VOLUME XIII, No. 3 - Current

RUSSIA: ORBÁN’S STRATEGIC SHIFT

September 28, 2022

Author

Boris Kálnoky

BORIS KÁLNOKY (Munich, 1961) grew up in Germany, the United States, Holland and France. His family left Hungary in 1947. He studied Politics and History in Hamburg and went on to work at the German daily Die Welt in 1987. In 1995, he became Balkans Correspondent for Die Welt, based in Budapest, and moved on in 2004 to become Middle East correspondent, based in Istanbul. He is the author of Ahnenland (Droemer Verlag, Munich, 2011), a book about what happened to his family and Hungary since 1952. He returned to Budapest in 2013, still for Die Welt. He also writes for a number of other media in Germany, Austria and Switzerland. Since September 2020 he has been appointed Head of Media School at Mathias Corvinus Collegium, Budapest.
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Boris Kálnoky

There is a widespread view that Hungary’s relations with Russia are so close that they represent a betrayal of the ‘West’, the EU, and NATO, and that there is some sort of comradeship between the ‘authoritarian’ leaders of both countries, Viktor Orbán and Vladimir Putin.

In reality, it was Hungary’s socialist government(s) between 2002 and 2010 that launched a policy of closer cooperation. The government of Viktor Orbán (from 2010 on) built on that because it made economic sense. But Russia’s war against Ukraine is changing that.

During the fall of communism, it was Orbán, then a student leader, who publicly demanded in 1989 that Russian troops should leave the country.¹ Most anticommunist leaders of the time thought that this was too risky a thing to say. ‘I told him it was too early, too sensitive’, says Géza Jeszenszky, at the time foreign policy speaker of the democratic movement ‘Magyar Demokrata Fórum’ (MDF),²which later became Hungary’s ruling party in 1990–1994. But Orbán had correctly gauged the mood of the time and rose to instant fame. That speech launched his political career.

In the years that followed, political and economic relations with Russia were friendly but low-key. Hungary focused on strengthening its ties with the EU and NATO. Russia suffered intense economic and political turmoil because of the collapse of the Soviet Union. Its economic crisis in 1998 further weakened bilateral trade.³

Around 2001 Russia began to recover economically. As a consequence, bilateral trade improved. The socialist government that came to power in 2002 opted for a strategy of closer relations. It made good sense: the Soviet Union had been a big market for Hungary under communism, there were still many well-connected experts around, and there was money to be made. Imports from and exports to Russia rapidly increased from 2002 and peaked in 2008. Then the financial crisis of 2009 hit both countries hard. Bilateral trade collapsed and never fully recovered.

The resumption of close economic relations from 2002 onward also translated into closer political ties. Socialist Prime Minister Péter Medgyessy travelled to Moscow soon after coming to office in 2002.⁴ Meanwhile, within a month of him becoming prime minister, the daily Magyar Nemzet—regarded as the mouthpiece of Fidesz, then the main opposition party—revealed that he had been a counterintelligence officer during communism. He was also accused of reporting to Soviet services, but that was never proven. Medgyessy met Putin, saying he had ‘come as a friend’. The two leaders announced a new beginning in bilateral relations, centred on economic cooperation. Then Medgyessy went to see the leadership of the Russian gas company Gazprom.

That, in a nutshell, summarizes Hungarian–Russian relations ever since. Hungary exports pharmaceutical products, cars, and computers, and imports mainly Russian gas and oil.

Medgyessy had to resign after only two years, for reasons unrelated to his past as an intelligence officer. The next socialist leader, Prime Minister Ferenc Gyurcsány, elevated relations with Russia to the rank of ‘strategic importance’ in his government programme:⁵‘Economic relations with Russia and Ukraine are of strategic importance to Hungary. We strive for the development of bilateral relations with Russia in all their aspects.⁶

High-level bilateral visits multiplied. There were twelve meetings on the level of heads of government/heads of state or deputy prime ministers between 2002 and 2009.⁷ Gyurcsány met Putin three times while prime minister, and even welcomed him to his private apartment in Budapest. (Additionally, he also met him in Russia after losing power in 2009.) The two leaders danced together in 2007⁸

