“The great Fidesz gas theft”

On Friday Viktor Orbán summarized his administration’s achievements at a conference held in Bratislava/Pozsony.  The short English-language talk was mostly about the accomplishments of his unorthodox economic policies, but he briefly called attention to the necessity of having a strong domestic capitalist class. In Hungary, just in other former socialist countries, he admitted, there is not enough capital to enable local entrepreneurs to become really powerful economic engines. But, he added, “we are getting there.”

Under these circumstances how can a country create a strong monied class in record time? If conditions were normal, it would take a considerable length of time for local businessmen to grow organically and compete successfully with foreign companies. If, however, you want instant super-rich capitalists, I can see only one way of achieving that miracle: to make sure that the state creates a legal framework that allows public money to be funneled into private hands. And this is what the Orbán government has been doing in the last five and a half years. The case study I’m sharing today–MET Holding–is most likely only the tip of the iceberg.

The story is not new, but now we have most of the documentation to prove what we have suspected all along: a few of Viktor Orbán’s close friends have made billions at the expense of the Hungarian people.

In 2007 MET Group, headquartered in Switzerland, began operations “in natural gas retail and wholesale trading in the European market as well as in the retail sale of natural gas to industrial customers in Hungary, Slovakia and Croatia.” Five years later, in 2012, MET Holding was established to manage and support the subsidiaries of MET Group.

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, through a pipeline from Austria. The cheaper gas was supposed to be sold to hospitals, schools, and public buildings. MVM claimed, however, that its own retailer, MVMP (MVM Partners), didn’t have enough experience, so they would have to use a Swiss subsidiary of MET Holding, METI (MET International), for the transactions. As a result, MET itself reaped about 80% of the gain that the cheaper gas coming from the West offered to MVM. That is, the savings from the cheaper gas went to the shareholders of MET Holding instead of to Hungarian consumers.

In order to make that business deal legal, the Orbán government simply changed the regulation governing trading via the pipeline. In 2011 Tamás Fellegi, minister of national development, signed a new regulation allowing MVM to be the sole trader of gas from the open market. The arrangement, which was originally intended to remedy a one-time shortage in gas reserves, was extended year after year. The Hungarian government was perfectly happy to have MET, a private company, be the chief beneficiary of the cheaper gas coming from the West and not the state-owned MVM. This arrangement, by the way, is coming to an end on July 1 because Hungary is currently under an infringement procedure for allowing a single company to use the gas pipeline without holding any auctions.

We knew some of these details already last fall. I wrote about them in November, but then we had no documentation and hence no hard proof. Since then, however, Bertalan Tóth, an MSZP member of parliament, sued MVM for refusing to release the documentation of what is considered to be “a bizarre arrangement” between MET and MVM. Tóth won in the court of first instance and, after MVM’s appeal, also in the court of appeal. He received thousands of documents back in January, but it took months to wade through them and reconstruct a plausible scenario of three years of shady transactions. This morning summaries of the documents appeared on MSZP’s website. On the basis of the documents, the losses the publicly-owned MVM suffered in three years may be as high as 100 billion forints. In November, the estimate was only half that much.

Some of the details that have emerged from these documents are truly bizarre. For example, MVM bought MET’s gas on the Austrian side and later gave it back to MET on the Hungarian side and charged only 2.3-3.5 ft./m³ for shipping. It is also clear from the documents that MVM’s claim that MVMP, the subsidiary created to be a retailer for MVM, was not experienced enough to do the actual buying and selling on the open market was an outright lie. MVMP did a brisk business already in 2011 and 2012 and bought gas for MVM 16.55 forints cheaper than MET did. It even happened that MVMP bought gas from MET on the Austrian side and sold it back to MET for a lower price. MVMP didn’t lose any money because the gas sold back to MET included some gas purchased from another company at a much lower price. From the documents it looks as if MVMP acted only as a “mailman” between MET and MVM. MVM didn’t lose money on its transactions with MET, but its own profit was minimal.

Viktor Orbán and István Garancsi

Viktor Orbán and István Garancsi

Since the documents were released only this morning, there hasn’t been much time to comb through the material. Moreover, Tóth and his experts on gas transactions figure that perhaps 1,000 documents are still missing, without which the picture is far from complete. Still, the skeleton of the story is there. The Orbán government used the power of the state and its ability to change laws to pass public money to private individuals.

One of the owners of MET, by the way, is István Garancsi, who is described as the new Lajos Simicska. He is the owner of the Videoton Football League which, in turn, has close connections with the Ferenc Puskás Academy. Garancsi is considered to be one of Orbán’s frontmen. He is the one who just signed a contract with the Hungarian government to build the sites for the Aquatic World Championships to be held in 2017.

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David Sade
Guest
This statement of Orban that “…the necessity of having a strong domestic capitalist class…” is achieved not by the natural development of capitalism, but by simple theft of the nation’s assets. When for example Ford started to make motor cars, it took many decades to become a millionaire, and in the process his company provided not only goods, but gave jobs to tens of thousands of workers, and created new technologies for the world to follow. In contrast, the Orban-family and the Fidesz cronies didn’t create any jobs, didn’t create knowledge, they only created their personal fortune by simple theft that in many cases was reinforced by laws they themselves put into ‘legal framework’. Simple as that… The once so-called ‘state assets ownership’ of Hungary by now is intermingled with the selected (an not so few…) Fidesz cronies, and soon we can arrive to the situation where there will be no more state owned assets left, but the “…strong domestic capitalist class…” has been formed by the continuous transfer of the state assets to those private individuals. This process is no less than if the Italian or any other mafia would justify their actions by the same reasoning as Orban:… Read more »
petofi
Guest

Well said.

