Paks Nuclear Power Plant

Vladimir Putin in Budapest

Four times today the Hungarian government had to revise the appointed hour of the Orbán-Putin press conference. At last the great event took place close to 8 p.m. Putin arrived late in the first place. Instead of 2 p.m. he landed at 3:20. Just to give you an idea of the scale of this visit, the Russians came with eight planes and carried along 30 some cars to protect Vladimir Putin’s armored limousine. Putin’s convoy moved to Heroes Square and from there to the Russian military cemetery.

Let’s pause here a bit because this cemetery became the object of great interest. Buried in most of the thousands of graves on this site are soldiers who died during the siege of Budapest during the winter of 1944-45. In addition, there are graves that belong to soldiers who died during the revolution in October 1956. In the cemetery there are monuments to their heroism during “the counterrevolution.” Most likely not too many people noticed these forgotten relics, which survived the regime change. But now, especially since belittling the greatness of the 1956 revolution is a punishable offense, most anti-government commentators are appalled. How is it possible that the Hungarian government didn’t manage to impress on the Russians that calling 1956 a counterrevolution is a sensitive issue in Hungary and that the inscriptions should be changed to something more neutral? After all, Boris Yeltsin apologized for 1956 and one would think that the new “democratic” regime in Russia no longer considers the Soviet intervention in 1956 justifiable. It turned out that Csaba Hende, minister of defense, suggested a change but to no avail. Knowing Vladimir Putin’s attachment to the Soviet past, I’m certain that he in fact considers the uprising in Hungary a counterrevolution. So, it’s no wonder that some of the speakers at yesterday’s demonstration denounced Viktor Orbán’s friendship with Putin as a desecration of Hungary’s proudest moment in the last century. Especially since Viktor Orbán claims pride of place in the events that led to a democratic regime thirty some years later.

As for the topics discussed by the two leaders, the public learned very little. On the Hungarian side almost no information was revealed. The little we learned was from Russian sources. According to one source, sputniknews.com, Yuri Ushakov, presidential aide to Putin, informed the paper that the 1998 gas contract that expires this year will certainly will be discussed. He also indicated that Putin would discuss an alternative to the Southern Stream. Otherwise, fairly mundane topics were on the agenda. Opposition circles guffawed over the news that Hungary will open a third consulate in Kazan, capital of the Republic of Tatarstan.

Putin and Orban Budapest2

Source: Reuters / Photo László Balogh

Five agreements were signed: on regional economic cooperation, on bilateral cooperation on healthcare issues and higher education, on the opening of the consulate in Kazan, and on the exchange of technical know-how on atomic energy issues. This last one is a first step toward building the second reactor in Paks. On the surface these are pretty meager achievements given the fanfare that preceded the visit.

After the press conference Hungarian talking heads announced that Viktor Orbán hadn’t achieved anything. Putin came empty-handed and didn’t seem to appreciate Orbán’s efforts on his behalf in the face of opposition by the European Union and the United States.

As I mentioned earlier, the press conference was held an hour later than originally planned. Between Putin’s arrival and the press conference more than four hours elapsed. That left plenty of time for a lengthy discussion between the two men. In my estimation Orbán had a much longer discussion with Putin than he did with Angela Merkel. If I had to judge, just on the basis of Orbán’s countenance, I would say that the Hungarian prime minister’s conversation with Putin went a great deal better than his conversation with Merkel did. At least from his point of view. Orbán certainly made sure that he would in no way show himself at odds with the Russian position. He talked about Ukraine as little as possible, and then simply repeated his desire for peace. At what price? He did not touch on any of that.

He was unctuous when he thanked Putin for the visit and stressed that his decision to come was “a great honor for us.” Hungary needs Russia because of energy. Cooperation and good relations are important not only for the two countries but also between Russia and the European Union. He emphasized the importance of “Eurasian cooperation” and expressed his delight that French leaders share his thoughts on the subject. He did not refer to Paks but said that a “political agreement was reached” on the use of the gas that Hungary had contracted for but had still not used. Hungary will be able to use this considerable amount of gas over the next few years instead of paying for it before the expiration of the contract. This “guarantees the future of Hungarian industry.” Unfortunately, we know nothing of the details–of the price of gas or the duration of the new contract. According to Magyar Nemzet, it is unlikely that Hungary will be able to purchase natural gas from Russia cheaper than, for example, Germany, a country that is not so heavily dependent on the Russian supply.

From Putin’s short speech we at last learned that it was, after all, Viktor Orbán who invited Putin to Hungary, a point of debate among Hungarian political observers. Putin talked about Paks and the 9 billion dollars Russia will lend to Hungary on very good terms. Paks will create 10,000 new jobs as an added bonus, he said. He found the talks very constructive. Putin made sure to mention that he invited Orbán to the celebration of the 70th anniversary of the end of World War II, which will take place in Moscow on May 9. Of course, Putin invited the leaders of all the countries that were involved in that war, but we don’t know yet whether, for example, Barack Obama will accept the invitation given “the deep chill in relations between Russia and the West, triggered by Russia’s annexation of the Crimea peninsula from Ukraine and its support for a rebellion in the country’s east.” North Korean leader Kim Jong-un was also invited to attend the ceremonies.

