It’s time to turn our attention eastward, to Russia. Yesterday’s dramatic events shook the world despite the fact that people keeping an eye on the Russian economy have known for at least a year that Russia is in trouble.
Putin’s Russia, which not so long ago Viktor Orbán viewed as an ascendant power–as opposed to the countries of the declining west, is close to economic collapse. Viktor Orbán bet on the wrong horse both politically and economically. His scheme to offer Gazprom storage facilities in return for cheaper gas fell through when Putin was forced to abandon his ambitious plans for the Southern Stream that would ultimately reach Italy and Austria. As for Orbán’s grandiose project of adding two more reactors to the already functioning Paks nuclear power plant, there is a good chance that Russia will not be able to fulfill its promise of a 10 billion euro loan to Hungary. All in all, Orbán’s Russia policy is crumbling.
I would like to return to the passages from the infamous Bloomberg interview in which Orbán talked about his foreign policy objectives. Although some of Orbán’s English sentences are well nigh incomprehensible, here’s my best guess as to his intent.
I found it somewhat surprising that he admitted that the original underpinning of his foreign policy is no longer applicable. We all know that in his mind foreign policy is driven solely by commercial and financial interests. His whole Eastern Opening was based on this belief. Hungary may be a member of the European Union, but its economic future lies with the East. Well, he discovered that currently foreign policy “is based on geopolitics … which is a new challenge for all of us.” Well, not for all of us. It is a challenge for members of the new Hungarian diplomatic corps who have no diplomatic experience. It is a challenge for Péter Szijjártó whose only job until now was running around in Asian and Middle Eastern countries trying to drum up business.
When it came to Russia, Orbán was rather fuzzy in this interview. Hungary’s “Russian Doctrine”–whatever ‘doctrine’ means in this context–“is respect for international law while keeping open opportunities for economic cooperation.” This is a simplistic way of looking at the art of diplomacy. Russia did not respect international law and therefore Hungary, according to its Russian Doctrine, should stand squarely with the European Union. But that attitude most likely precludes “economic cooperation” with Moscow at the moment. How is he planning to achieve this acrobatic feat? “Hungary’s national interest on [sic] Russia is that we have to stick to principles of international law and shape economic sanctions depending on the situation. We shouldn’t throw sanctions out of the tool box but the EU should also start talks with Eurasian countries at the same time.” First of all, it is not clear what he means by “Eurasian countries.” Does he mean those countries that belong to the Eurasian Union? Belarus and Kazakhstan? Belarus used to send 80% of its exports to Russia, but because of Russia’s economic collapse those exports now make up only 40-45% of the country’s total exports. President Aleksandr Lukashenka urged his government to seek new markets. The Hungarian government, which complained bitterly about the EU sanctions that affected the country’s agricultural sector, would most likely have seen its agricultural exports to Russia slashed as well, even without the sanctions.
There is another Orbán sentence I found intriguing: “it can be expected of Hungary that it be as loyal as it can to Europe’s common foreign policy and for it not damage its efficiency.” My best guess is that this means that Hungary will be loyal as long as such loyalty does not damage its own interests. That’s not much of a commitment.
The first batch of EU sanctions against Russia expires in March, the next in April, and the most painful ones on Russian banks and energy firms at the end of July. Russia already began lobbying in the capitals of countries most likely to take Russia’s side and thus prevent the renewal of the sanctions. The three countries the Russians are concentrating on are Hungary, Cyprus, and Italy. Hungary and Cyprus are considered to be vehicles of Russian designs–not exactly countries loyal to the EU cause. For the Hungarian prime minister, loyalty to the West only goes so far.
As for the future of Paks, more and more people believe, even within Fidesz circles, that nothing will come of it. Yet on December 9 three contracts were signed by MVM Paks II Atomerőmű Fejlesztő Zrt. and the Russian Joint-Stock Company Nizhny Novgorod Engineering Company. The Hungarian government official in charge of the project claimed that five months of intensive negotiations preceded the signing of the contracts. All details concerning the deals are secret. It seems to me that the Hungarian government is trying to sign all contracts pertinent to the building of the reactors as soon as possible. Of course, these contracts have nothing to do with the loan agreement itself. Contracts with engineering firms will be useless if there is no Russian loan. One can only hope that the Hungarian side had the good sense to include a proviso to the effect that the contracts are binding only if Hungary gets the necessary loan from Moscow.
Since December 9 not much has been heard about the contracts except for an exchange between Bertalan Tóth, an MSZP member of parliament, and János Lázár, minister of the prime minister’s office. According to Lázár, it was decided that in building the new reactors the government will invite western managers and partner firms. International headhunters are looking for the appropriate partners, according to Lázár. According to information received by vs.hu, two such energy companies might be in serious contention: the French Areva and the Finnish Fortum. This sounds to me like an attempt to sweeten the bitter pill for Brussels. Of course, it is possible that all this effort will be in vain and that Orbán’s dream of being the supplier of energy for half of western Europe will never materialize.