Viktor Orbán picks another fight with the West, this time over the Southern Stream

I know that everybody is intensely interested in the Hungarian government’s latest brainstorm, the introduction of an internet tax, but I would rather wait with an analysis of this latest scandal until it becomes clear what the fate of the proposal will be. So far the reaction to this new tax has been so vehement that the government most likely will have to retreat. When an article in the right-wing Válasz predicts that “if we had an election today Fidesz would lose big,” I think it’s time to order a quick turnabout. I would like to add just one observation on a related topic: the Hungarian budget must be in a sorry state if an additional tax must be levied on soap and detergent, allegedly because they are harmful to the environment. Let’s not contemplate the detrimental effect of curtailing the use of soap because this would take us too far afield.

So, instead of dealing with the effects of an internet tax, I will look at other recent governmental decisions that have been detrimental to Hungary’s relations with the United States and the European Union. What I have in mind is Viktor Orbán’s flirtation with Putin’s Russia, which is being watched with growing concern in Washington and Brussels. Already there have been a couple of moves indicating close cooperation with Russia that raised eyebrows in the democratic world: the building of a nuclear power plant by a Russian firm on Russian money, Hungary’s refusal to support the common European position on the Russian sanctions, a tête-à-tête between Gazprom and the Hungarian prime minister followed by the Hungarian decision to stop supplying gas to Ukraine, and the government’s decision to let Gazprom use Hungarian facilities to store gas in case Russia cuts off the flow of gas through Ukraine.

These moves worried and irritated the United States and the European Union, only compounding their concerns about all the transgressions of the rules of democracy committed by the Fidesz government against the Hungarian people. Years have gone by; at last western politicians are slowly, ever so slowly deciding that they have had enough. After Norway it was the United States that openly showed its dissatisfaction with the domestic and foreign policies of the Orbán government. Yet, as the last few days have demonstrated, Viktor Orbán is not changing tactics. On the contrary, as I wrote yesterday, he is strengthening ties with countries whose relations with the United States and the European Union are strained. Almost as if Viktor Orbán purposefully wanted to have an open break with Hungary’s western allies.

Yesterday one could still hope that Viktor Orbán would  come to his senses and would at least make some gestures, but as yesterday’s meeting between Péter Szijjártó and Victoria Nuland indicated, the new Hungarian foreign minister was sent to Washington without a Plan B. By today, however, most likely in his absence, the government came out with a new idea. What if the Hungarian office of taxation and customs (NAV) announces that in the last several years they have been diligently pursuing their investigation of those criminal elements who through tax fraud unfairly competed against the American company Bunge? Maybe it will work. Mihály Varga, minister of national economy, announced this morning that four of the culprits are already in jail. Very nice, but there is a fly in the ointment. Most likely the U.S. State Department remembers, as I do, that András Horváth, the whistleblower at NAV, months ago gave a detailed description of the ways in which these criminals operated. He asked NAV to investigate and disclose their findings, but the managers of the tax office first fired Horváth and a couple of days later announced that after an internal investigation found everything in perfect order. So I doubt that the Americans will fall for that bogus story.

Yesterday Portfólió asked “how to make the USA more angry with Hungary,” but they “did not have the faintest idea that the government has been holding the best answer to that and it beats every idea [the Portfólió] have ever had.” So, what is it? In order to understand the situation we have to go back to the controversy over Russia’s new pipeline already under construction–the Southern Stream–that would supply Russian gas to Bulgaria, Serbia, Hungary, Austria, Slovenia, Greece, and Italy. The United States and the European Union were never too happy about the project and now, in the middle of the Russian-Ukrainian crisis, they are especially leery of Putin’s plans. In fact, the European Commission asked the Bulgarians to stop the construction of the pipeline in their country. They obliged. The European Union also warned Serbia that they can forget about future membership in the European Union if they agree to support the project right now.

southern stream

In Hungary construction has not yet begun, but the Orbán government seemed to be afraid that something similar would happen to them what happened to the Bulgarians. They decided to act. Changing the law by now has become a Fidesz pastime. Today Antal Rogán proposed an amendment to a 2008 law on natural gas that will allow any gas company to construct a pipeline. The original law, in harmony with laws of a similar nature in other countries, specified that the company in charge of the construction has to be a certified transmission system operator who must conform to international rules. Since pipelines are transnational projects, the countries involved must coordinate their individual projects. What the Hungarians hope is that as a result of this amendment Hungary will not be bound by any international constraint. Starting the project will depend only on the Hungarian Energy Office, which could give permission to any company it chooses to construct the pipeline. Portfólió suspects that both the European Union and the United States will be “furious” upon hearing this latest Hungarian ruse.

Clever Hungarian lawyers, who seem to specialize in circumventing the letter of the law, might think that this scheme is foolproof, but I suspect that EU lawyers will find the legislation full of holes. Hungarian papers suggest that the Orbán government is playing for time. But the case is settled, they argue; the pipeline will be built. Surely no one will force Hungary to destroy it.