Viktor Orbán had the last word. He delivered a ringing speech attacking those people “who want to shut Russia out from the energy market of Europe, a proposition [he considers] utter nonsense (badarság).” Orbán I assume was referring to the United States. It is hard to fathom why it was necessary to attack Washington, especially after Péter Szijjártó expressed his hope for improved U.S.-Hungarian relations. Orbán said he was disappointed about the demise of the Southern Stream project but announced that Hungary has been negotiating with Turkey, Macedonia, Serbia, and Greece about a pipeline through these countries. According to Orbán, Vladimir Putin “has given us encouragement” to continue these negotiations. It was not quite clear what Orbán meant by claiming that between 1998 and 2002 “awful things happened in Russia.” Perhaps this was an attempt to explain why he as prime minister during those years was such a determined foe of Russia, despite the fact that Putin became prime minister of Russia in 1999. Finally he praised Putin’s Russia as a partner one can trust.

On the same day that Orbán met with Vladimir Putin, American Ambassador Colleen Bell gave a lunch in honor of Mykhailo Yunger, chargé d’affaires of the Ukrainian Embassy. Bell minced no words:

I find it significant and inspiring that the unity of effort among us has played such a critical part.  Our unity on sanctions has sent a clear message to Russia, that we cannot be divided.  And our collective message has also made clear that we do not accept the vision of “New Russia,” we do not accept Moscow’s explanation for the shooting down of the Malaysian airliner, we do not accept missile attacks on civilians in Mariupol, and we do not accept continued falsehoods about the recruiting, arming and equipping of separatists who are murdering and maiming innocent people including defenseless children.  We say no to this.  We say yes to Ukraine’s sovereignty.

As you are all well aware, President Putin is in Budapest today.  We could think of no better way to observe the day than to focus on our hopes for Ukraine’s sovereignty and its future, and to share those hopes with you, Mr. Yunger, among our friends and allies.

As a friend of mine, a well-known journalist, wrote to me: “after this speech they will wish Goodfriend back.”

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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.

Thoughts in advance of the German and Russian visits to Budapest

Yesterday the Neue Zürcher Zeitung published an article about the forthcoming visits of Angela Merkel and Vladimir Putin to Budapest titled “Orbans Tanz auf zwei Hochzeiten,” indicating that Viktor Orbán will be able to have his cake and eat it too. He will remain a member in good standing of the European Union and will be a close friend of Russia at the same time. I, on the other hand, maintain that he will not be able to pull off that extraordinary feat. There are many signs that the Hungarian prime minister is already in retreat.

Let’s start with the Merkel visit. Hungarian and foreign observers have come up with all sorts of explanations for her trip, starting with the simplest one–that she could no longer postpone it. After all, she has not visited the Hungarian capital in the last five years, ever since Viktor Orbán’s Fidesz, which professes to be a Christian Democratic party, won a stunning victory in 2010. Her last trip took place in 2009, on the twentieth anniversary of the Hungarian opening of the Austro-Hungarian border for East German refugees, when the socialist-liberal government of Gordon Bajnai was still in power. If the purpose of the trip was to have a serious discussion about the Russian-Ukrainian crisis and Hungary’s role in it, Merkel’s five-hour stay, with very little face time with Viktor Orbán, would not suffice. She is coming because she promised to and because, according to a 1992 agreement between Hungary and Germany, she has to.

There are analysts who are convinced that Angela Merkel will not even mention the erosion of Hungarian democracy under Viktor Orbán’s regime, the systematic transformation of a fledgling democracy into an autocratic regime akin to the political setup that existed in Hungary between the two world wars. She has more pressing issues on her agenda: Greece, the sanctions against Russia, and the growth of the German anti-immigration movement–PEGIDA (Patriotische Europäer gegen die Islamisierung des Abendlandes / Patriotic Europeans Against the Islamization of the West), especially popular in the former East Germany. It is unlikely that Merkel will waste any time on the woes of Hungarian democracy. Her only aim is to make sure that Viktor Orbán stands by the extension of the sanctions. This hypothesis, in part at least, is outdated: Hungary obediently voted for the extension on January 29.

Others are more optimistic. They maintain that the trouble with Angela Merkel’s visit is that it seems to put a stamp of approval on the illiberal regime of Viktor Orbán. This is certainly how the Orbán government is portraying it. If Merkel says nothing about the state of democracy in Hungary, Orbán’s regime scores a victory. There is pressure on Merkel at home, however, to do something about the Hungarian situation. She has to give the appearance that her visit is something of a warning to Viktor Orbán.

There is some truth in this interpretation. In fact, there are signs that behind the scenes some “disciplinary measures” have already taken place. The successful negotiations with the leaders of  the RTL Group indicate that Orbán got the message: there will be consequences if the Hungarian government blatantly and illegally discriminates against a media outlet just because it doesn’t like RTL’s news broadcast. Orbán caved, and I for one am certain that he didn’t get much in return. I find it interesting that the official announcement of Merkel’s visit occurred very late, on January 28, the day when according to Népszava‘s information the Hungarian government agreed to a substantial reduction in the enormous tax it had levied on RTL Klub. Was this agreement the price, or part of the price, of Merkel’s visit?

