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To the Viktor goes the oil Hungary’s government appears set on maintaining its cozy relationship with Moscow. But at what cost? 

Source: Meduza

By Eilish Hart for The Beet

In the 11 months since Moscow began its full-scale invasion of Ukraine, Hungary has supported nine rounds of EU sanctions against Russia and welcomed more than 2.1 million Ukrainian refugees. However, it has also proven to be a dissenting voice in the European bloc’s united front. On top of refusing to allow weapons to pass through Hungarian territory to Ukraine, Budapest has traded on its EU veto power, and is loath to relinquish Russian energy imports. Indeed, since winning re-election last April, Viktor Orbán and his government appear increasingly set on maintaining good relations with the Kremlin. But at what cost?

This article first appeared in The Beet, a weekly email dispatch from Meduza covering Central and Eastern Europe, the Caucasus, and Central Asia. Sign up here to get the next issue delivered directly to your inbox.

“I have never sat at such a long table before,” Viktor Orbán joked after meeting with Vladimir Putin on February 1, 2022. The Hungarian prime minister was in Moscow on what he described as a “peace mission” aimed at lowering tensions between “the West and the East.” (At the time, more than 100,000 Russian troops were concentrated on the border with Ukraine.) Calling for dialogue, Orbán suggested the “Hungarian model” as a way forward. “We are members of NATO and the European Union. Nevertheless, we can maintain excellent relations with Russia. This is possible. What do we need for this? We need mutual respect,” he declared.

Less than a month later, on February 24, Russian forces swept across the border into Ukraine. The scale of the attack took Budapest by surprise. “Even in the last 24 hours before the invasion of Ukraine, the Hungarian intelligence services were convinced that no full-scale invasion was imaginable,” Szabolcs Panyi, an investigative journalist at Direkt36, told The Beet. “They were completely sure that Russia would not attack the Ukrainian capital.” 

As Moscow rained missiles down on Kyiv and other Ukrainian cities, Orbán released a video statement condemning the invasion, but he stressed that Hungary would provide Ukraine with only humanitarian (not military) aid. “We have to adjust everything,” Orbán told reporters two days later, while visiting a border crossing where refugees were arriving from neighboring Ukraine. EU-level sanctions against Russia, he said, were already in the works, with Hungary’s backing. “We will block nothing,” the prime minister assured. “This is not the time to be clever, this the time to be united — it’s a war.”

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According to Panyi, many believed that the full-scale invasion would finally force Orbán to abandon his controversial pro-Kremlin policies and throw Hungary’s support behind Ukraine. But with a parliamentary election on the horizon, the Hungarian strongman and his right-wing Fidesz party took a different approach. 

Pledging to provide humanitarian assistance, Budapest refused to allow weapons to pass through Hungarian territory to Ukraine, “to guarantee the security of Hungary and the Hungarian community in Transcarpathia” (a region of western Ukraine). Orbán then ruled out sanctioning Russian oil and gas, arguing that Hungary’s economy “simply cannot function” without them, and positioned Fidesz as the “party of peace.” “The government managed to dominate the narrative and essentially force the opposition parties into a very reactive position, claiming that they would  [drag] Hungary into the war if they were to come to power,” said Zsuzsanna Vegh, a visiting fellow at the German Marshall Fund of the United States and a lecturer and researcher at European University Viadrina. 

Naturally, this ambiguous foreign policy hasn’t gone over well with Kyiv. Addressing the European Council in late March, Ukrainian President Volodymyr Zelensky urged Hungary to pick a side. “You have to decide for yourself who you are with. You are a sovereign state,” he said. “Listen, Viktor, do you know what's going on in Mariupol?” 

Fidesz took home 54 percent of the vote on April 3, granting Orbán a fourth consecutive term as prime minister and a two-thirds supermajority in parliament. In his victory speech, Orbán listed the Ukrainian president and “Brussels bureaucrats” among his opponents. 

‘Business as usual’

After the election, Orbán and his government doubled down on their opposition to sanctioning Russian energy and set about making things work with Moscow. “The Orbán government did everything it could to ensure that there were no major changes in its relations with Russia,” Vegh told The Beet. “It continued to prioritize economic and energy relations and generally [sought] to conduct business as usual.” 

For Budapest, this meant obtaining an exemption from the EU’s embargo on Russian oil, striking a deal with Gazprom to boost supplies of Russian gas, and pushing forward with the construction of Paks II, a Russia-financed nuclear power plant. (Russia’s International Investment Bank, which other EU countries quit after the February invasion, also continues to operate out of Budapest.)

Hungary relies on Russia for 65 percent of its oil and 85 percent of its gas, as well as nuclear fuel, and consecutive governments have made little effort to diversify. Asked how the energy relationship between Russia and Hungary has changed over the past 11 months, energy analyst Nicholas Birman-Trickett said it “continues as normal, relatively speaking.” Infrastructural constraints, he explained, partially dictate Hungary’s commitment to Russian energy imports. “That said, it's pretty clear that Orbán enjoys using his relationship with Moscow as an excuse to try and demand concessions from the EU when relevant,” Birman-Trickett pointed out. 