These friendly personal ties led to two things: Putin learned Hungarian folk dance steps from Gyurcsány, and—at least this is what some experts suspect—persuaded Gyurcsány to let Austria’s OMV buy a 21.2 per cent share in the Hungarian energy company MOL, which it then passed on to Russia’s Surgutneftegaz.⁹(The Orbán government bought MOL back in 2011).¹⁰

Relations were therefore cordial, but there was a major glitch during the Russian– Ukrainian gas disputes of 2005–2006. Russia temporarily stopped sending gas through pipelines via Ukraine, saying Ukraine was stealing transit gas destined for Western customers. Gas deliveries to Hungary consequently dropped by 40 per cent.¹¹ The socialist government realized there was a problem and decided to expand gas storage capacities—but that required money. In the end, it was decided to build new storage facilities in partnership with Russia’s Gazprom.¹²

What Orbán did when he came to power in 2010 was to add a catchy narrative to the already considerable degree of economic cooperation, and embed it within a grander geopolitical strategy. An ‘Eastern Opening’ was to improve relations not only with Russia, but also with China, Turkey, and other countries.¹³ The aim was the diversification of economic relations. The term itself, and the strategic concept, sounded similar to Turkey’s ‘Eastern Opening’ from 2009 onwards.¹⁴ ‘This is really more opening to the world’, Turkey’s then Foreign Minister Ahmet Davutoğlu told me in an interview in 2011,¹⁵ and aimed to ‘normalize’ the country’s international relations, just like Western countries had been doing all along.

Hungary’s ‘Eastern Opening’ from 2011 onwards followed the same spirit. Orbán announced a foreign policy aimed at a ‘balance’ in relations with all relevant ‘big’ or at least ‘regional’ powers. Hungary would give something (but never everything) that mattered to Russia, the US, China, Germany, and Turkey, and thus ‘make them interested in seeing a successful Hungary’.¹⁶To the US, Hungary would give military cooperation and participation in military missions abroad. To Germany, generous industrial cooperation. To Russia, Orbán gave two things: a stage within the EU, by receiving Putin in Budapest on a regular basis. And, in 2014, a contract with Russia’s nuclear energy company Rosatom to expand and modernize Hungary’s only, Russian-built nuclear power plant in Paks.

The agreement met with fierce criticism from Hungary’s opposition parties, because the contract was awarded without a tender, and contract details were declared a state secret for thirty years. This debate calmed down somewhat after the EU declared the project to be in line with EU regulations in 2017.¹⁷ Most experts agreed that the nuclear plant needed to be modernized and expanded. Hungary imported around 30 per cent of its electricity. Paks provided half of all domestic electricity production, and without an upgrade it would have had to go offline by 2037.¹⁸

The modernized and expanded plant, Paks II, would produce enough electricity to cover all household consumption over a much longer lifetime. Without that, Hungary would have had to import not 30 per cent but 80 per cent of its electricity after 2037. This was also clear to the previous, socialist governments between 2002 and 2010. Beginning in 2006 there were discussions about expanding the lifetime of Paks, but also about enlarging it with new reactors. Hungary’s electricity company MVM signed a cooperation agreement exploring options with two Russian companies.¹⁹ In 2009, Parliament—under the then socialist government—passed an amendment to the law regarding nuclear energy, and authorized preparatory studies for an eventual enlargement of the nuclear plant.²⁰ Now comes the confusing part: such an amendment was not legally required for preparatory work. Only for a decision to actually enlarge the nuclear plant. The text of this theoretically unnecessary amendment incomprehensibly referred to a paragraph in the law explicitly dealing with an eventual enlargement. But the amendment itself did not mention any decision to enlarge Paks.

One way to read these bizarre developments was that the socialist government had tricked Parliament into—unwittingly—approving an extension to the existing facilities. This happened during the very last days of Gyurcsány’s tenure as prime minister. In a later interview (2015), he denied that there was any such scheme (at the price of sounding utterly clueless as to what his government had been doing).²¹ In any case, Gyurcsány’s amendment became the legal foundation for Orbán’s deal with Putin in 2014.