Because that’s not all. In his regular Friday morning interview Orbán announced that the exorbitant tax levies on the banking sector will most likely be gradually reduced because the Hungarian economy has greatly improved. “If possible, the interests of the country and the businessmen must be reconciled,” said the man who until now had laid all the financial burdens of his erroneous economic policies on businesses, especially foreign ones.

There might be several reasons for Orbán’s cooperation in addition to German negotiations. One is that the Americans undoubtedly know more about the Hungarian mafia state and Viktor Orbán’s role in it than they let on, but the Hungarian prime minister doesn’t know how much they know. That must be a powerful incentive to stick with the countries that provide Hungary with economic aid and military shelter. Another consideration might be the effect of the sanctions and the sinking price of oil on the Russian economy, which makes close ties with Putin’s Russia a less desirable option than, let’s say, a year ago.

And that leads us to the Putin visit on February 17. It was almost a year ago, in March of 2014, that the United States and the European Union began applying sanctions against Russia. Although Hungary agreed to support the move, in August Viktor Orbán declared that “Europe shot itself in the foot,” meaning that the sanctions actually hurt only the West and did nothing to weaken the Russian economy. Just about this time, however, oil prices began falling. The combination of sanctions and falling energy prices has made the Russian economic situation close to desperate by now.

Orbán was initially very proud of what he considered to be the crowning achievements of his Russia policy: the Southern Stream, which would have brought gas to Hungary circumventing Ukraine, and the Russian loan for the extension of the Paks Nuclear Power Plant. Since then, Russia abandoned the Southern Stream project because of lack of funds, and many people think that the much heralded Paks deal is also in trouble. Thus, the rationale for close relations with Russia has more or less evaporated, which leaves Viktor Orbán in the unenviable position of suffering the ill effects of his overly cozy relation with Putin while reaping practically no benefits.

Depiction of the Trojan Horse at the Schlilemann Museum in Akershagen, Germany

Depiction of the Trojan Horse at the Schliemann Museum in Akershagen, Germany

Under these circumstances I doubt that the initiative for the Putin visit came from Budapest. It is no longer to Orbán’s benefit to make a lavish display of friendship with Russia. And indeed, the government is trying to downplay the importance of Putin’s visit, noting that it is only a working trip and not a state visit with the usual fanfare. For Putin, by contrast, it is an important trip at a time when nobody wants to have anything to do with him. Just think of the humiliation he suffered in Brisbane, Australia. He wants to demonstrate that he has at least one good friend  in the European Union.

Putin’s second reason for the trip, I suspect along with others, is to find out how much he can rely on Viktor Orbán. Will he deliver as promised? Or it was just talk? Perhaps Orbán oversold his usefulness to Putin and is turning out to be a useless ally from the Russian point of view. Last August Jan-Werner Müller wrote an article in Foreign Affairs titled “Moscow’s Trojan Horse: In Europe’s Ideological War, Hungary Picks Putinism.” Well, the Trojan Horse may be just an empty shell and the damage it can cause within the European Union little to none.

Two narratives of the impending Budapest visit of Angela Merkel

As Chancellor Angela Merkel’s visit to Budapest nears, there is conflicting speculation about the purpose of her visit. Merkel will spend five hours in Budapest, apparently on February 2. This short stint will include a meeting with Prime Minister Viktor Orbán and a visit to Mazsihisz, the umbrella organization representing the Jewish religious community. Why is Merkel traveling to Hungary? According to critics, the trip is ill-advised because, with a visit to Budapest, she is implicitly endorsing the illiberal regime of Viktor Orbán. A few days ago one of the leading MSZP politicians announced that the party expects Merkel “to signal to Viktor Orbán in unambiguous terms that he has no place in the community of democratic European politicians.”

Others seem to be convinced that Merkel is going to Budapest to ensure that Viktor Orbán will vote together with the rest of the European prime ministers to extend the sanctions currently in force against Russia. After all, it wasn’t so long ago that the German chancellor made it clear that sanctions can be lifted only after the agreement reached in Minsk is fulfilled. And nothing of the sort has happened. In fact, just this morning Kiev announced that 700 Russian troops had crossed into Ukraine to aid the rebels fighting for control of the eastern provinces.

Attila Ara-Kovács, the foreign policy expert of Demokratikus Koalíció, is one of those who believe that the trip’s main purpose is to convince Viktor Orbán of the necessity of extending the sanctions. But he goes even further when he hypothesizes that Merkel has another message for Orbán in light of the recent demonstrations: he should end the political conflict at home. Somewhat similarly, Stratfor, an American geopolitical intelligence and advisory firm, is convinced that Merkel’s visit is part and parcel of a U.S. “diplomatic offensive” in the region and can be viewed as putting joint U.S.-German pressure on Viktor Orbán. The aim is to stop the spread of Russian influence in the region.

