotted 2.4bn HUF (770,000 EUR) for this purpose.

Concerning culture, the poll conducted by Századvég Alapítvány before Putin’s visit had shown that only 10% of the Hungarians were against any relations with Russia. 75% would like to see pragmatic relations. Another poll says that 63% of the Hungarians welcomed Putin’s visit and only 20% objected to it. Today, Putin and Trump are more popular in Hungary than Merkel.

According to a poll organized by Nézőpont Intézet, 47% of the Hungarians are against the anti-Russian sanctions, with only 33% of them supporting this policy. Among the supporters of the ruling Fidesz party, the percentage of those opposing the sanctions is as high as 58%, In the leftist camp, the percentage is 51%, in the National-Socialist camp, it is 47%.

The Liberal camp is more anti-Russian. The leaders of LMP, a force representing Budapest’s Jewish elite, were protesting against Putin’s visit and quite strangely among the protesters was the leader of MSZP Ferenc Gyurcsány: once called by Orban “Putin’s pinscher,” now he called Putin a “tyrant” and a “threat” for Hungary.

Despite this hysteria, Hungarian Foreign Minister Péter Szijjártó said that the current international political situation was favorable for Hungarian-Russian relations. Hungarian experts share the general opinion that now that Trump has been elected U.S. President, the world will change. None of them can say how exactly this will influence Russian-Hungarian relations but one thing is clear: this will require rapprochement between Russia and the West and peace in Ukraine.

As far as Hungary is concerned, it has no influence on external factors. Orban is strong and secure. He controls the mass media and has amended the electoral laws in line with his party’s interests. If nothing extraordinary happens, he will win the next year’s parliamentary elections. So, he may continue dancing his slow “peacock dance” for Moscow until he is stopped by Brussels.

One year ago, Orban said that there was no sense in prolonging the anti-Russian sanctions and promised that in 2016 they would not be prolonged. This time, he made no such promises but expressed hope that in the near future there will be new, good relations between Russia and the EU as “it would be very hard to live without open, fruitful and intensive forms of co-operation.” But then he added that Russia and Hungary were moving in different military, geopolitical and foreign political dimensions. And he used no “partner” term. So, the Russians should not have illusions concerning the Hungarians. They may be neutral but they will hardly be pro-Russian. They have always supported the EU in its sanction policy and will hardly go against it in future.

EADaily’s European Bureau