Rossatom

Hungary and Europe through Russian eyes

Today let’s look at some Russian responses to Viktor Orbán’s policies as well as Russian analyses of U.S.-Hungarian and U.S.-EU relations. It was about a month ago that Vladimir Putin profusely praised Orbán’s Hungary as Russia’s best friend and ally in Europe. A few days ago Hungary again came up on a Russian State Television program called “Bремя покажет” (Time will tell) when a political scientist, Yuri Solozobov, an associate of the National Strategy Institute of the Russian Federation, explained to his audience that, instead of employing sanctions against the European Union, Russia should use some of its member countries to loosen the unity of the Union. After all, Russia already has allies in Eastern Europe: Hungary and Serbia. If there is no consensus regarding sanctions against Russia, the entire anti-Russian policy of the West will collapse. The video below is a three-minute segment on Hungary with English subtitles.

Solozobov is not the only Russian political scientist who contemplates using Hungary as a tool in Russian diplomacy. Pravda interviewed two other political analysts in the aftermath of Viktor Orbán’s announcement that “a new era has started when the United States not only interferes but takes an active part in internal politics in central European countries,” adding that this was “due to the Russia-Ukraine conflict, and the free trade talks under way between the European Union and the U.S.” Finalizing the free trade agreement, officially called the Transatlantic Trade and Investment Partnership (TTIP), has been dragging on for a very long time and the issues are too complex to discuss here, but promoters claim that it would promote economic growth. Opponents in Europe insist that it would benefit only American corporations and would cause harm to the environment by adopting less stringent measures than those currently in force in Europe. Just the other day farmers and trade unions demonstrated in Brussels against the treaty.

The first political scientist to comment on Hungary’s economic and political dependence on the United States and the European Union was Vladimir Bruter, an expert from the International Institute of Humanitarian and Political Studies. He has written several studies for an English-language publication available online called Russia in Global Affairs, a quarterly produced with the participation of the American journal Foreign Affairs. In Bruter’s estimation Hungary depends on the U.S. both economically and politically, and the U.S. “has effective tools to create a conflict within a country that may result in [the] overthrow of power at the U.S.’s bidding.” Bruter is against the adoption of the free trade agreement because in his opinion it will merely serve U.S. interests. If adopted, “the actual independence of the European economy will simply cease to exist.” And this is especially dangerous for small countries like Hungary. American policy is “unacceptable for Central Europe.”

The other analyst who was questioned on Hungary was Aleksey Drynochkin, lead research scientist at the Institute of Europe of the Russian Academy of Sciences. He stressed that American political pressure on Hungary has been relentless. First, there were the accusations of a lack of democracy, now it is “corruption.” Surely, this is a cover story just as Viktor Orbán said. Drynochkin agrees with Orbán: the demonstrations are also the work of the United States. And he foresees the possibility that “some technical regulations on [the] operation of nuclear stations within the European Union may be toughened,” presumably undermining the enlargement of the Paks nuclear power plant by the Russian firm Rossatom.

As for the free trade agreement, according to Drynochkin “in terms of a bare economic theory, this project is likely to have no problems.” But there is a political aspect to it, and  it “is possible that [the] Americans are pursuing their own goal–to completely finish off Europe,” I guess economically. But what the U.S. would achieve by “finishing off Europe” remains a mystery. In his opinion, in political terms the European Union will be less and less independent and “will be more and more the conductor of some foreign actions and intentions.” What Drynochkin and other Russian analysts fail to see is that it was Russian aggression against Ukraine that brought the European Union and the United States closer together. Moreover, it is possible that Vladimir Putin’s belligerence will be the catalyst for a speedier adoption of the EU-U.S. free trade agreement.

But Russian strategists are correct: trying to undermine the cohesion of the European Union is a great deal less costly and risky than settling for a long trade war and a series of sanctions. Trying to torpedo the free-trade agreement is also in Russia’s interest. But why does Hungary support the Russian position in these matters? What does Hungary gain from standing by Russia? I find the Hungarian government’s position hard to explain.

