Narrowing room for manoeuvre: The effects of Putin's war on Hungary

One foundational pillar of Hungarian foreign policy since 2010 has been building multilateral ties with great economic powers in order to boost trade, foreign investment, and development. Meanwhile, maintaining traditional commitments to EU and NATO allies in the security and defence realm could not be omitted either, as realistically speaking there is no alternative to them, and they also enjoy broad, majority support from the Hungarian public. This duality of a bluntly mercantilist foreign policy, sometimes conflicting with the allies’ more profound focus on value-based actions, has brought about a balancing act for Hungarian foreign policy, occasionally inciting harsh criticism from Western allies. Utilitarian foreign policy sentiments towards non-European great powers have been further amplified by domestic policy trends, the Government’s loud anti-liberal rhetoric, and Viktor Orban’s personal conviction that a fundamental shift in global relations in favour of non-Western, non-democratic countries is inevitable.

Hungary’s nexus with Russia has rested on these two major pillars. Moscow was seen as a potential provider of economic benefits connected to energy and industrial cooperation. The two leaders also tried to capitalize on the fact that their anti-liberal, Western-sceptical mindsets partially overlap. Thus, pursuing ‘normal relations’ with Putin, even in times of crises, as in 2014-15, did not cause the obstinate Orban any headaches. At the same time, even though Hungary has occasionally used her veto power to block certain decisions within EU foreign policy that could have caused marginal strain to China or Russia, such occasions have only been minor gestures. On real, substantial issues, such as introducing and maintaining sanctions on Russia since 2014, PM Orban has not broken with the EU/NATO block discipline.

While Hungary has been skirting the outer reaches of Western-Russian relations, its diplomatic tensions on Hungarian minority issues with Ukraine have remained severe. This has been all the more unusual since the Government has normalized its relations with all of its other neighbours and traditional sensitivities over minority issues have almost fully disappeared from the regional agenda. At the same time, Orban raised the issue of autonomy for Hungarians in Transcarpathia (cultural autonomy, plausibly) during the 2014 Donetsk conflict and reacted sharply to Ukraine’s education law. The response to the latter hampered progress in NATO-Ukrainian institutional relations, with Hungary often voting unilaterally against all the other member states.

The immediate aftermath of the Russian aggression

If Putin underestimated the implications of his aggression, Orban underestimated the plausibility of war. His personal visit to Moscow in early February, focusing on enhancing energy cooperation, was conducted as if nothing of the sort would be happening and was just framed rhetorically as a ‘successful peace mission’. Subsequent events not only surprised the Government – which first firmly denied the possibility of armed conflict until the last moment, then found it difficult to define Hungary’s position in relation to the war – but also significantly narrowed its room for manoeuvre and balancing. The rapid, unanimous firm political and then economic responses of the western allies toward the Russian aggression did not create any room for opting out of definitely taking a side. Retrospectively, it can be said that while the Hungarian Government correctly recognized early on that the international system is going to fundamentally change and a multipolar world order is going to replace western hegemony, it then drew the wrong conclusion, predicting that this would allow greater room for manoeuvre. Russia’s war against Ukraine and the West’s intention to fully isolate Russia show that the multipolar world order will not result in more freedom in foreign policy, but less as ‘block discipline’ will likely increase. Furthermore, the overwhelming western support for Ukraine’s struggle and international sympathy for Kyiv leaves no room for showing any sign of discontent in Hungarian–Ukrainian bilateral relations. Hungary has had to change its long-established attitudes on refugee reception issues and on Ukraine–NATO relations overnight. In such a situation, any pro-Russian stance and balancing became practically impossible.

In this strained environment, the Government took a peculiar position, advocating for Hungary to ‘stay out of the war in any respect’. Practicing ‘strategic calmness’ – as PM Orban calls it – the non-confrontational position includes condemning Russia’s military aggression, supporting Ukraine’s territorial integrity, calling for restoring peace, and not blocking wide-ranging political, economic, and military decisions by allies in NATO and  the EU. At the same time, no direct military support by, or through the territory of Hungary can be provided to Ukraine. Such restraint in the early days of the conflict gained majority support from the Hungarian people.

At the same time, the Hungarian ‘Sonderweg’, its peculiar foreign policy conduct, has yet again produced mixed responses, both from its allies and from Russia. Hungary’s current foreign policy narrative is not in line with most of the NATO and EU Member States’ – and practically all other Central European countries’ – dominant, vocal criticism of Russia. Neither U.S. Secretary of State Antony Blinken, nor NATO Secretary General Jens Stoltenberg visited Hungary when they toured Eastern Flank countries. The primary regional cooperation framework for Budapest, the other three of the Visegrad 4 countries, are also much more engaged in supporting joint allied, European, and Ukrainian efforts than Hungary is: Poland and Slovakia are hosting significant new NATO contingents to boost military deterrence, while the Czech Republic, Poland and Slovakia have been providing weapons and other military aid to Ukraine. Nevertheless, the Hungarian Government has not vetoed any sanctions against Russia thus far and is unlikely to do so in the future. However, this self-restraint did not make Hungary an exception when Russia designated all of the EU Member States as ‘unfriendly countries’. It would be difficult to expect any Russian differentiation favouring Hungary in the current situation.

