Tag Archives: INA

Orbán’s Hungary under attack by its enemies, and they are many

While Viktor Orbán is battling the European Union and defending the country against the invading conquerors from Africa and the Middle East, the rest of the gang is not idle either.

János Lázár and enemies all around

Once upon a time, naturally before Viktor Orbán began work on the “renewal” of Hungary, there was a cabinet post to oversee the Hungarian intelligence network. Usually, the occupant of that post was a minister without portfolio. Now, however, like so many other matters, it is supervised by János Lázár, the all-powerful minister of the prime minister’s office. Orbán’s “chancellery,” as the prime minister’s office is often called, is a huge organization. The number of people employed in this particular office is close to 1,400. Of this number almost 650 people work for intelligence and information (i.e., propaganda).

On June 23 the parliamentary committee on national security, chaired by Zsolt Molnár (MSZP), asked Lázár to report on the current situation. It began as a routine affair, most likely prompted by the arrival of thousands of refugees at Hungary’s southern border. But as time went by, the hearing turned into something that I can only describe as an accusatory tirade against Hungary’s neighbors and indirectly against the United States. Naturally, the “internal enemy,” the opposition, is also charged with actively ruining their own country’s future.

The countries who were accused of anti-Hungarian policies are Ukraine, Romania, and Croatia. The Ukrainian government is guilty of impeding the Hungarian government’s efforts to assist the Hungarian minorities living in Ukraine. Lázár indicated that this attitude of the Ukrainian authorities keeps the Hungarian intelligence service busy. He also admitted that, as a result, diplomatic relations between the two countries are somewhat rocky.

enemies

In Romania, the government conducts an outright anti-Hungarian policy “under the guise of transparency and justice.” For some background, you might want to read my post on recent Hungarian-Romanian relations and the active Romanian Anticorruption Directorate (Direcţia Naţională Anticorupţie/DNA). Only recently Prime Minister Victor Ponta himself was accused of corruption by the DNA. In fact, Ponta just announced that for reasons of ill health he will retire for a couple of months and his deputy will take over the reins of government. Hundreds if not thousands of cases are pending, so the couple of Hungarian politicians accused of corruption cannot be interpreted as a deliberate attack on ethnic Hungarians or an unfriendly gesture toward Hungary.

But Lázár didn’t stop there. He, in fact, practically accused the United States of being behind the Romanians’ anti-Hungarian policies when he said that “at the moment we cannot ascertain whether these actions have anything to do with the close cooperation between the United States and the Romanian government.” I guess the hundreds of intelligence officers attached to the prime minister’s office are now madly trying to find out whether it is Washington that is encouraging the Romanians “to destabilize the financial foundations of the Hungarian historic churches [in Romania] and to limit the freedom of religion there.” The evil United States was also mentioned as being behind the bad German press.

Croatia is no friend either. Its government is bent on “discrediting the whole Hungarian business elite” through the MOL-INA affair. This is a long story about which I wrote at least twice, once in 2012 and again in 2013. Zsolt Hernádi, CEO of MOL, is being accused of bribery in connection with MOL’s purchase and management of the Croatian oil refinery, INA. Through a clever legal maneuver Hernádi has so far successfully avoided appearing before the Croatian authorities. But he cannot leave the territory of Hungary because he is still on Interpol’s wanted list.

Lázár further claimed that they have “unambiguous information” that certain business groups “intentionally boycott the completion of the pipelines coming from Romania and Croatia.”

All in all, incredible charges against Hungary’s neighbors from the second most powerful politician in Budapest.

György Matolcsy found an enemy in The Economist

It is not only governments that want to discredit and ruin Hungary. For example, the editors of The Economist decided to bury the economic achievements of the Hungarian government, as Matolcsy complained in a letter-to-the-editor. Here we learn that Matolcsy, who is a regular reader of the magazine, found the weekly tables presenting macroeconomic and financial market developments in certain countries and regions extremely helpful. He was, however, surprised to see that, “contrary to your former practice, since your 25 April issue the macroeconomic indicators related to Hungary have been omitted.”

After devoting a long paragraph to the spectacular achievements of his unorthodox economic policies Matolcsy comes to the point:

The omission of the data is detrimental to perceptions about the Hungarian economy. Moreover, its timing gives the impression as if The Economist was keen on presenting those data to its readers that confirmed the problems of the Hungarian economy, which indeed did exist in the past, while it would rather hide the data demonstrating the successes achieved in recent years. The deletion of information related to Hungary hinders readers with a general interest in economic developments from making an educated assessment, while it reduces the opportunity of investors with a presence in Hungary or considering future investments in the country to monitor the most important developments in the Hungarian economy in one of the world’s most widely read economic weeklies.