In the 1960s, when Paks was built, the original plan had been to create a much bigger nuclear plant, with a total capacity of 6,000 MWH. Only a capacity of 2,000 MWH was ever built, however. Ever since, even under communism in the 1980s, plans were drawn up time and again to build more reactor blocks. After the fall of communism, Western and Chinese competitors for such projects appeared. So why did Rosatom get the deal? One answer is that the existing nuclear plant was Russian-built. Hungarian experts knew how to work with it. Many had been trained in Russia and spoke Russian. But why no tender? Pál Kovács, the state secretary responsible for ‘capacity conservation’ at Paks, has been quoted as saying that competition from France, the USA, and China would have drawn in the governments of those countries, and that could have led to complications that might have made any decision impossible.²²

To recap, Orbán built on what the Gyurcsány government had started. There were some differences though. Gyurcsány, and before him Medgyessy, had warmly and publicly embraced Putin as a ‘friend’, whereas Orbán said: ‘One can’t be friends with Putin’, meaning that Putin always acts as the leader of Russia, never as a private person.²³ Nevertheless, it was Orbán who was branded as ‘Putin’s best friend’ in the media.

There are three main reasons for that. First, although his Russia strategy did not differ substantially from that of the socialists, he did add a strong political narrative to it (‘Eastern Opening’), which was an easy target for his critics (‘We should belong to the West’). Second, his overtures to Russia came at an unfortunate historical time—in 2014, when pro-Russian forces first started a war against Ukraine. It made him look as if he was siding with Putin when everyone else was condemning him. Thirdly, the media were eager to reinforce that perception—unlike their treatment of Gyurcsány, who had followed more or less similar policies, and also had been harshly criticized for being ‘pro-Putin’ by the then opposition, among others, by Orbán himself. But that, at the time, for some reason, was not an attractive story for the Western media. Comparing Orbán to Putin was. One explanation for this may be friendly ties between the Western media and left-wing Hungarian politicians—the media are more willing to echo narratives of Hungary’s political left than narratives offered by Fidesz.

Be that as it may, in reality Russian–Hungarian trade never again attained the peak it reached under Gyurcsány in 2008.²⁴ The ‘Great Recession’ of 2009 crippled both countries’ economies. By the time they got back on their feet, EU sanctions against Russia, as a consequence of the first Ukraine war in 2014, limited trade in many areas. Then came the second Ukraine War in 2022, and more sanctions. Hungary opposed many of the sanctions, arguing they did little to weaken Russia and much to weaken the EU economies. But it did implement them.

The Russian invasion of Ukraine brought about a fundamental re-evaluation. Russia remained important, even now. In Orbán’s mind, as he stated in an interview with a conservative weekly in March 2022, the war would one day be over, but ‘Russia will still exist’.²⁵ He argued that whatever the outcome of the war, Hungary would still have ‘interests’, and that there was no reason to stop ‘energy cooperation’ with Russia, meaning that Hungary would still need Russian gas, oil, and cooperation to expand the nuclear plant at Paks.

But as the war dragged on, Orbán realized he needed a new approach. A month after his Mandiner interview, in a press conference on 6 April, he noted that Hungary had built balanced and ‘correct’ relations with Russia since 2010, but that the war had changed everything. Although Hungary was trying to preserve as much of it as possible, the structure of its relationship with Russia was crumbling and ‘maybe there will be nothing left’. ‘I don’t yet know how profound this change will be’, he said. ‘Some speak of a new Iron Curtain, others of damages that can be repaired. I can’t judge how it will be. The decision is not in our hands, but something new is beginning. When I see the outlines of that emerge […], then we will work out a new policy towards Russia.’²⁶

Three and a half months later, he announced a first deep strategic shift. In a speech in the Transylvanian town of Băile Tușnad (Hungarian: Tusnádfürdő) on 23 July 2022, he said the world had entered a new era of conflicts and crises in which the West was crippled by a lack of energy sources. Consequently, for Hungary, the aim had to be to come off gas and switch to domestic energy sources. ‘We have to come off gas, electricity is much less of a burden for Hungary, because we have a nuclear plant, and we have solar energy.’²⁷

That sentence announced a fundamental shift of strategy for Hungary, whose economy had relied on cheap Russian gas ever since communist times. A short time later, the government announced that it would reduce subsidies for household gas and electricity. Subsidies would remain, but beyond a basic level of consumption, households would have to pay something more closely resembling global market prices.²⁸

The essential element was that electricity prices would ‘only’ double, but gas prices would increase sevenfold. The strategic aim behind this was clear: people would try to save gas. Households and companies would invest to equip their homes and enterprises with other forms of energy instead. The government also decided to increase domestic gas production by 25 per cent, to rely more on coal, and even to increase the production of firewood.

