economic sanctions

Hungary through American eyes

American diplomats have been employing novel ways of communication. For example, yesterday Daniel Fried gave a press conference by telephone from Washington to a small number of Hungarian journalists about the American position on economic sanctions against Russia. Daniel Fried is the State Department’s coordinator for sanctions policy.

Fried is a senior diplomat with vast experience in Eastern Europe. He served as political officer at the U.S. Embassy in Moscow in Soviet times; he headed the Polish desk during the regime change in the late 1980s. After Poland emerged as one of the democracies of the region, he was political counselor at the U.S. Embassy in Warsaw. Later he served as assistant secretary of state for European and Eurasian affairs and special assistant to the president and senior director for European and Eurasian affairs at the National Security Council. So, why does Daniel Fried think that he has to give a long-distant press conference for Hungarian journalists? Surely, because Washington wants the Hungarian public to know the American position on Russian aggression against Ukraine. And it also wants to share its opinion of the current state of Russian-Hungarian relations.

Ambassador Daniel Fried

Ambassador Daniel Fried

Up to this point we have two independent versions of the telephone interview: one from Népszabadság and the other from VilággazdaságI can’t imagine that MTI was not invited, but for the time being there is no MTI report on the event.

The main message was that sanctions will be applied as long as Moscow does not fulfill all twelve points of the Minsk Agreement. A good summary of these twelve points can be found on the BBC website. Russian regular troops are still on Ukrainian soil and “the Russian aggression continues.” The United States wants a political solution to the crisis and is ready to cooperate with Russia in many areas, but Russia must respect the territorial integrity and sovereignty of Ukraine. With its aggression against Ukraine Russia “seriously endangers the European security system that came into being after the 1989-1990 East European events.” If Russian aggression continues, the United States and the European Union are ready to introduce new sanctions.

Fried then turned to specifically Hungarian issues. Hungary and its prime minister should know from Hungarian history what it is like when a country is left alone unprotected in the event of outside aggression. Therefore Hungary ought to realize the importance of the steps that are being taken in this case. Viktor Orbán first claimed that “the European Union shot itself in the foot when it introduced sanctions against Russia” and later at the NATO summit in Wales he declared that “we are hawks when it comes to military security but doves in economic terms.” Fried said that “we all want to be on good terms with Russia, to improve our relations, but this is not the right time for friendship.” Fried cited Russian Foreign Minister Sergey Lavrov’s claim that sanctions only deepen the Ukrainian crisis. “The Russians say all sorts of things, many of them are simply not true. After all, they deny that their soldiers are in the territory of Ukraine.”

During the press conference it became clear that talks took place between the Hungarian and the U.S. governments concerning the sanctions. It seems that the U.S. listened to Hungary’s objections but was not impressed.  The sanctions hurt not only Hungarian businesses but businesses of all nations, including those of the United States. The European Union made a brave decision which Hungary supported.

The message was that one cannot play the kind of game Viktor Orbán is playing at the moment. On the one hand, he is a supporter of the common cause against Russia, but when it comes to sanctions he tries to make special deals with Moscow. For instance, Sándor Fazekas, the Hungarian agriculture minister, visited Moscow on September 8 where he had talks with Nikolay Fyedorov, his Russian counterpart. There Fazekas agreed with Fyedorov that “the sanctions don’t offer a solution to the Ukrainian crisis, which should be settled through negotiations.”

And according to leaked documents, we know that Vladimir Putin told Petro Poroshenko during one of their telephone conversations that he “through bilateral contacts can influence some European countries to form ‘a blocking minority’ in the European Council.” The countries he has in mind are Slovakia, Bulgaria, Hungary, and Cyprus. I guess Daniel Fried wanted to make sure that Hungarians understand that Washington fully supports the application of sanctions and that the large majority of the EU countries are also on board.

While we are talking about U.S.-Hungarian relations, I ought to mention that U.S. Senator Ben Cardin (D), who is a member of the Senate Foreign Relations Committee and chairman of the U.S. Helsinki Commission, and Senator John McCain (R) introduced a resolution in recognition of the International Day of Democracy on September 15. Accompanying the introduction of the resolution Senator Carden’s press release talked at length about the sad state of democracy in Hungary where “there is an unprecedented global crackdown on civil society organizations seeking to express their voice and exercise their rights. Earlier this week, Hungarian authorities raided the offices of two NGOs in Budapest in what appears to be part of a tightening squeeze on civil society. Such actions not only undermine democracy but chill investigative reporting on corruption and good governance. Now, more than ever, is the time for the international community to push back on threats to civil society and protect efforts by these organizations to build strong democratic institutions.”