And why does the editorial board of Magyar Nemzet believe it necessary to turn up the volume, accusing the United States of creating a Hungarian Maidan in Budapest? The title itself is outrageous: “Kievan scenario with Western producer?” Or why does Zsolt Bayer, a friend of Viktor Orbán and the owner of the #5 Fidesz membership card, write about “the many American scoundrels (gazember)” who are responsible for the Maidan uprising?  He says that the Americans achieved what they wanted. They will privatize the gas pipelines and will take over the rich land of the country. In brief, they will exploit Ukraine.

Hungary has a bad track record when it comes to picking sides in conflicts. And such governmental decisions have always come at a high cost to the country. “This time is different,” governments say, but it’s almost never different.

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Mysterious trips of Viktor Orbán and János Lázár to Switzerland

Today I will have to pull up my socks if I want to give even a semi-coherent summary of the growing scandal surrounding a company called MET Holding A.G. with headquarters in Switzerland. The holding company, established only a couple of years ago, is partially owned by MOL (40%) and partially by Hungarian individuals–people formerly employed by MOL and businessmen with close ties to Viktor Orbán.

First of all, it’s hard to decipher the company’s structure which is, as is often the case with enterprises like MET Holding, extremely complicated. Second, since it is likely that MET Holding, in addition to its regular activities, also serves as a money laundering operation for Fidesz as well as Viktor Orbán and his friends, those involved do everything in their power to conceal the company’s business activities, ownership, financials, and so on.

I should go back a few years to February 2010, only a month before the national election and the birth of the two-thirds majority, when the U.S. Embassy in Budapest compiled a report entitled “Allegations of political corruption surround unbundling law.” From the lengthy report we learn that “it is an open secret in Hungary that MVM and MOL provide significant funding to the two main political parties, with MVM rumored to favor the Socialists and MOL favoring Fidesz.”

MET Group predated this U.S. report. According to its promotional material, it began operating in 2007 “in the natural gas retail and wholesale sector benefiting from the market liberalization starting in 2004.” Currently it is active in wholesale gas trading in the European market as well as in the retail sale of natural gas to industrial customers in Hungary, Slovakia, Romania, and Croatia. Five years later, in 2012 MET Holding was established with the objective of being “a central holding organization to manage and support all the subsidiaries of MET Group.” (If you want to know why MET Holding might have been layered on top of MET Group, I suggest you take a look at “How a Holding Company Works.”)

Shortly after the election in 2010 Orbán promised cheaper energy to consumers. In order to lower prices the state-owned MVM (Magyar Villamossági Művek) was allowed to dip into its gas reserves which it could then replenish with cheaper gas from the open market. MVM could have bought the necessary gas directly from Austria, but instead it purchased gas through MET. According to the figures that are available about the transaction, MVM gained little while MET made about 50 billion forints on the deal.

The owners of MET, in addition to MOL, are István Garancsi, a personal friend of Viktor Orbán and owner of Orbán’s favorite football team, Videoton, and György Nagy, one of the founders of Wallis Asset Management Co., a private equity/venture capital firm. Both men have close ties to Zsolt Hernádi, the beleagured CEO of MOL who is accused of bribery in Croatia, and to Sándor Csányi, his deputy and the CEO of OTP, Hungary’s largest bank. Heading MET Holding is Benjamin Lakatos. He expects sales this year to total some 3.8 billion euros.

Most likely nobody would have cared about this Hungarian company with headquarters in Zug, Switzerland, if Hungary’s prime minister hadn’t been so involved in negotiations with Putin as well as with Russian energy companies, in particular Gazprom and Rossatom, the Russian company that specializes in building nuclear power plants. Rossatom was chosen to construct two extra reactors at the Paks power plant. Given the widespread concern over Viktor Orbán’s dealings with the Russian autocrat, Swiss journalists started probing into this mysterious MET. A  well researched article appeared on November 3 in TagesAnzeiger, which was later reprinted in Basler Zeitung. According to the Swiss paper, MET Power, MET Marketing, MET International, and MET Holding all share the same Zug address. Benjamin Lakatos is the CEO of all of them. Zug, by the way, is about 20 km south of Zurich.