“Orbán has always been fairly open about [the fact that] his conditional support for the sanctions [against Russia] was dependent on the European Union doing something for him,” said political analyst András Tóth-Czifra. According to Direkt36’s reporting, for example, Orbán and his government initially hoped that the European Commission would unfreeze billions of euros in pandemic recovery funds (withheld over corruption concerns) as a “reward” for backing the sanctions. 

When this didn’t happen, Budapest began brandishing its veto power at the EU-level, where major items require unanimous approval. The situation came to a crunch last November, when Hungary threatened to block an 18-billion-euro ($19.6-billion) financial support package for Ukraine. The standoff ended with a compromise deal: the EU lowered the amount of suspended funding and Hungary dropped its veto. “Ultimately, it was a positive development that the Hungarian government did not veto a common European [aid] package, but already in December we have seen suggestions that if Hungary blocks, the 26 remaining EU member states could potentially go a separate way,” Vegh noted. “So, I think Hungary won’t be able to pull this [off] again.”

However, that doesn’t mean Budapest won’t try. Just last week, Orbán said that Hungary would veto any potential sanctions on Russia’s nuclear sector, calling such restrictions “out of the question.” The Fidesz government has also ramped up its anti-sanctions rhetoric at home, as seen in the run-up to a recent “national consultation” on the EU’s Russia sanctions. The results showed that 97 percent of respondents opposed sanctioning Russian oil and gas, though critics emphasized that the response rate was low (17 percent of eligible voters). Observers also say the questions themselves were misleading, referring to “Brussels sanctions,” for example, while failing to mention that all EU member states, including Hungary, have approved every sanctions package so far. 

Asked about the costs and benefits of Hungary maintaining close ties with Moscow, Vegh said that “the balance is really tilting towards costs” in the foreign policy sphere. Relations with Ukraine have sunk to an all-time low, and Hungary is now isolated from its Western allies. Nevertheless, Budapest appears unlikely to reverse its Russia policy anytime soon. “There is a high level of path dependency here that the Hungarian government maneuvered itself into,” she explained. “It would be not impossible, but certainly very hard, to backtrack now.” 

Fear and favors

While seated at the long table with Orbán in February 2022, Putin claimed that “Hungary is buying Russian gas at a rate five times cheaper than the market price in Europe” thanks to its most recent long-term contract with Gazprom. At the subsequent press conference, Orbán said Russian gas has enabled Hungary’s years-long policy of freezing utility rates. “If we have Russian gas, we can provide a cheap supply [...] to Hungarian households. If there is no Russian gas then we cannot do this,” the prime minister maintained. 

The Orbán government’s utility price cap has been one of its “most important, most symbolic signature policies” over the past 10 years, Tóth-Czifra told The Beet. First introduced ahead of elections in 2014, it also formed a key plank in Orbán’s 2022 re-election campaign. But the narrative about “cheap Russian gas” soon fell apart. Shortly after the elections, Hungarian media reported (citing foreign trade data) that the price formula for the “discount” gas appeared to be linked to market prices from preceding months. By July, the Hungarian government had declared an “energy emergency” and, in a significant reversal, announced plans to scrap price caps on household gas and electricity consumption above the national average. 

Hungary’s economic situation continued to spiral in the fall. By November, food prices had jumped 49 percent year-on-year and inflation hit 25 percent by year end. According to Tóth-Czifra, this was also in large part due to the government’s own policies backfiring. In December, Orbán’s government was forced to eliminate its price cap on fuels due to countrywide supply shortages, while an effort to cap staple food prices left retailers rationing products ahead of the holidays. “At the end of last year, when gas prices in Europe were already going down, Hungary paid significantly more for the gas imported from Russia than consumers elsewhere in Europe did,” Tóth-Czifra added.

Does Moscow need Budapest’s business? “Russia needs everything it can get, but the market is small,” Birman-Trickett told The Beet. “In this case, Orban's getting the better bargain and not delivering much for Moscow, even if there is some degree of leverage the relationship provides [Putin’s] regime.”

Hungarian Central Bank Governor György Matolcsy has raised the alarm over the government’s economic policy, describing its use of price caps as a “flawed” “crisis management strategy” and a driver of inflation. But rather than change gears, Orbán and his government have opted to shift the blame — namely, onto the EU’s sanctions against Russia. In a recent interview, Hungarian Foreign Minister Péter Szijjártó insisted that the sanctions have failed, claiming that they’ve done more harm to European economies than to Russia. 

“The Hungarian government is, in reality, frightened that the Russians will cut off gas supplies,” Panyi said, pointing to certain “favors” that Budapest is doing to maintain the Kremlin’s goodwill. Hungary’s successful lobbying for a sanctions exemption for the Russian Orthodox Church’s Patriarch Kirill is a prime example, he said. More recently, diplomatic sources told RFE/RL that Budapest is petitioning to remove nine people (namely, oligarchs and their family members) from the EU’s Russia sanctions list. “That the Hungarian government is trying to do these favors for the Russian side shows, to me, some desperation,” Panyi underscored. 

That said, the Hungarian leadership may still stand to profit in some way. “The real story here is that all kinds of business deals [with Russia] — not just gas or oil, but also nuclear and even the procurement of metro cars in Budapest — all involved allegations of corruption,” Panyi explained, referencing his past reporting. “There’s a clear trace of how money is being transferred from the Russian state to some private pockets that belong to people in the prime minister’s [Orbán’s] inner circle.”