Putin’s visit: “Strategic impetus” for future Russian-Hungarian relations?

Yesterday the Russian ambassador to Hungary, Vladimir Sergeyev, when asked about Russian President Vladimir Putin’s visit to Hungary, basically repeated what Prime Minister Viktor Orbán has been telling the Hungarians in the last few days. Putin’s visit to Budapest is nothing out of the ordinary. The main topic of the talks will be “the extension of a long-term contract” that will ensure the uninterrupted flow of natural gas from Russia to Hungary. The contract is due to expire this year, hence the urgency of the negotiations. Sergeyev emphasized that Putin’s visit has nothing whatsoever to do with “the overall situation in the world and the tension we now observe.” In addition to energy questions, the two leaders will discuss “cooperation in tourism and culture.” All this sounds utterly innocent until we get to the last sentence: that the talks are designed “to give a strategic impetus” to the future development of relations.

Viktor Orbán, although he is usually quite tight-mouthed, also indicated, perhaps unwittingly, that “over and above the question of energy, we must strive for a truly balanced relation. That’s why we invited and welcome President Putin.” These sentences indicate that the conversations will go beyond economic relations. Suspicion is growing in Budapest that the “urgent issue of the gas supply from Russia” is only an excuse for a visit by the Russian president. The real reason is what Ambassador Sergeyev called a “strategic impetus” for closer relations between the two countries. And that is a political, not an economic issue.

Let’s return briefly to Lajos Simicska, the oligarch to whom Viktor Orbán owes his rise to power but who is no longer Orbán’s friend. In his interview with Magyar Narancs Simicska told the reporter that after the April elections he had a long conversation with Viktor Orbán, during which the prime minister outlined his “plans,” which Simicska did not like. Among other things, Orbán shared his views of Russian-Hungarian relations, which Simicska found odious. He expressed his disapproval of Orbán’s scheme, saying: “No, I don’t like it at all. I grew up at the time when the Soviet Union was still here and I don’t have pleasant memories of the activities of the Russians in Hungary. I can’t really see any difference between the behavior of the former Soviets and the political behavior of today’s Russians.” I am sure that Simicska’s anti-Russian feelings are genuine. He was known for his intense dislike of the Soviets even as a high school student. This antipathy most likely had something to do with his father’s involvement in the Revolution of 1956 and the reprisals the family suffered as a result. If his old friend Viktor had talked to him only about economic ties and a secure supply of gas, surely Simicska wouldn’t have reacted so negatively.

A Romanian view: "Putin will visit Hungary: A challenge to the United States Source: Independent.md

A Romanian view: “Putin will visit Hungary: A challenge to the United States”
Source: Independent.md

No, it is becoming clear that the urgent negotiations about a long-term gas contract are only a smokescreen. Although it is true that the current agreement will expire at the end of June, the flow of gas will not stop. According to the present contract, Gazprom is obliged to supply gas to Hungary for at least two more years. Perhaps three. Fifteen years ago, when the contract was signed, energy consumption was higher than it is now. The contract specified a certain amount of natural gas between 2000 and 2015, but that amount hasn’t been used up. So why is this deal suddenly so important to Orbán? Why does he think that he will be able to get the best deal from Gazprom thanks to Putin’s good offices? What did Orbán promise to Putin in exchange for cheap gas? Will he get cheap gas and, if so, at what price? Will Rossatom’s building of the two new reactors at Paks be enough for Putin in return? Or will Orbán be ready to sell or rent the storage facilities he purchased earlier from the German firm E-On to Gazprom? Most important, why is Orbán so keen on a special deal with Gazprom when by now Russia’s monopoly on the gas supply to Europe is broken?

Some observers even claim that it is not to Hungary’s advantage to sign a long-term contract with Russia because the current market price of natural gas is actually lower than what Hungary is paying for Russian gas. Hungary is paying between $350 and $400 for 1,000m³ of gas; on the open market it sells for $300. Moreover, as I already noted, Russia’s gas monopoly is a thing of the past. By now there are alternate pipelines through which western gas can reach Hungary. Although it is true that the completion of the pipeline between Slovakia and Hungary has been delayed due to technical problems on the Hungarian side, it should be ready very soon. Meanwhile gas has been steadily coming into the country from Austria and Croatia.

The Orbán government in the last five years or so was not too eager to work either on alternative pipelines or on reducing the amount of gas used by Hungarian households, which is twice that of Austrian households. The reason is inadequate insulation. European Union directives oblige energy suppliers to improve the insulation of buildings, but for some strange reason the Orbán government is in no hurry to change the Hungarian law to allow such a solution. According to experts, people could save 30 to 50% on their gas bills if this essential repair work on windows and doors were done. Definitely more than the much touted 10% decrease in utility bills legislated by the government.