So this was the immediate effect of the war on Hungary’s Russia strategy: shortterm, buy more gas if possible in 2022,²⁹ but in the longer term, the aim is now to ‘come off gas’ (not just Russian gas, but any gas that needs be imported), while speeding up the expansion of the Paks nuclear plant with Russian help.³⁰ Access to Russian oil will remain a strategic interest for Hungary, although in August, Hungary also started importing chemically compatible oil from the Middle East for its only refinery in Százhalombatta. As for the rest, trade relations will have to be ‘rethought’, as the war and the sanctions regime have ‘narrowed’ potential for growth in trade relations.

In other words, the ‘Eastern Opening’, as far as relations with Russia are concerned, has ceased to be a political priority. It has been replaced with strategy of damage control (keep as much access and good relations with Russia as possible), a new focus on domestic energy production to replace Russian imports, and ‘strategic patience³¹ (no rushed decisions, wait and see where Russia stands in ten or twenty years). Circumstances have changed, but Hungary’s approach to Russia even now remains centred on pragmatic economic considerations. Ever since the end of communism, that has always been the case.

Critics claim that Orbán’s relationship with Putin is based on more than simply economic considerations. For instance, while 24 NATO countries have expelled 400 Russian diplomats since the beginning of the war in Ukraine, Hungary has not expelled any.³² In 2019, Hungary let the Russian-dominated, Sovietera ‘International Investment Bank’ (IIB) move its headquarters from Moscow to Budapest, and agreed to give diplomatic immunity to its employees (widely regarded to be connected with Russia’s intelligence services).³³ And when most states with a stake in that bank announced they would leave it as a consequence of Russia’s invasion of Ukraine, Orbán said Hungary would stay, and so would the bank.³⁴ How can that be explained, critics ask, except by a Putin–Orbán relationship that is deeper than economic logic would demand?

The answer may be that Orbán regards political gestures as a cheap way to reap economic benefits. It does not cost anything, for example, to publicly support Turkey’s bid to become an EU member and praise its President Recep Tayyip Erdoğan as a great statesman. But it pleases Erdoğan, and that can bring benefits in trade relations. ‘We give the Sultan the respect he needs’, one key Orbán aide told me back in 2017. ‘But that doesn’t mean we believe that Turkey is well-governed.³⁵ There was even a plan to let Turkey build a huge mosque in Budapest.³⁶ That did not mean Orbán had any feelings for Turkey or for Islam. When the migrant crisis changed the political landscape in 2015, the plan was ditched.

As regards the IIB, it did bring some, although not very substantial, economic benefits. As for the danger of it becoming a base for Russian spies, the same has been said of Orbán’s plan to bring a campus of China’s Fudan University to Budapest.³⁷ Security expert István Gyarmati has commented that this should be the least of one’s worries: ‘To the extent that the University might allow Chinese intelligence to become more active in Hungary, that’s what counterintelligence services are for—let them do their jobs and ward off the threat.’ The same argument can be made regarding the IIB.³⁸

Another argument critics use against Orbán’s readiness to work with ‘autocratic’ governments, such as those of Russia or China, is that he simply prefers autocrats over democrats. Because he himself has autocratic instincts. It is true that Orbán may value the fact that coming to an agreement with such countries, ‘by handshake’ between leaders, is easier than obtaining results with countries where complex and competing institutions need to be involved before a deal can be reached. But this is essentially a baseless argument. It is true that—as British historian Norman Stone once said—Orbán ‘doesn’t believe in foreign policy based on moralizing and human rights’.³⁹

But neither do most other countries. The difference to, say, Germany or Austria is that they will quietly do lucrative business with China and Russia, but publicly pretend to care about human rights and ‘democratic values’. Orbán will not. He will always be ready to deal with anyone, and never try to publicly tell any government how to behave.