Is this the truth?

Is this the truth?

Or that?

Or this?

The other narrative of the impending Merkel visit comes straight from Fidesz. It is well summarized in the headline of an article by Zsolt Hazafi: “Is Merkel Orbán’s guardian angel?” It is true that the journalist turned the Fidesz message into a question, but the answer is “yes.” The story line goes as follows: Hungary and Germany are very close allies who synchronize all their diplomatic moves. More than that, Orbán’s Hungary is doing Germany’s bidding. Or at least this is what József Szájer, a Fidesz member of the European Parliament, intimated in his interview with Antónia Mészáros of ATV yesterday. As he put it: “Germany sent us ahead” to test the ground vis-à-vis Russia. Berlin, according to him, is just as much against sanctions as Budapest is, but Merkel is constrained, presumably by the United States. Therefore, she secretly welcomes Hungary’s position on the sanctions.

After talking with several high-level government officials, Hazafi gained the impression that in the last few years a Russian-German-Hungarian triangle came into being, a three-way relationship that includes an understanding about building a second reactor at the Paks nuclear power plant. Why would the German chancellor agree to the secret Russian-Hungarian deal on Paks? According to this narrative, Germany, where soon enough there will be no nuclear power plants, will be able to get inexpensive energy from Paks. Fidesz informants pointed out that a German firm was instrumental in making the Russian loan to Hungary possible. They added as proof of the understanding between Germany and Hungary on Paks that Günther Oettinger, former European commissioner for energy matters and a German, raised no objection to the Putin-Orbán deal. Members of the Hungarian government and leading Fidesz leaders consider both visits–Merkel’s and Putin’s–diplomatic triumphs. “Hungary is back on the map,” Orbán allegedly said.

Népszabadság also had its own Fidesz informants. They claim that Germany didn’t object to the Orbán-Putin meeting since Germany and Hungary work hand in hand when it comes to Russia. Some of the more embarrassing statements of Viktor Orbán are no more than trial balloons. One example is the question of sanctions. According to other Fidesz politicians, those who see a connection between the visits of Merkel and Putin “are not far from the truth.” Insiders also claim that the relationship between Merkel and Orbán is close. According to them, the two became closer after their hour-long meeting in Milan last year. Government officials, when claiming close German-Russian-Hungarian cooperation, usually bring up the fact that Klaus Mangold, former CEO of Daimler-Chrysler, was the middleman between Orbán and Putin throughout the negotiations. The informers seem to be pretty certain that “it is no longer in the interest of Germany to talk seriously about the lack of democracy in Hungary.” The author of the article (we don’t know who he/she is because there was no by-line) added that Merkel might have to resort to more serious criticism after “the prime minister’s crude anti-immigration theses” in the wake of the terrorist attacks in Paris.

So, here we have two irreconcilable narratives. I find the Fidesz version of close German-Hungarian relations hard to believe. There are just too many signs that contradict it. Unless, of course, we assume duplicity on the part of Angela Merkel. After all, time and again she expressed her misgivings about Russian aggression and her support of the sanctions, including additional ones if Russia refused to cooperate. Such a double game would make no sense, especially now that Russia is in serious economic and political trouble. Thus, my hunch is that the sudden talkativeness of Fidesz potentates is a concerted effort on the part of the Orbán regime to burnish the prime minister’s image, to point to his diplomatic importance and genius, and to portray him as one of the most important leaders in Europe.

I am inclined to believe that the main reason for the Merkel visit is indeed the question of the sanctions and Hungary’s overly chummy relations with Putin. I am also convinced that Merkel will talk about what Hungarians call “the democracy deficit,” which is something that is hard to ignore given the wide coverage of Orbán’s illiberal state and the latest demonstrations. In brief, I consider this latest tsunami of leaks by Fidesz politicians to be a part of a disinformation campaign.

The Hungarian people are not thrilled with Orbán’s Russia policy

Népszava‘s information about Vladimir Putin’s visit to Budapest, seconded by Attila Ara-Kovács on Klubrádió, turned out to be accurate. Válasz, a pro-government internet site, was skeptical about the accuracy of the news because, after all, there was no mention of such a visit in Russian sources. Moreover, no western media picked up the news from Népszava. A commenter on this blog also expressed his doubts about the authenticity of the news. After all, Népszava is an opposition paper and therefore, I guess, not quite reliable. By this morning, however, the press department of the Prime Minister’s Office confirmed the information: Putin is coming to Hungary, although the date hasn’t been fixed.

Meanwile Népszabadság, another opposition paper, learned “from diplomatic circles” that the trip was planned a year ago on Hungary’s initiative. At that time the sanctions against Russia were not yet in place. Moreover, originally the trip was supposed to take place sometime in 2014, but because of scheduling difficulties it was postponed to this year, a change that might be advantageous to Putin but is mighty uncomfortable for Orbán. But as László Kovács, former foreign minister, said yesterday, Orbán developed a relationship with Putin that precludes any postponement of the meeting.