GW
Guest

I agree that this post is well put, but I would characterize the Fidesz-created wealthy class not as a capitalist class but rather as a restoration of Hungariy’s pre-capitalist, pre-industrialized landed aristocracy. This is entirely in keeping with Fidesz’s peculiar obsessions with Hungary’s feudal history and their illiberal ideology. This is also why we don’t see an investment in education that leads to actual growth-producing jobs: the feudal organization of society requires an uneducated and unambitious working class. I do not think it unreasonable to expect that if Fidesz wins a third election in a row, we we see long-term leases of agricultural land turned into freehold properties and a restriction of voting rights to property owners.

Webber
Guest

There is nothing new to this. At the start of his first term in office (1998-2002), Orban said something along the lines of: enough of this corruption going to the left – it’s time to create a right-wing elite.

Guest

Something which will never cease to surprise me is how public contracts in Hungary are ‘won’ without (real) tenders. No reaction neither from justice (expected but still) nor from the Hungarian people.

Nádas
Guest

It shouldn’t be so surprising, it’s not like Orbán pioneered this type of corruption. In the US, Dick Cheney saw to it that his former company, Halliburton, received huge no-bid contracts in the reconstruction of Iraq. They overcharged and underperformed on a massive scale, and there was – as you note about Fidesz – no real reaction from either the Justice Department or the American people.

back
Guest

It’s all legal. Orban and his cronies arranged for the paperwork to back up the transactions and the utmost reliability of the people involved who will never testify.

The lefties should have been smarter when stealing. Alas they never had a vision about how to steal and what to do wit the spoils — they were small time crooks. This lack of vision is why they are dying out, never to return.

Guest

I have the feeling the leader is taking a couple of pages from Putin’s management of his country when it comes to ‘bizness’ and economics. That’ll get the GDP going. Just thinking about that supposed Eurasian Union setup. So Europe will be able to work with a gigantic kleptocracy if it comes to fruition? Orban looks like he’s laying the groundwork.

lakos85
Guest

The Liget project is on. The structures will be even bigger than previously published.

Nobody in Fidesz cares about the local, district XIV and VII voters, they are “communists” anyway (meaning Fidesz does not calculate with their votes anyway), so they can suck it up.

Orban and his people will win again and build those buildings. They have imagination and so they always win. No one can stop him.

http://444.hu/2015/06/23/tizezren-tiltakoznak-a-varosligeti-gigaberuhazas-ellen/

Elvtársak
Guest

I just love this guy, I hope you do too.

V.O. penetrates the EU in the rectum all the while he is getting rich beyond belief from EU subsidies he channels into friendly coffers. He is the Zuckerberg and Bill Gates and Paganini (bundled into one) of screwing the EU and getting at the same time politically strong in Hungary – which is the only constituency that counts. He will win again with this chess game too. Can anybody possibly have more fun that this? I don’t think so.

The opposition is – but of course – completely speechless. No, it doesn’t even exist any more.

Finkelstein, Habony, Orban will be crowned soon.

http://cink.hu/orban-viktor-siman-megnyeri-ezt-a-meccset-1713304703

petofi
Guest

Gee, I hope you’ll be as enthusiastic when the starving masses will be randomly ransacking Budapest and blood will fill the drains. Keep prodding the bunko mainstream–the whirlwind you will harvest will be your just reward.

Webber
Guest

Congratulations to Lakos85 and Elvtársak. You have the criminal leadership you deserve, and apparently enjoy.
Elvtársak, you’ve missed something: The only rear VO is brutalizing is that of the Hungarian taxpayer.
nota bene: The Great O is too small even to reach the EU’s knees, much less more attractive bits.

Istvan
Guest

A short while ago Reuters released another report on the US Army’s pre-position tanks, artillery and other military equipment in Central Europe. To see this report go to http://www.reuters.com/article/2015/06/23/us-usa-europe-defense-idUSKBN0P315620150623?virtualBrandChannel=11563

Hungary was listed last week as one of the nations that would be hosting these weapons, in today’s report it is no longer on the list.

Webber
Guest

If last week’s list also was from Reuters, Reuters made a mistake. Hungary was never on that list.

Guest

In Hungary Lorinc Meszaros is our Steve Jobs and this says a lot. Probably this describes very graphically the difference between the two countries too. Funny, but living in Budapest somehow I cannot laugh wholeheartedly.

spectator
Guest

You do mean, don’t you, that Mészáros is a forward thinking and innovative genius, who managed to turn the way of thinking of the whole World as well, having achieved everything on his hard work?

Isn’t it possible, that you mixed up some names here?

I agree with the rest and (I guess) I got the ‘parallel’ bit right, but the name somehow off, you know. To me, that is.

Istvan
Guest

Webber Hungary was also mentioned as being on that list in the New York Times and the Washington Post. Some US military deep throat gave out that information and I suspect that there was at least some initial support for it among the Hungarian military.

Zogu
Guest

Nobody in the Hungarian political elite wants more US (jewish, capitalist, rationalist) influence in Hungary, so no more US troops and weaponry.

Orban hates foreign meddling unless its the Russian kind because Russians know how to be kind with important people.

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