Let’s contemplate another scenario. What if the European Union and the United States in joint action put such pressure on the Hungarian government that the plan must be abandoned? As it is, according to analysts, Budapest is already between a rock and a hard place. When political scientist Gábor Török, who has the annoying habit of sitting on the fence, says that “the Orbán government is in big trouble. It was before but now it is different. It will not fall, surely not now…. But if it does not recognize the fork in the road or if it chooses the wrong road, we will mark the events of today as a definite turning point.” And in an interview this afternoon Ferenc Gyurcsány twice repeated his belief that Hungary is at the verge of leaving the Union and, when it happens, it will not be Viktor Orbán’s choice.

I wouldn’t go that far, but I do predict that the screws will be tightened. Among those who will apply pressure will be Norway since the Hungarian government audit office just came out with its report claiming that Ökotárs, the organization in charge of distributing the Norwegian Civil Funds, has used the money inappropriately. A criminal investigation will be launched.

We know that Barack Obama said that the American government supports NGOs in countries where they are under fire. Today we learned that Veronika Móra, chairman of Ökotárs, was a member of a delegation that visited Washington in late September. During that trip the NGO leaders were received by President Obama in the White House. By contrast, Péter Szijjártó did not get any higher than one of the assistant undersecretaries of the State Department. If I were Viktor Orbán, I would take that as a warning.


  1. “but many senior figures in the ruling Fidesz party believe Prime Minister Viktor Orban is steering the country back to its authoritarian past.”

    This Thorpe guy must be wired into the brains of them senior Fidesz party figures because here in Hungary I can assure the dear readers no senior Fidesz figures believes so.

    This is the time-honored good cop bad cop division. For years Western politicians deluded themselves by talking to the oh-so-moderate Martonyi, Szajer, Nemeth, Orban (ie. Anita, who was the source for many wikileaks cables as a ‘conservative commentators’), Prohle. When in reality these people duly revealed themselves as die-hard Fidesz troopers who would support their dear leader until the very last bullet.

    Thorpe is on a PR mission I am afraid, at the behest of some fideszniks who are somewhat more concerned about the recent Russian orientation — but it seems to me that these – supposedly existing internal – dissenters are still, after all these years supporting Orban like the troopers they are.

    There is no internal political division whatsoever I can assure everyone, there’s some struggle between oligarchs.

    “In a country where backbench rebellions are almost unknown,” — has Thorpe met any socialist part member in his life? No backbencher rebellion in Hungary? Not at Fidesz, but otherwise absolutely yes (and I don’t just mean the sacking of Medgyessy).

    I think he is exaggerating the internal struggles to express the goodwill of some misterious “atlanticists” in Fidesz. There are no such species.

    Let’s remind ourselves after four years of amok running not a single Fidesz politician has openly left the party or resigned.

    Even the humiliated, demoted ones like Pröhle (or Laszlo Madi from earlier times) soldier on relentlessly within the system.

  2. Re: the latest Nick Thorpe article for the BBC. It reminds me of a saying about sinking ships and rats.

  3. @Past’s Long Shadow

    Ok, I get it. Everybody overbilled everybody …

    1. How come nobody is complaining?
    2. Why is this the concern of the Hungarian government?

    I overbill my clients regularly by the way (I pay taxes after the income).

  4. muttdamon: “Everybody overbilled everybody … ”

    This is an excellent point (although I am not sure at all that the NGO in question did it). Car repair shops bill based on the number of hours in the “book” for a certain repair, regardless of how many actual hours were spent. Lawyers bill by the hour for a letter or any other trivial task, I doubt that they actually spend all that time. And so on…

    The main concern of the government is that they pay their taxes based on the total income, even if they bill ten times the available man-hours.

  5. Totally OT:

    M1 TV is right now showing the wonderful film “Daniel is catching a train” (“Szerencsés Dániel”, played by a very young Rudolf Péter) as a tribute to 1956 – well done! (I have to admit this…)

  6. Laszló Kövér says maybe it is worth to leave the EU…given that the euro atlantic world is in a moral crisis.

    Not a joke.

    As it was said before Orban and his loyalists have already prepared themselves for the leaving of both NATO and the EU. The minds of their followers are being prepared.

    And Nick Thorpe wants the world to believe that there is dischord within the top echelon of Fidesz. Right.

  7. @Eva S. Balogh and @Garfield 3 –
    I wish I didn’t agree with Garfield 3, but I do. There is not the slightest sign of real dissent within Fidesz’s leading ranks. Occasionally one or another will say something mildly critical, but the tone is reminiscent of reform communists in an earlier era – they want to keep the system (and power) intact, but want to make a few little adjustments.

  8. Orban is in Brussels. He didn’t seem particularly worried on a picture shot today. But of course, why would he be?

  9. Internet tax (contained in bill T-1705)

    Fidesz is determined to push it through the Parliament quickly.
    The so called “detailed debate” will take place on Monday at 1 PM.
    The final vote, with certain result, will follow not before long.

    100 GB = 50 euros a month = 10% of an average net salary

    If service providers have to pay by the internet traffic, they will cancel
    the current unlimited plans.

  10. in all this noise I think it’s time to remind ourselves to look at the reward system and then follow it. In this case it’s clear, money. That the Norwegians wouldn’t play ball translates to eliminate any credible alternative.

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