While waiting for the arrival of Angela Merkel and Vladimir Putin, several civic groups are preparing demonstrations. A group headed by Zoltán Vajda and Balázs Gulyás, two people whom I consider to be the most promising among the organizers of the recent demonstrations, plans to take the lead. Balázs Gulyás was the organizer of the mass demonstration against the internet tax, and Zoltán Vajda organized the demonstration on behalf of those 60,000 people whose savings in private pension funds the Orbán government wants to expropriate.

Vajda and Gulyás are planning two demonstrations. One will take place on February 1, the day before Angela Merkel’s arrival. It is called “Spring comes–Orbán goes: Demonstration for a European Hungary.” The second demonstration is planned for February 9 or, if Putin comes later, it will be postponed to the day of his arrival. The theme of the second will be “We will not be a Russian colony.” Other organizations and parties expressed an interest in joining these two Facebook groups, and it seems that they, unlike some others, are ready to cooperate with everybody who is ready to join them. As I wrote yesterday, PM asked all democratic parties to take part in massive demonstrations that include both parties and civilians.

In the lively discussion that followed yesterday’s post, a question was raised about the attitude of Fidesz voters toward Russia. According to one opinion, Fidesz voters are so brainwashed that they are ready to follow Viktor Orbán all the way to Moscow. Others, myself included, doubted the accuracy of this observation. In fact, I ventured to suggest that anti-Russian feelings might be a catalyst that will bring about a united opposition to Orbán’s regime. Well, today we have a more scientific answer to the question of Hungarians’ attitude toward the United States and Russia. The poll was taken by Medián for 444.hu

Here are some figures confirming that the Orbán propaganda did not significantly alter Hungarians’ anti-Russian sentiments. I will start with the most important and most telling figures: “If Hungary had to choose between the United States and Russia as a close associate, which country would you choose?” Fifty-three percent chose the United States and only 25% Russia. Hungarians are aware of the worsening relations between the United States and Hungary, and surprisingly the majority blame the Hungarian government for it. This finding goes against the widespread belief that Hungarians always blame others for their misfortunes. Fifty-seven percent of the respondents blame Hungary and only 14% the United States.

Medián also ran these figures against party affiliation. Those who feel more aligned with the democratic parties overwhelmingly blame their own country for the current situation (80%); only 4% blame the United States. Interestingly, the majority of Jobbik voters (59%) side with the United States. Only 13% put the blame on the U.S. while 27% think that the blame should be shared by the two countries. The situation is about the same among undecided voters. Fidesz voters are not as uniformly pro-Russian as some commenters on Hungarian Spectrum suspected. Only 37% blame the United States, 22% Hungary, and 40% think that both countries are at fault. I wouldn’t call that a resounding endorsement of a pro-Russian, anti-U.S. foreign policy.

Diplomats, present and former, have found it difficult to figure out what the real purpose of this meeting is. I could suggest a few topics that might come up. First, I think, is Paks. Orbán, for whom the building of a second reactor at the Paks Nuclear Power Plant is very important, surely would like to get reassurance from Putin that the project is still on and that Russia will not turn its back on Paks as it did on the Southern Stream. Another topic might be Hungary’s attitude toward the extension of the sanctions against Russia. Would Hungary vote against such a decision? There is also the question of the U.S.-EU free trade agreement, officially called the Transatlantic Trade and Investment Partnership (TTIP), which Russia opposes.

I wouldn’t be at all surprised if Orbán were a ready partner of Russia in opposing the free-trade agreement. On what am I basing this opinion? István Mikola, formerly the “nation’s doctor” and nowadays one of the undersecretaries in the foreign ministry, announced last night on HírTV that Hungary would go so far as to veto the TTIP if Hungary’s interests were not taken into consideration. One such reason would be the acceptance in the European Union of genetically modified food products coming from the United States. Fidesz lawmakers included a GMO ban in the new constitution. András Schiffer, the anti-capitalist, anti-globalist co-chair of LMP, went even further. In his opinion, the whole free-trade agreement is against the interests of Hungary. In fact, not just Hungary but in his words “it means in the long run the ruin of the whole globe.” He added that the agreement would mean the loss of 600,000 jobs in the EU. So, Putin and Orbán are of one mind when it comes to the TTIP. András Schiffer, the so-called opposition leader, joins them because of his far-left notions of modern capitalism and globalism.

Not so long ago, however, James Stavridis, dean of the Fletcher School of Law and Diplomacy at Tufts University, wrote an article in Foreign Policy: “Vladimir Putin hates the TTIP which is exactly why Europe and America need to get it done.” Stavridis explains his support of the treaty this way:

The TTIP is a sensible agreement on economic grounds, broadly speaking. But it also holds enormous real value in the geopolitical sphere. The increased linkages between the United States and our European allies and partners will stand in direct opposition to Putin’s key strategy of driving a wedge between the United States and the EU as the central members of the transatlantic community.

I don’t know how important the GMO issue is in the scheme of things, but one has the feeling that Hungary will be a difficult negotiating partner when it comes to the TTIP.