In brief, Matolcsy is certain that even the editors of The Economist are conspiring against Hungary by refusing to share the good economic news coming from the country. Surely, it is madness but, I’m afraid, quite typical. Otherwise, I just learned from György Bolgár’s column in 168 Óra, which functions as a kind of Hungarian “fact check,” that Hungary was replaced by the Philippines on the list of 42 countries, but only in the print edition. Online, Hungary is still there. Bolgár noted that Portugal, whose territory is practically the same as that of Hungary, is not listed either, although its economy is larger than Hungary’s. But, Bolgár added ironically, “they don’t have a Matolcsy who would indignantly complain.”

Freedom House is also an enemy of Hungary

Complaining at every instance about perceived unfair criticism is part of the central directive coming straight from Viktor Orbán, who repeatedly instructs Hungarian ambassadors to raise their voices every time Hungary is “unfairly” criticized. And the fact is that, as far Hungary’s current political regime is concerned, all criticism is unfair. For example, the latest Freedom House report, which degraded Hungary to a “semi-consolidated democracy” from “consolidated democracy.” What does that mean? Where does that put Hungary among the former socialist countries? Poland, the Czech Republic, Slovakia, and the Baltic states are consolidated democracies. As of 2014 Hungary joined Romania, Bulgaria, and Serbia as a semi-consolidated democracy.

A day after the report became public, the ministry of justice published an announcement titled “Freedom House paints a false picture of Hungarian democracy.” The arguments that are supposed to show that Freedom House’s criticisms are unfounded are weak. For example, on the electoral system’s failings, the ministry of justice can say only that “last year’s elections prove that our electoral system works well and reflects voters’ will.” What they neglect to say is that with less than 50% of the votes Fidesz managed to have a two-thirds majority in parliament. The only answer to the criticism of the justice system is that Freedom House should take a look at the European Union’s Justice Scoreboard, which “showcases the quality, independence and efficiency of the justice system.”

Freedom House is also wrong when it accuses the Hungarian government of not supporting disadvantaged social groups when in fact the government’s “main tools of these efforts are triggering economic growth, stopping inflation, creating jobs and public catering for children.” Clearly, this is no answer to the absolute neglect of the poorest segment of society. Otherwise, “the Government of Hungary is ready and open to all discussions concerning democracy and human rights, and accordingly to contribute to the development of a true picture of the country.”

One must admit that the present leaders of the country are unbeatable when it comes to misleading unsuspecting and trusting foreigners. Luckily, their numbers are diminishing.

International pressure on Viktor Orbán: Russia, Putin, and Gazprom

There is real concern among former Hungarian diplomats and foreign policy experts that Hungary’s isolation is practically complete and that she may remain the only “strategic ally,” to use Viktor Orbán’s favorite term even in connection with China, of Vladimir Putin’s Russia. And if the Orbán government does not try to extricate itself from this situation, the consequences can be serious. Although Fidesz supporters are convinced that the United States has embarked on the destabilization of the country with the goal of removing Viktor Orbán from power, this cannot be Washington’s intent. After all, the opposition is in disarray and replacing Orbán with another Fidesz politician would not accomplish anything. A new prime minister would be merely a figurehead; the real power would remain in the hands of Viktor Orbán.

Admittedly, on the surface this conspiracy theory finds some support in the coincidence of the American move to ban six corrupt officials and businessmen from the United States and the massive demonstrations against the internet tax that soon enough became a protest movement against the whole regime. But the latter wasn’t the U.S.’s doing. It was the folly of the Hungarian government that seems to commit more and more mistakes lately. Did Viktor Orbán lose his magic touch, or has he navigated himself into an impossible situation in which the “peacock dance” is no longer possible? He is increasingly being faced with a stark choice: either total commitment to the side of Russia or capitulation and acceptance of the rules of the game within NATO and the European Union.

Orbán might be a good politician–if we define a good politician as someone who can play one person against another, who can fool his allies, who disregards the law, and who within a few years manages to institute a one-party system, because that is what we have in Hungary. But his track record shows that he cannot govern, that he cannot run a country successfully. We who watched his first four years between 1998 and 2002 with growing concern knew that already, but it seems that in the eight years that followed his disastrous rule the Hungarian people forgot why they went out in record numbers to make sure that this man and his regime don’t come back.

The situation today is ten times worse than it was during his first administration. He has transformed the country into an illiberal democracy, and his pro-Russian policies have alienated Hungary’s allies. Viktor Orbán is considered to be a pariah and someone who is toxic because of his potential influence on some of the other countries in the region. Western politicians look upon him as a fellow traveler of Vladimir Putin. And, indeed, they seem to borrow each other’s ideas. Orbán copies Putin’s attacks on NGOs, while, it seems, Putin was inspired by Orbán’s nationalization of the textbook industry, reported just yesterday in the western press.