In addition, on September 18 Deputy Chief of the United States Mission to the Organization for Security and Co-operation in Europe (OSCE) Kate Byrnes delivered the following speech to the Permanent Council in Vienna:

Three months ago, on June 19, the United States addressed the Permanent Council regarding an apparent campaign of intimidation directed toward civil society and independent media in Hungary. I regret that I must speak to the Council again on this topic.

As we said in June, just one day after the April 6 elections, the Hungarian government accused organizations that conduct legitimate work in human rights, transparency, and gender equality of serving “foreign interests.” Shortly afterwards, the Prime Minister’s Office alleged that NGOs that monitor and evaluate grant proposals for the EEA-Norway NGO fund were tied to an opposition party. On September 8, Hungary’s National Bureau of Investigation initiated a series of police raids on two NGOs responsible for the EEA-Norway NGO grant program in Hungary. With no prior warning, and in a show of intimidation, over 30 officers entered the NGOs’ facilities and seized the organizations’ documents and computers.

These police raids appear to be aimed at suppressing critical voices and restricting the space for civil society to operate freely. The United States again reminds Hungary of its OSCE commitments to human rights and fundamental freedoms, democracy, and the rule of law.

Mr. Chair, we raise these issues to express our concern about actions that appear inconsistent with OSCE principles, and also to encourage dialogue. We intend to continue to encourage the government of Hungary to observe its commitments and allow NGOs to operate without further harassment, interference, or intimidation. The United States believes that such respect for its commitments will help Hungary to become a more prosperous, robust and inclusive democracy.

Finally, here is something from former President Bill Clinton, who appeared on the Daily Show with Jon Stewart. “There’s the authoritarian capitalism model which is Russia and in a different way China, and it has some appeal. Like the Hungarian Prime Minister – they owe a lot to America; he just said he liked authoritarian capitalism, just saying “I don’t ever want to have to leave power” – usually those guys want to stay forever and make money. And there’s the democracy model …”

Hungary is in the news, no doubt. It would be better if it weren’t.

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Viktor Orbán between Russia and Brussels

In Budapest there is the usual Friday political turmoil since it’s the day that Viktor Orbán holds a well-rehearsed conversation with a journalist of the Hungarian state radio. I no longer call Magyar Televízió and Magyar Rádió public television and radio stations since in the last four years both have become mouthpieces of the government. Just like in the Kádár regime.

Normally the world does not pay much attention to these early morning chats, but today was different. By 04:45 EST Reuters reported on what Viktor Orbán had to say about the European Union’s sanctions against Russia. After the leaders of the Union decided on tough economic sanctions against Russia, Orbán publicly voiced his opposition to the plan. Referring to the Russian ban on agricultural products coming from the European Union, Canada, the United States, and Australia, he announced that the sanctions policy pursued by the West “causes more harm to us than to Russia…. In politics, this is called shooting oneself in the foot.” He continued: “I will do my utmost–of course we are all aware of Hungary’s weight, so the possibilities are clear–but I am looking for partners to change the EU’s sanctions policy.”

This move of Orbán may not have come at the best time. Just yesterday political observers noticed that Putin adopted a softer tone during a visit to the Crimea that was not carried live on Russian television. Moreover, the sanctions have just begun to bite, but even before there were signs of financial strain as a result of the annexation of the Crimea. Desperate for cash, the Russian government dipped into the national pension fund which means taking away from every Russian two years’ worth of social security payments. Although Putin’s personal popularity is extraordinarily high, according to one survey only 7-12% of the population are ready to make financial sacrifices for the sake of Russia’s policies in Ukraine.

Inflation is up 9% this year while there is no economic growth. The government is contemplating a new 3% sales tax to plug some holes in the federal budget. There are already shortages in the supermarkets. Forty percent of Russia’s food supply comes from abroad, and Russian consumers will be unhappy very soon. In the last twenty years or so they became accustomed to a great variety of products from all over the world and they have no intention of returning to Soviet times of limited supplies and inferior quality. Putin’s propaganda that the ban on Western food is just a means of “supporting the product manufacturers of the fatherland” will wear thin soon enough.