Another issue that might be discussed is Putin’s pet subject, the Eurasian Economic Union. It was only a few days ago that Russia’s EU ambassador urged Brussels to start talks with the newly born Eurasian Economic Union despite the Ukrainian crisis. As he put it, “common sense advises us to explore the possibility of establishing a common economic space in the Eurasian region.” A Russian-led bloc might be a better partner for the European Union than the United States. The reason: low health standards in the U.S. food industry. Orbán again might be helpful on this issue. However, in Orbán’s place I would tread lightly. It is true that Putin’s idea of a Eurasian Union became reality on January 1, but according to Reid Standish, an expert on Kazakhstan, Putin’s Eurasian dream was over before it began.

Eurasian Union

All in all, I think the two have plenty to talk about. The topics I have outlined are primarily Russian concerns, and getting Hungary on board would be only to Russia’s advantage. For Hungary to become Moscow’s Trojan horse in Europe is not strategically wise.

An optimistic prediction: The Orbán regime’s inevitable demise

I would like to report on a lengthy article that appeared on 444.hu on September 18, 2014, written by someone who calls himself “Nolite Timere,” “don’t be afraid” in Latin. The piece has the upbeat title “The NER’s coming demise.” An optimistic title, that is, for those who are opponents of the Orbán regime. It is a prediction few people believe today in Hungary. In fact, an increasing number of editorial and op/ed pages forecast exactly the opposite. So, let’s see on what basis Nolite Timere makes his prediction.

Before I attempt to summarize his argument, let me remind everybody that NER is the abbreviation of Nemzeti Együttműködés Rendszere or, in English, the System of National Cooperation. In the first few months of the Orbán administration one could hear a lot about NER, but by early July I wrote that, despite Péter Szijjártó’s best efforts, the designation had disappeared from usage. Well, the name may have disappeared, but Viktor Orbán’s proclamation of NER signaled the beginning of a new era and a new political system. The text of the proclamation can be found in the above cited post.

Nolite Timere begins his argument by saying that NER rests on shaky foundations. Its support comes exclusively from Fidesz voters. The graph below shows the tight correlation between those Hungarians who support Fidesz and those who are satisfied with the performance of the government.

Therefore, opposition to the government automatically means opposition to the regime. Once this government loses power, the new government will most likely try to dismantle the NER. A lot of economic and political players may even find themselves in legal trouble. Therefore, maintenance of the Orbán system is of vital importance to those in power today.

Blue: the country is moving in the right direction. Orange: voters' support of Fidesz Source: 444.hu

Blue: the country is moving in the right direction. Orange: voters’ support for Fidesz
Source: 444.hu

The graph shows how the population reacts to financial fluctuations. At the beginning of 2012 only about 17-18 percent of the population was satisfied with the government’s performance, but as soon as utility prices were lowered and the impoverished population got a few thousand extra forints a month, they were once again ready to support Fidesz and its government. Conclusion? Viktor Orbán must make sure that he can reduce the number of dissatisfied voters for twenty or thirty years by increasing the well-being of the population. Nolite Timere’s prediction is that he will not be able to pull this off. At least this is what earlier efforts tell us.

All regimes since 1919 attempted to do two things simultaneously: continuously raise living standards and at the same time satisfy the expectations of their own base. The Horthy regime failed because it was unwilling to break up the large aristocratic and church estates; Mátyás Rákosi favored those who came from the working class and the peasantry to such an extent that by 1952 there was widespread hunger in the country; János Kádár refused to give up the primacy of the communist party in economic matters and therefore could maintain the modest but steady rise in living standards only as the result of  cheap Soviet energy and foreign loans. Once there were no more loans and no cheap oil the regime collapsed. The slow economic growth that began in 1995-96 lasted only as long as there were state-owned companies to be sold. After 2002 the economic growth could once again be maintained only through indebtedness. In 2008 that came to an end.

Hungary’s perennial problem ever since modern capitalism arrived in the region is a lack of capital. Since 1990 almost all capital came from abroad, and this has at least two serious drawbacks: it is expensive and it can be moved at any time. However, a country without its own capital must first rely on foreign sources. This was the case in Hungary between 1867 and 1914. Originally 60% of all investment came from Austria and Germany, but over the next 35 years a new generation of Hungarian capitalists grew up who learned from their foreign colleagues and amassed capital of their own. By 1914 only 25% of investment came from outside of the country. (Note that Viktor Orbán wants to achieve the same shift in the source of investment in a few years. Failure is guaranteed.)

Nolite Timere is convinced that in a country short on capital it is dangerous to build a regime that has only shaky legitimacy, as NER does. “The trick can be achieved only with foreign help … the regime survives only as long as foreign capital is coming in.” There was no appreciable economic growth in Hungary, yet the government lowered taxes, raised pensions, built stadiums. Where did they get the money? In part from foreign companies, in the form of extra levies, the lowering of utility prices, and many other tricks that took away large chunks of these companies’ profits. In some cases the companies even had to dip into their own capital to satisfy the Orbán regime’s appetite.