Orbán has exaggerated the danger of running short of gas. He even indicated that if he is unsuccessful in his negotiations with Putin, Hungarians will freeze to death because there will be no gas to heat their houses and apartments. Of course, this is not only an outright lie but a stupid business tactic. If the situation is so desperate, the negotiating partner will have the upper hand in the negotiations, as several people pointed out.

And with that I return to Russian Ambassador Sergeyev’s mysterious “strategic impetus” for future relations between the two countries. Suspicion is growing in Hungary that Orbán is making some kind of a political deal with Putin which may commit Hungary to a closer relationship in the future. Miklós Hargitai of Népszabadság goes so far as to speculate that “it is not the decrease in our utilities bills that will depend on Putin but Orbán’s hold on power.” For whatever reason, the Russian card seems to be of the utmost importance to Hungary’s gambling mini-Putin.

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63 comments

  1. @Jon Van Til
    “I often find it difficult to be proud to be an American in today’s complex global world. But Andre Goodfriend made me proud.
    Agree!
    And if you would be a Hungarian you’d probably light a candle and pray for him every evening!
    However, the “being proud to be Hungarian” part would came only in your dreams.
    If someone is already awaken, there is no chance!

  2. Obama in a recent interview on Putin:
    ““I think he looks at problems through this cold war lens,” Obama said, attributing the Kremlin’s “old Soviet-style aggression” and failure to diversify Russia’s economy to Putin’s dated worldview. If Russia struggles economically, Obama said, a reversion to “old expansionist ideas” would have negative consequences for the US.”
    and
    ““He has a foot very much in the Soviet past,” Obama said of Putin. “That’s how he came of age. He ran the KGB. Those were his formative experiences.” ”
    http://www.theguardian.com/us-news/2015/feb/11/obama-says-putin-kgb-mentality-war-in-ukraine

  3. I could hardly put Peter Pomeratnsev’s new book “Nothing is true and everything is possible” down. I wholeheartedly recommend it.

    Anne Applebaum says that is “an electrifying, terrifying book”.

    It’s simply one of the best books written in English language on modern, middle-class Russia, with the weird, post-postmodern media world in the focus of the book.

    I think it’s comparable to Ryszard Kapuscinski’s books, it’s extremely well written/edited, sensitive and very insightful.

    Although at times I was wondering if everything really happened as it stood in the book, this nagging feeling (maybe I’m a bit distrustful) didn’t subtract anything from the value and entertainment level of the book. In any case, just as with Kapuscinski it doesn’t really matter whether everything exactly happened or some parts were exaggerated because the reality of this present day Russia is that it itself is a crazy, exaggerated, almost unreal place (and as Heidegger put in art has more truth in it than non-fiction). But most of the book must have been fact checked (checkable) and is clearly based on verifyable (even already published) sources, so most of it is guaranteed to be real. Almost unbelievable.

    This is a riveting book and people who deal with Eastern Europe in any way must read it.

    http://www.faber.co.uk/shop/general-non-fiction/9780571308019-nothing-is-true-and-everything-is-possible.html

  4. @Lucy

    Thank you for your information. 🙂

    On the basis of previous experience with Croatian businessmen during ’90s and 00s, I would prefer that INA stays in MOL’s hands. Actually, so far I don’t see any signs that MOL would really want let go INA. It is interesting that even some time ago when it was a very important topic, according to my internal sources from INA, INA was working regularly, as there was no fuss.

    This what you said about Zsolt Hernádi is very interesting. I would say that he is second the most famous Hungarian (after Orban) in Croatian media. He was a figure that police in Croatia wanted to interrogate under suspicion that he gave a bribe to Croatian former PM Ivo Sanader for selling INA. There was a request from Croatia to Hungary to allow questioning of Mr Hernádi, but Hungary refused.

    Even today we had an article about Croatian oil, some secret documents leaked about how the oil will be processed in Bosnia, Serbia or Hungary. Here is the source: http://www.jutarnji.hr/ina-razradila-plan-izvoza-domace-nafte–sisak-ostaje-bez-sirovine/1292468/
    i don’t know if I am right, but something is in the air that engages political establishments of all states involved.

  5. I guess we could come much closer to reality if we just call the other side simply ‘democratic’.
    I am quite convinced that the right-left terminology rather misleading in case of Hungary.

    But on a second thought when a ruling party cheerfully applying bolshevism – the majority dictate – in place of democracy, even this word pretty much devaluated (right along the local currency, mind you,) so we are in trouble here. I am, to be exact.

    Not to mention, if anybody want to define his/her place left from a bolshevik, there isn’t much respectable place to be, really.