During his first administration Orbán was fiercely anti-Russian, and it seems that he didn’t change his mind on that score until lately. In December 2009 a Hungarian foreign policy expert and obvious admirer of Orbán described the forthcoming Fidesz victory as “Moscow’s nightmare.” Early in his second administration he worked furiously on a quasi-alliance system from the Baltic to the Adriatic in which Hungary would have a leading position. But his fellow prime ministers in the region wanted nothing to do with Orbán’s grandiose plan. He made every effort to dislodge Surgut, a Russian company that had a 21.2% stake in MOL, the Hungarian oil and gas company. By May 2011, after lengthy negotiations, the Hungarian government bought out Surgut, paying a very high price. At that time Hungary was no friend of Russia. Not yet. However, according to Fidesz sources, Orbán decided to radically change course sometime in early 2013.  He spent about six months pondering the issue and came to the conclusion sometime during the summer of 2013 that he would turn to Russia for an expansion of the Paks nuclear power plant. According to the same sources, his decision was based on his belief that the Czech Republic and Germany would need cheap energy which Hungary would be able to provide.

Since then, with the outbreak of the Russian-Ukrainian conflict, the political climate in Europe has changed dramatically. Orbán’s flirtation with Russia is looked upon with more than suspicion. The West considers Viktor Orbán and Hungary a liability. Soon enough, I believe, he will have to show his true colors. No more peacock dance. But it seems that Orbán by now is embroiled in all sorts of machinations with Russia in general and Gazprom in particular. The current setting for Hungarian machinations with Gazprom is Croatia.

Just a few words by way of background. In 2008-2009 MOL acquired a 47.47% stake in INA, the Croatian oil and gas company. In 2011 a Croatian newspaper reported that Zsolt Hernádi, CEO of MOL, had been accused by the Croatian prosecutor’s office of bribery. Naturally, the Hungarian prosecutor’s office found nothing wrong, but the Croats eventually went so far as to hand the case over to Interpol. As a result, Hernádi couldn’t leave the country; otherwise he would have been subject to immediate arrest. More details can be found in a post I wrote on the subject in October 2013. The decision was eventually made to get rid of MOL’s share in INA, but the Croatian government does not have the kind of money needed to buy MOL’s stake. Lately, there has been talk in the Hungarian press that MOL will sell its shares to a Russian buyer, most likely Gazprom itself. So, Gazprom will not only store gas in Hungary but might even control almost half of INA in Croatia.

INA: Managed by MOL

INA: Managed by MOL

And now let’s return to American-Hungarian relations. According to some observers, “the highly unusual step of blacklisting six people with ties to the government in Hungary, a NATO ally and European Union member,” also has something to do with the “growing closeness between Hungary and the Kremlin over energy that could undermine Western attempts to isolate Russian leader Vladimir Putin over his intervention in Ukraine.” So far there is not much new in that assertion, published in an article by Reuters. We have known all along that, in addition to Orbán’s domestic policies, his relations with Russia were a serious concern to the United States and the European Union. What is new in this revelation is that Washington is apparently keeping an eye on the possible MOL-INA deal with Gazprom. According to the article, Chris Murphy, U.S. senator from Connecticut, was dispatched to Zagreb “to lobby the government … on the issue.” Another interesting piece of information gleaned from the article is that State Department official Amos J. Hochstein, Acting Special Envoy and Coordinator for International Energy Affairs, met Hungarian Foreign Minister Péter Szijjártó and had a “productive meeting during Szijjártó’s recent visit to Washington about MOL’s stake, the South Stream, and Hungarian gas deliveries to Ukraine.”

All in all, it seems to me that Viktor Orbán is in over his head, especially with a foreign minister with no diplomatic experience. Szijjártó was an excellent spokesman for Viktor Orbán as the head of the “parrot commando,” but he is not qualified to be foreign minister, especially at such a delicate juncture.

It is hard to tell what Orbán’s next step will be. Fidesz media attacks on the United States are fiercer than ever, and its admiration of Russia is frightening. But more about that tomorrow.