The second source is naturally the European Union. Between 2007 and 2012 Hungary received subsidies equivalent to 21% of the country’s GDP. In 2013 monies coming Brussels amounted to 5% of the GDP. In 2014 it will most likely be higher. In brief, “the future of the regime depends on the availability of foreign capital.”

The author is convinced that the end is nigh. All the money taken from foreign firms and received from the European Union was only enough to raise real wages modestly in the second half of 2013 and early 2014 in preparation for the coming election. As a result of the large amount of capital pumped into the economy, GDP growth in 2014 is expected to be substantial. Government propaganda points to this as a great success that will continue into the future. This is unlikely, claims our author.

Banks and other foreign companies are at a breaking point; they can absorb no additional levies. Bayern LB, owner of MKB, is a case in point; it threw in the towel and sold its Hungarian holding to the state rather than pay all the debts it accrued as a result of the government’s interference in its business activities. It is very possible that others will follow. If the state then sells these banks and other concerns to its supporters, it will be difficult to extract more taxes from them or even to maintain the low utility prices. After all, there will be no foreign money coming in to replenish the losses.

The leaders of the regime might try to attract foreign companies, especially German and Austrian businesses, to Hungary, but such recruiting has its limits. After all, the government wants to strengthen those Hungarian capitalists who are friends of the regime. That’s why the government makes a distinction between “good” and “bad” foreign investors, thereby limiting their number. Of course, the question is how long a foreign company can remain a “good company” and when Viktor Orbán will decide that, after all, he made a mistake. Moreover, Nolite Timere thinks that unless some kind of miracle happens, the amount of money coming from Brussels in 2016-2017 will decrease sharply as a result of the very nature of the system of disbursement.

And so Viktor Orbán needs capital from outside the European Union and the United States. Hence the “Eastern Opening,” which up to this point has not brought real results. That’s why Orbán turned to Vladimir Putin last year and signed a 10-billion euro secret agreement for a Russian company to construct a new atomic reactor in Paks. Most of that money will not add to Hungary’s GDP because once construction actually begins on the reactor the lion’s share of the work will be done by the Russian company that “won” the contract. In comparison to the EU subsidies, this Russian money is small potatoes, 120 billion euros a year as opposed to the 30,000 billion coming from Brussels. Of course, it is possible that Orbán is hoping for very inexpensive gas from Russia, which would add another 50 billion euros worth of capital a year.

The maintenance of the Orbán regime in the long run needs all three sources of financing: the EU, Moscow, and Western capital via government bond purchases. If any one of these three falters, the regime itself might be in danger. Brussels must pay without delay. Withholding money might upset the delicate financial balancing act of the Orbán government. As far as Paks is concerned, the Russian-Ukrainian crisis came at the worst possible time from Orbán’s point of view. Even before the crisis Brussels was not exactly happy either with the building of the Southern Stream or with the secret Russian-Hungarian agreement to have Russia build a nuclear reactor inside of the European Union. In addition, one never knows what may happen in the internal financial markets that might weaken the forint further. Hungarian bonds might be less attractive to foreign investors if the United States raises its interest rates in the future. All this could have disastrous effects on the Hungarian economy. This is especially so because the capital that is coming into the country is not being used to lay the groundwork for further economic growth. Instead it is being used to artificially raise living standards, lower utility prices, hand out higher pensions, maintain the flat tax, buy companies to be passed on to friends of Fidesz, and erect state-financed projects like stadiums and renovate state-owned buildings. With such a strategy no country ever became highly developed.

Hungary managed to lock itself into a position of total economic dependence. At this stage the regime no longer cares from whom the money comes or how much it costs in the long run; what counts is that comes and that it comes fast. When foreign capital dries up, this regime will inevitably fail.

Hungary is in a difficult diplomatic bind: The “Orbán doctrine” is dead

This morning 168 Óra ran the headline “The Orbán doctrine has collapsed after three days.” The reason is the Russian “incursion” into Ukrainian territory. After that, said Árpád Székely, former Hungarian ambassador to Moscow, there will be neither Paks nor the Southern Stream. Székely actually welcomes the first consequence, a dubious deal between the Hungarian and the Russian government to build a new nuclear reactor in Hungary, but he is sorry about the likelihood of scrapping the Southern Stream project that would have supplied gas to the Balkans, Hungary, and Austria.

While high-level negotiations in the UN, NATO, and EU are going on over the Russo-Ukrainian conflict, I had to think about one of the many fallacies Viktor Orbán presented us with during his pep talk to the Hungarian ambassadors only four days ago. In his speech he indicated that as far as he is concerned old-fashioned diplomacy is passé. “Not that classical diplomacy has lost its magic and beauty” but “we must acknowledge the realities of the economic age in which we live.” Well, the Russo-Ukrainian conflict must be solved by old fashioned diplomacy, and Hungary’s newly reorganized foreign ministry is ill prepared for the task. Moreover, its leaders are constrained by the prime minister’s unorthodox ideas on diplomacy. Orbán’s Hungary is in a bind.