    Consequently, one can not see the Hungarian left from the Fidesz, you see! 🙂

  6. Dijana Erakovic: natural resources only bring curse (Canada, Australia and Norway are the only exceptions, although environmentally they are cursed too). To be honest I’m very happy that in the Makó árok (close to Szeged) in Hungary no shale gas could be produced economically and given the extreme heat technologically, even though some Russian company is still trying (Exxon gave it up). So, I only hope for Croatia’s sake that those rigs will be found not viable, not just because they will be ugly as hell and dangerous for the environment but the amount of corruption such monies would bring is clearly undesirable.

  7. @Dijana Erakovic

    Hungary has proved that if a country wants to smother its foreign investors and take away their assets such a country can do so very easily.

    Thus MOL and the Hungarian politics realized in my view that MOL can’t hold on to INA forever, it just costs too much and Croatia really wants it back. It’s apparently a kind of obsession. So MOL will sooner or later get rid of INA, but it has to be a good bargain. Hungary eventually paid a hell of a lot for the E.ON gas storage.

    In any case, big money to be found for those MOL people like Hernadi is not in MOL any more, but in MET AG, the unnecessary Swiss-based middleman which has been making untold billions in the Hungarian natural gas market just by being an unnecessary middleman.

    I think such MOL people spend way more time and energy on managing their interests in MET then on the more difficult and risky MOL transactions. Their hearts are not in MOL any more.

  8. @antal and dominic gerhard
    Thank you for your reflection. You are right, Croatia wants INA back, and we are already in panic due to rigs because tourism is so important for Croatian economy that you wouldn’t believe. I would say that natural beauties are a base of our tourist offer. If it is jeopardized, we are in deep trouble. Also, to us nature is not only important for economic reasons, of course.
    You gave me some additional hints that are helpful. Thank you.

  9. A bit OT:

    @Dijana:
    It would really be horrible to destroy the beautiful Croatian coast by oil rigs and possible spills and whatever!
    I have very fond memories of Croatia (even when it was part of “Socialist” Yugoslavia) – spent not only summers there …
    For many years we had a “summer residence” i e a caravan standing on a campsite all year where we (and other family members) would go (as often as we could) from Easter to September to relax …

  10. Am I the only one who wonders if Putin visits every country where Russian gas firms are negotiating long-term contracts?

  11. Except insulation: why not investing on a large scale in solar energy instead of ‘modernizing’ nuclear installations ? The conditions in Hungary are very good. Besides it creates new jobs.

  12. FRANS KOELEMEIJER: The viktor and his gang set up large Government projects, so that they can steal about 30-40% of the moneys and use it for corruption and self enrichment on a very large scale. They steal a large portion of the EU development moneys they get also, BIG TIME! Hundreds of billions (in local currency) every year. Hungary is now a Kleptocracia, similar to Putin’s Russia.

    Hungary does not need a nuclear power plant, but the viktor needs the money so he can support his power base by giving them contracts, so hey can pocket 35-40% of the money and return a portion of it to the Fidesz owned companies for doing next to nothing or writing a few pages worth of unnecessary, garbage reports.

    Government projects can be run in complete secrecy without accountability of the moneys spent. Say the word “nuclear” and the project is 100% secretly run, nobody can ask what they spent the moneys on and how much?

    Part of the moneys end up in the pockets of victor’s trusted and faithful friends who keep it for him, so it cannot be traced as his personal property. The viktor and his relatives, together are now the richest family in Hungary, yet it does not show up anywhere, except a small fraction of it. It is the same exact model, Putin set up in Russia, where he is the wealthiest man, his fortune was estimated to be minimum $40.0 billion in currency and many more billions in real estate and other tangibles. Putin is silent partner in hundreds of companies and every contract they get from the Government, there is sizable return to the owners. The viktor copied it exactly and Simicska was and is running most of the schemes, except the viktor is now changing his bagmens and trying to put Simicska out to pasture. The nuclear power plans is estimated to cost €12.5 Billion, but as we know the actual spending for nuclear plans are usually three times the original estimates.
    The viktor also wants to buy the Slovakian nuclear power plant with newer generators only partially built, which is a very big loss to the Italian owners so far. Construction of the “new generators” was started 14-16 years ago and they could only come on line in about 4-5 years. It is ancient technology by now, but, again a very good cash cow for him and the supporters. That is one reason why the viktor is purchasing banks, which can launder the moneys and hide the transactions.
    Renewable energy is the least, the viktor wants to see in Hungary, so they put on a high tax on solar panels and all renewable energy components. Hungary is worse than most Third World countries, when it comes to renewable energy and recycling, which are practically ZERO!

  13. I didn’t mean political conditions. We know the situation in Hungary. IT was a kind of cri du coeur. Thanks for your lengthy comment. Frans

    Verstuurd vanaf mijn iPad

    > Op 13 feb. 2015 om 13:39 heeft Hungarian Spectrum het volgende geschreven: > > >

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