MOL’s CEO, the Croatian courts, and Viktor Orbán

It’s time to turn our attention to the woes of MOL, the Hungarian oil refining company, in Croatia where the company owns 49.1% of INA (Industrija Nafte), its Croatian equivalent, and has management rights. MOL acquired this holding in 2009.  A couple of years later, in the summer of 2011, the leading Croatian paper, Večernji list, reported that MOL’s CEO, Zsolt Hernádi, was accused by the Croatian prosecutor’s office of bribery in connection with the privatization of INA. According to the paper, Hernádi paid Ivo Sanader, Croatian prime minister at the time, €5 million for a favorable deal. As a result, MOL received a 47.47% stake in INA while the Croatian government held on to 44.85%. Sanader abruptly resigned on July 1, 2009 and fled to Austria from which he was eventually extradited. Following a long legal procedure he was sentenced to a ten-year jail term, which he is currently appealing.

Several times Croatian prosecutors tried to question Zsolt Hernádi, to no avail. Eventually the Hungarian prosecutors decided to investigate on their own but found no grounds for the charges. It is a long story, which I tried to summarize back in November 2012.

A few days ago the case took a much more serious turn. HVG reported already in July that the Croatian authorities planned to issue an international arrest warrant that would force the Hungarians to hand over Hernádi to the Croatian prosecutors. It took a little while, but on September 27 Hungarian papers reported that Hernádi’s picture is the first among several Hungarian nationals who are being sought by Interpol. Hernádi was supposed to appear at a Zagreb court on September 25 and, when he didn’t show, the judge ordered his arrest. Hungarian legal experts on international law, by the way, cannot decide whether or not Hungary is obliged to hand Hernádi over to the Croats.

It was at this point that Viktor Orbán decided to interfere. With that interference the longstanding feud between MOL and its business partner, the Croatian government, moved to a political level. The Hungarian government pointed out that “the developments of the past few days … made it clear to the [Hungarian] government that the dispute is no longer an economic conflict between co-owners and shareholders.” It noted that there is a concerted Croatian effort “to exert pressure [on MOL] outside the economic sphere.” The communiqué added that “these methods are unacceptable in the European Union and therefore Hungary cannot leave these measures unanswered.” For good measure the government cancelled Hungarian participation in a summit organized for October 3 in Dubrovik and asked MOL’s management to review the company’s portfolio and if necessary prepare the sale of its INA shares to the Croatian government or a third party. The cabinet also authorized “the Minister of Justice and the management of the Hungarian Asset Management company [that handles state assets] to examine what civil and criminal action would be possible to resolve the damages to MOL and Hungary.” Viktor Orbán showed that he is a tough guy who doesn’t allow anyone to treat an important Hungarian company this way.

The answer of Croatia’s prime minister, Zoran Milanovic, was conciliatory, but he pointed out that “Croatia’s government has no influence over the decisions taken by the country’s judicial bodies.” The Croatian president, Ivo Josipovic, was less charitable, saying that Orbán doesn’t seem to realize that Croatia is not Hungary where the government can instruct the judiciary.

Orbán is not changing his stance on the issue. Today during his usual Friday morning interview he reiterated that “coercion outside the economic realm does not make it possible and justified [for MOL] … to remain in the Croatian energy market.” He gave advice to the Croats: the state should get their energy sector back. Buy the MOL shares just as Hungary bought the gas storage facilities from E.On. That’s the civilized way, he added.

MOL3

As far as the Croatian government is concerned, the solution is not that simple. According to Croatian papers, the government doesn’t have the €7.8 billion necessary to buy MOL’s stake at market value. But who else would be foolish enough to buy into INA given the murky purchase of the MOL stake? If it turns out that Hernádi is implicated, the entire original agreement of 2009 might be deemed null and void and the ownership of the MOL shares might be transferred to the Croatian government.

I’m also not at all sure whether MOL would consider selling its rather large holding in INA at this juncture. Apparently in the last three years the company invested a great deal of money into INA, and it is unlikely under the circumstances that MOL would receive a fair price for its stake. INA is a large chunk of MOL’s total wealth: about a third of all its assets. MOL’s importance as the region’s largest oil refinery would be jeopardized, especially if we consider Croatia’s access to harbors and pipelines necessary for MOL’s future expansion.

Orbán’s interference might also impact the price MOL can get for INA as a “state-ordered decision doesn’t bode well, even if selling the stake would be the economically reasonable step for MOL.” Meanwhile, MOL stock has dropped 4.6% in the past three days and is heading for its lowest close in sixteen months.

Sooner or later one will have to ask what actually happened in 2009 when MOL acquired its INA holding and its management. Until now no one in Hungary questioned Hernádi’s innocence, but lately there are more and more voices raising the issue of possible wrongdoing. As the argument goes, if Hernádi is innocent why isn’t he ready to face his accusers? Why does Viktor Orbán insist on MOL’s divesting its Croatian business? Is it perhaps because this way the Hungarian government hopes that the case against Hernádi will be dropped and therefore Hungary will not be obliged to extradite him to the Croatian authorities? There are just too many questions and at the moment no answers.