I should note in passing that German-Hungarian relations have cooled considerably. Earlier, I wrote about a warning from Michael Roth, undersecretary of the German foreign ministry, that in his government’s point of view “Hungary is going in the wrong direction.” Since then an even more detailed and stronger statement was signed by Michael Roth, undersecretary in charge of European Affairs at the German Foreign Ministry, and his colleague Tomáš Prouza in the Czech Foreign Ministry. They warned that “Europe is more than a market.” It is a community of shared values.

According to Hungarian sources, Hungarian diplomats have been trying for some time to entice Chancellor Angela Merkel to visit Hungary for the annual German-Hungarian Forum. After all, this is the twenty-fifth anniversary of the German refugees’ safe passage to Austria thanks to the action of the Hungarian government in 1989. If she could not come, they at least hoped for a visit by the new foreign minister, Frank-Walter Steinmeier. Well, it seems that Budapest will have to be satisfied with an assistant undersecretary as the representative of the German government. The highest ranking German participant will be Reinhold Gall, social democratic minister of the interior of Baden-Württemberg.

Now, to return to the current diplomatic challenge. After the failure of the meeting between Vladimir Putin and Petro Poroshenko in Belarus, several thousand Russian troops crossed the Russian-Ukrainian border. Subsequently Prime Minister Arseny Yatsenyuk announced that his government will introduce a proposal in parliament to change the non-aligned status of the country and to request membership in the North Atlantic Treaty Organization. Some observers immediately announced that Ukrainian admission to NATO was very unlikely. However, NATO chief Anders Fogh Rasmussen made a statement today in Brussels, saying: “I’m not going to interfere in political discussions in Ukraine. But let me remind you of NATO’s decision at the Bucharest summit in 2008, according to which Ukraine ‘will become a member of NATO’ provided of course, Ukraine so wishes and fulfills the necessary criteria.” A strong warning for Russia. Putin often stressed that Russia will not tolerate a NATO presence on Ukrainian soil.

Meanwhile, EU foreign ministers are recommending tougher sanctions against Russia. They gathered in Milan today for an informal meeting to discuss the Ukrainian crisis. Tibor Navracsics represented Hungary in Milan, but I could find no report on his position in the Council of Foreign Ministers. We know that Germany, the Netherlands, Sweden, Latvia, and Denmark were strongly in support of tougher action.

"German

German Foreign Minister Walter Steinmeier is arriving at the informal meeting of EU foreign ministers in Milan

Tomorrow the European Council will meet again to decide on the President of the European Union and the EU Foreign Affairs Chief. According to the latest intelligence, the next President of the European Union will be most likely Donald Tusk, prime minister of Poland.

Tusk’s government has been among the most hawkish in Europe over the issue of Ukraine. Just today the Polish government announced that it will allow the plane of Russian Defense Minister Sergey Shoygu to fly over its territory only if the plane changes its status from military to civilian. Earlier his plane was barred altogether from Polish air space. Russia was not very happy. Its foreign ministry declared that Poland’s closing its air space to Shoygu’s plane is “a major violation of norms and ethics of the communication between states.”

Today three of the four members of the Visegrád4 (Poland, Czech Republic, Slovakia, and Hungary) issued statements about the Russian incursion. Poland’s foreign ministry said that it regards the incursion of Russian troops into the southern regions of the Donetsk province “as actions that fulfill the attributes of aggression, as defined in UN documents–Resolution 3314 of the United Nations General Assembly.”

The Czech statement was equally strongly worded. “The Czech Republic considers the incursion of the armed forces of the Russian Federation into the territory of eastern and southeastern Ukraine a fundamental threat to peace and stability of all of Europe.” It called on Russia “to immediately withdraw its troops from the Ukrainian territory.”

The silence from Slovakia was deafening.

Hungary chose an intermediate position and released the following statement: “We are closely monitoring and evaluating the situation on the ground, and we are in contact with our EU and NATO allies. A confirmed incursion of  Russian regular military units on Ukrainian territory would gravely escalate the crisis. In line with our consistently expressed earlier position, we emphasise that only a political process can lend a sustainable solution to the present crisis and therefore we support all diplomatic efforts to this end. The upcoming extraordinary European Council meeting and the informal meeting of the EU foreign ministers offer good opportunities for harmonizing the European position on this matter.”

Two of the opposition parties, Együtt-PM and DK, called on the government to stand by Ukraine’s independence and territorial integrity. The former also wants the Hungarian government to suspend preparations for the expansion of the Paks Nuclear Power Plant while Russian troops remain on Ukrainian soil. The party also asked Orbán to use his good offices with Putin to convince the Russian leader to withdraw his troops from Ukraine.

DK wants to call together the parliamentary committees on foreign affairs, national security, and defense and to have the government prepare a statement that condemns Russian military action against Ukraine. In addition, Tibor Navracsics should call in the Russian ambassador to Hungary to convey to him Hungary’s condemnation of Russian aggression. Naturally, none of these suggestions or demands will be considered by the Orbán government.

On the other hand, I believe that Viktor Orbán will quietly vote with the majority on all the issues that will be discussed at tomorrow’s European Council meeting only to go home and report on the excellent ideas he gave to his colleagues about how to solve the Ukrainian crisis.