The temporary loss of the Russian market for Hungarian agriculture is less significant than the Hungarian government wants the world to believe. Orbán put in a bid for compensation and therefore, I assume, he exaggerates the potential losses for Hungarian farmers. Reuters in its report claims that Russia is Hungary’s largest trading partner outside the European Union, with exports worth 2.55 billion euros in 2013. However, this figure may be wrong. According to a Hungarian source, that figure is 70 billion forints, which is only 223 million euros at today’s exchange rate. So, the Russian sanctions against Hungary will not be as painful as Orbán would like to portray them. On the other hand, Western sanctions against Russia are more serious from Hungary’s point of view than the Russian sanctions against Hungary, Zsolt Kerner claims. One of the Russian banks affected by the sanctions is the state-owned Vnesneconombank (Bank for Development and Foreign Economic Affairs), which owns part of Dunaferr and is also the bank through which the Russian loan to build a new nuclear power plant in Paks will be administered.

Orbán’s attack on the Russian policy of the European Union is also ill-timed.  Finland’s president, Sauli Niinistö, is currently in Moscow to negotiate with Putin. Although Niinistö is not an official envoy of the European Union, he was in contact with western colleagues. The European Union has been seeking a diplomatic solution to the crisis, and they don’t need Viktor Orbán’s good offices as a messenger between Moscow and Brussels.

While Niinistö was negotiating with Putin in Moscow, the EU foreign ministers held an emergency meeting in Brussels, discussing among other things the Ukrainian situation. Of course, I have no idea what position Tibor Navracsics took at this meeting, but I assume he was instructed to oppose sanctions and perhaps suggest bilateral discussions with Moscow. Whatever the Hungarian position was, according to the agreed-upon statement “any unilateral military actions on the part of the Russian Federation in Ukraine under any pretext, including humanitarian, will be considered by the European Union as a blatant violation of international law.” And, most importantly, “the Council  … remains ready to consider further steps, in light of the evolution of the situation on the ground.” According to diplomats, the new measures would target Russian sales of sovereign debt, its ability to raise funding through syndicated bank loans, and high-tech machine imports.

I may add here that Viktor Orbán’s old friend David Cameron, with whom he saw eye to eye on the nomination of Jean-Claude Juncker to be president of the European Commission, is unlikely to be on his side on the issue of EU sanctions against Russia. Great Britain is one of the harshest critics of Russia’s destabilizing efforts in the region.

By now Orbán has one staunch ally and that is Robert Fico, the prime minister of Slovakia who announced his opposition to sanctions already yesterday. However, it seems that the Slovak leadership is divided. Andrej Kiska, who recently defeated Fico to become Slovakia’s president, came down on the side of sanctions. He said that “when words aren’t enough, economic sanctions can be used to bear greater pressure on countries which seek to expand, dictate or threaten.”

Orbán’s comment that the sanctions policy hurts the European Union more than it does Russia and that EU policy is in fact a move by which the EU shoots itself in the foot was not left unanswered. Lithuania’s foreign minister, Linas Linkevicius, upon arriving for the EU foreign ministers meeting in Brussels, retorted that it was better to shoot oneself in the foot than to let oneself be shot in the head. Naturally, Lithuania politicians are a great deal more worried about Russian intentions than is Orbán, who looks upon his country as a kind of bridge between Moscow and Brussels.

What kind of sanctions? Let the man eat his sandwich in piece Source: Posteemes /Photo: Urmas Nemvalts

What kinds of sanctions? Let the man eat his sandwich in peace.
Source: Postimees / Urmas Nemvalts

Estonia, which is in the same boat as Lithuania and Latvia, has lately changed its until now pro-Hungarian attitude. One reason for that change is Orbán’s overly cozy relations with Putin’s Russia. But there is another. While Hungary just opened a new embassy in Ecuador’s Quito, it unceremoniously closed its embassy in Tallinn, the capital of Estonia. Estonia is not only a fellow EU member, but Estonians speak a Finno-Ugric language. This linguistic connection has always been the source of a special bond between Estonia and Hungary, just as in the case of Finland. The Estonians not surprisingly took offense and closed their own embassy in Budapest.

And now the largest and most prestigious Estonian newspaper, Postimees, published an editorial with the title: “A delicate European problem called Viktor Orbán.” Here is a pull quote from the English-language editorial: “A headache indeed – the increasingly autocracy-minded statements and the ever tightening cooperation with Putin’s Russia by Hungarian Prime Minister Viktor Orbán. The issue being: how united is Europe in its values, firstly, and secondly in bridling the warlike neighbouring Kremlin. Obviously, the latter is searching for weak links in Europe. Alas, the still economically troubled Hungary and its populist-type anti-Brussels PM provide for one.”

Orbán’s fame is spreading, but it’s not exactly the kind that Hungarians can be proud of.