I understand that the company’s management is made up of former MOL employees who know the energy business inside out but who found greater opportunities outside of MOL. Lakatos is very proud of his achievement of building MET Holding in two years from practically nothing to a sizable player in the energy business, though one cannot help but be suspicious of a such a sudden rise in fortune. Moreover, given the cozy relationship in the past between MOL and Fidesz, one wonders what role MET may play in the possibly continued reliance of Fidesz and Viktor Orbán on MOL as a source of illicit money. With István Garancsi’s name in the cast of characters, one becomes doubly suspicious since he is often portrayed in the Hungarian press as Orbán’s front man.

And now let’s move to more recent events that might have something to do with MET Holding. I’m patching the story together from several sources. You may recall that the editor-in-chief of Origo, an online news portal, was dismissed because one of the reporters of the internet site was too curious about a couple of very expensive trips János Lázár, the most important member of the Orbán government after the prime minister, made to Great Britain and Switzerland. Lázár for a long time resisted revealing any details of these trips but eventually after a court order the prime minister’s office released some information. Among the bits and pieces of information that Origo received, there was one item that might be relevant. Origo was informed that János Lázár during his Swiss trip “held conversations with a German citizen about German-Hungarian and Russian-Hungarian relations.”

More than a year later there was another trip to Switzerland. This time it was a private affair. Viktor Orbán and his wife and János Lázár and his wife spent a weekend in Zurich. First they stopped in Germany to visit a “family friend” and then off they went to Zurich, allegedly to attend a concert given by a children’s choir from the Szekler areas of Romania. Quite a lame excuse for traveling to Zurich because earlier this same group gave three concerts in the Hungarian Parliament in Budapest. There was also a side trip to visit a friend in Germany. Is he perhaps the same man Lázár held talks with in March 2012?

About a week ago Viktor Orbán made another trip to Switzerland. This time the occasion was a family visit (including his wife and their two youngest daughters) with Rachel, who is enrolled in a fancy, expensive hotel management course in Lausanne. Since, again, this was a private visit, the prime minister’s office refused to release any information about the trip. However, thanks to an eagle-eyed person, Orbán was spotted at the  Zurich railroad station having a beer with an unidentified man. Since the Orbáns decided to travel back to Hungary by train, a stopover in Zurich was unavoidable since there is no direct train from Geneva, a forty-minute train ride from Lausanne. But why did he choose to go by train from Lausanne all the way to Budapest, a trip that takes altogether 16 hours and 22 minutes? He said that wanted to spend more time with his children. Well, I could imagine many more pleasant ways of spending time with my family than sitting in a second-class train compartment. Suspicious Hungarians already have their own theory: for one reason or other, Orbán chose to travel by train because there is no inspection of either persons or luggage on trains. I find that difficult to believe. I hope that we are not at a point that the country’s prime minister is carrying millions of euros in his suitcase.

Although one can probably discard such speculation, one should take more seriously the information received by the Demokratikus Koalíció that while in Zurich Orbán met representatives of Credit Suisse and Pictet Bank. Pictet is a private bank which in 2012 was the target of a U.S. probe into the use of foreign banks by wealthy Americans seeking to avoid paying taxes. Pictet specializes in “wealth management.” As for Credit Suisse, which is one of the most powerful banks in the world, it also had its problems with the law. In July 2014 Credit Suisse reported a loss of $779 million because of the settlement of a tax evasion case in the United States. Zsolt Gréczy, the spokesman for DK, emphasized that they are not accusing Orbán of anything; they simply want to know whether he met with representatives of these two banks as the prime minister of Hungary or as a private individual.

All in all, the picture that emerges from the few pieces of information we have is not pretty. Orbán has enough trouble as it is. Tonight another 10,000 people demanded Ildikó Vida’s resignation–and his as well.