1
1 Text documented on mandiner.hu (6 June 2019), https://mandiner.hu/cikk/orban_viktor_beszede_
nagy_imre_ujratemetesen.
2
2 Private conversation, summer 2022.
3
3 About the financial crisis, see Brian Pinto and Sergei Ulatov, ‘Financial Globalization and the
Russian Crisis of 1998’ (World Bank Policy Research Working Paper, 2010).
4
4 ‘Medgyessy: Barátként jöttem Moszkvába’ (Medgyessy: I Came to Moscow as a Friend), Origo.hu
(20 December 2002), www.origo.hu/itthon/20021220medgyessy.html.
5
5 Norbert László Árok, ‘A magyar–orosz gazdasági kapcsolatok a rendszerváltástól napjainkig’
(Hungarian–Russian Economic Relations from the Change of Regime to the Present), 10–11.
https://btk.ppke.hu/uploads/articles/6414/file/%C3%A1roknorbert.pdf, accessed 25 August 2022.
6
6 www.globalsecurity.org/military/world/europe/hu-forrel-ru.htm.
7
7 Árok, ‘A magyar–orosz gazdasági kapcsolatok’, 38.
8
.8 Report on M1 public TV channel, 20 July 2007. Video accessible online: https://nava.hu/
id/456852/#.
9
9 István Marnitz and Gergely Nyilas, ‘Ötödrésznyi orosz kormánybefolyás a Molban’ (One-fifth Russian Influence in MOL), Népszabadság (30 March 2009), http://nol.hu/gazdasag/az_omv_
oroszoknak_eladta_mol-reszesedeset_-326774.
10
10 Katalin Antalóczy and Péter Vince, ‘Az államtól az államig—a MOL mint nemzeti bajnok’ (From
the State to the State—MOL as National Champion), 188, http://eco.u-szeged.hu/download.
php?docID=39965.
11
11 ‘Ukraine “stealing Europe’s Gas”’, BBC News (2 January 2006), http://news.bbc.co.uk/1/hi/
world/europe/4574630.stm.
12
12 Árok, ‘A magyar–orosz gazdasági kapcsolatok’, 18.
13
13 Ágnes Bernek, ‘Hazánk keleti nyitás politikája és a 21. századi geopolitikai stratégiák
összefüggései’ (The Eastern Opening Policy of Our Country and the Interrelations of Twenty-firstcentury Geopolitical Strategies), Külügyi Szemle (Summer 2018), https://kki.hu/assets/upload/06_
Bernek_Agnes.pdf.
14
14 Boris Kálnoky, ‘Supertürk des 21. Jahrhunderts’, Weltwoche (13 June 2013), https://weltwoche.ch/
story/suepertuerk-des-21-jahrhunderts/.
15
15 Boris Kálnoky, ‘Manche Europäer verstehen die neue Türkei nicht’, Die Welt (6 March 2011),
www.welt.de/politik/ausland/article12708334/Manche-Europaeer-verstehen-die-neue-Tuerkeinicht.html.
16
16 Conversation on the margins of an interview with the author (and others) in 2011.
17
17 ‘European Commission Press Release, 6 March 2017’, https://ec.europa.eu/commission/
presscorner/detail/en/IP_17_464.
18
18 ‘Paks 3 Operating Licence Extended to 2036’, World Nuclear News (6 January 2017), www.worldnuclear-news.org/RS-Paks-3-operating-licence-extended-to-2036-06011701.html.
19
19 Orsolya Fülöp, ‘“Putin ezt így csinálja” – Gyurcsány Ferenc Paksról és az orosz kapcsolatról’
(‘This Is How Putin Does It’ – Ferenc Gyurcsány on Paks and Russian Relations), Magyar Narancs
(10 February 2015), https://magyarnarancs.hu/belpol/gyurcsany-ferenc-paksrol-es-az-oroszkapcsolatrol-putyin-88504.
20
20 Áron Kovács, ‘Csukott szemmel bólintottak rá a paksi bővítésre’ (The Enlargement of Paks Was
Agreed to with Eyes Closed), Origo.hu (9 November 2009), www.origo.hu/itthon/20091030-apaksi-atomeromu-bovitese.html.
21
21 See endnote 19.
22
22 Tamás Sipos, Atomerőmű épités—egy atipikus döntési folyamat sajátoságai (Construction of a Nuclear
Power Plant—Specific Features of an Atypical Decision-making Process) (PhD thesis, University of
Pécs, 2020), 49.
23
23 Darko Janjevic, ‘Vladimir Putin’s and Viktor Orbán’s Special Relationship’, Deutsche
Welle (18 September 2018), www.dw.com/en/vladimir-putin-and-viktor-orbans-specialrelationship/a-45512712.
24
24 Ada Ámon and András Deák, ‘Hungary and Russia in Economic Terms—Love, Business, Both
or Neither?’, in Jacek Kucharczyk and Grigorij Meseznikov, eds, Diverging Voices, Converging Policies:
The Visegrád States’ Reactions to the Russia–Ukraine Conflict (Warsaw: Heinrich-Böll-Stiftung, 2015),
http://real.mtak.hu/33228/1/Amon_Deak_Hungary_and_Russia…_u.pdf.
25
25 See Gergő Kereki’s and Zoltán Szalai’s interview with Prime Minister Viktor Orbán in Mandiner
(3 March 2022), documented on the government website: https://kormany.hu/beszedek-interjuk/
miniszterelnok/orban-viktor-interjuja-a-mandiner-hetilapnak, accessed on 25 August 2022.
26
26 My translation, quoted from my recording of his remarks.
27
27 Speech documented on the government website: https://miniszterelnok.hu/orban-viktoreloadasa-a-xxxi-balvanyosi-nyari-szabadegyetem-es-diaktaborban/, accessed 25 August 2022.
28
28 Announcement of the measures on the government website, 22 July 2022, https://kormany.
hu/hirek/a-rezsicsokkentes-tovabbra-is-vedi-a-magyar-csaladokat-elkeszult-a-rezsicsokkentes-ujszabalyozasa, accessed 25 August 2022.
29
29 ‘Hungary in Talks with Russia about Buying More Gas’, Reuters (21 July 2022), www.reuters.
com/world/europe/hungary-talks-with-russia-about-buying-more-gas-2022-07-21/.
30
30 ‘Ősszel indul a paksi bővítés, sikeres volt a tárgyalás a Roszatom vezetőivel’ (Enlargement of Paks
Will Start in Autum – Negotiations with Leaders of Rosatom Were Successful), Világgazdaság (1
July 2022), www.vg.hu/vilaggazdasag-magyar-gazdasag/2022/07/osszel-mar-epul-a-paksi-bo.
31
’31 Erik Szirmák, ‘Orbán Viktor: Stratégiai nyugalom kell!’ (Viktor Orbán: ‘Need to Keep Calm
Strategically!’), Világgazdaság (27 February 2022), www.vg.hu/kozelet/2022/02/rendkivuli-interjutad-orban-viktor-miniszterelnok-az-m1-en.
32
32 Emergency information for US citizens distributed by US embassies (here, as an example, the
embassy in Luxemburg), 2 May 2022, https://lu.usembassy.gov/countries-expel-russian-diplomatsin-protest-over-ukraine-050222/, accessed 25 August 2022.
33
33 András Rácz, ‘A Foot in the Door? Russia’s International Investment Bank Moves to Hungary’,
European Council on Foreign Relations (18 March 2019), https://ecfr.eu/article/commentary_a_foot_
in_the_door_russias_international_investment_bank_moves_t/.
34
34 András Tóth-Czifra, ‘Orbán Mixes It up’, CEPA (3 August 2022), https://cepa.org/orban-mixesit-up/.
35
’35 Unrecorded background conversation with author under condition of anonymity.
36
36 Gábor Czene, ‘Budapesten húznák fel Európa legnagyobb mecsetét’ (Plans to Erect Europe’s
Largest Mosque in Budapest), Népszabadság (16 May 2015), http://nol.hu/belfold/ujra-teriteken-aziszlam-kozpont-1534359.
37
37 Ákos Keller-Alant and Reid Standish, ‘What’s Next for China’s Fudan University Campus
in Hungary?’, Radio Free Europe (8 June 2022), www.rferl.org/a/hungary-orban-china-fudanbudapest/31888800.html.
38
38 Lecture for the students of Mathias Corvinus Collegium, Budapest, 2021 (moderated by the
author).
39
39 Personal conversation with the author, 2017.

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