Economic motives and effects

Mercantilist considerations have been deeply imprinted into Hungarian foreign policy. Nonetheless, enthusiasm regarding Russian prospects has cooled down considerably in the last couple of years. Russia has slowly disappeared from among the primary target countries for Hungarian exports. While Russia comprised Hungary’s biggest export destination outside the EU in 2012 (3.2% of total exports), its share had dropped to 1.7% by 2019. Paradoxically, it was overtaken not just by the US (2.8%) but also by Ukraine (2.0% in 2019). Investments, especially Russian companies’ presences in Hungary, remain negligible. The EUR 12.5 billion, 2400 MW capacity nuclear construction contract with Rosatom (called ‘Paks-2’), agreed in January 2014, has showed little progress and was in the phase of permitting in early 2022. Negotiations with Rosatom have been rather tough and protracted. The only reasonable success has been the cooperation on the Balkan Stream pipeline construction and the conclusion of a long-term gas supply contract, both in late 2021. Not surprisingly, some sense of reality has been established within the Hungarian establishment over the years regarding Russia. Hungary’s economic attention has shifted to Far Eastern investors and partners with much more leverage and real inputs into the domestic economy.

The consequences of the 2022 Russo–Ukrainian war have changed the situation for the worse. Exports to and investments from the East are expected to crumble, common economic cooperation projects (i.e. transport equipment manufacturing with Egypt, a logistical terminal for Chinese imports) will likely come to a halt. The Paks-2 project is in imminent danger. The creditor bank VEB is banned from SWIFT. It remains unclear whether western companies like GE, Siemens and many others would be ready to deliver critical components in the future. While the Hungarian Government still insists that the Paks-2 project guarantees low utility prices in the future and does not support any sanction measures threatening the project, the fate of Paks-2 does not lie exclusively in the bilateral realm anymore. Even the conventional patterns of energy imports may become threatened in the short- to mid-term. There are hardly any mercantilist arguments in favour of the Hungarian-Russian nexus left.

Outlook

Short-term reactions to the war are deeply constrained by the upcoming parliamentary elections on 3 April. Risk aversion featuring stability, control, a commitment to peace and staying away from the war are messages that serve to appeal to the Hungarian public – and any possibilities for change are subject to the outcome of the election. If PM Orban retains power – which currently seems to be the more likely scenario – any possible shift is still deemed to be a vague option.

Nonetheless, the war has already affected major building blocks of Fidesz’s communications. While anti-refugee rhetoric and ‘zero migrants within the country’ were key messages in the Government’s communications prior to the conflict, Hungary has opened its border to Ukrainians unhesitatingly. During three weeks, as of 13 March, Hungary has received 255 000 Ukrainians, likely exceeding the total number of migrants entering the country during the 2015 migration crisis. It also had to change the respective legislation overnight, and the Defence Minister even publicly expressed the need for humanitarian aid and shelter for refugees. In a similar fashion, the Government’s ‘low utility price’ stance and its communicated linkage to the Paks-2 project is under major stress. Currently, all residential natural gas consumers pay just a fragment (15-20 %) of import prices, creating a huge financial burden for state-owned utilities. While the future of pricing practices remains unclear, the Government’s communications and justification for a strong Hungarian-Russian nexus seems to be fundamentally shaken.

Orban’s Government could manage these sudden policy turnarounds without significant damage to its former reputation. Control over major segments of the public broadcast media, trained practices of ‘mass oblivescence’ and the swift reshaping of its communication enhance the Government’s ability to backpedal and drop inconvenient, outdated messages. The united opposition could consolidate its position on the Russo-Ukrainian war. While reinforcing its own anti-Russian and pro-western sentiments, the opposition identifies more with the western mainstream, but its efforts to convert the war into a devastating campaign topic for Fidesz do not seem to be changing existing trends.

In the longer run, the war may have some other lasting effects for Hungarian foreign policy. First, it turns Hungary into a rim state of a major conflict zone, addressing foreign and national security policy in a structural way. Orban’s various administrations have  had little to say about defence-related conflicts in the past. Second, the war has disrupted the relatively peaceful patterns in which PM Orban could and did get on during the last decade. Much of the policy boundaries between Russia and the EU/NATO have disappeared, so pursuing the former line regarding Ukraine would be foolish and extremely dangerous. Western strategic thresholds will be likely set to lower levels, making any continuation of former policies impossible. Third, past concessions and policy initiatives, most notably the Paks-2 project, turn from opportunities into liabilities as a result of the war. Fourth and last, it remains to be seen how western attitudes towards outliers in general will change as a result. Depending on the turn that German security and defence policy might take – along with the feasibility of  the European energy policy framework transforming – Hungary might come under direct, politicized, economic pressure from Berlin, its prime economic partner, that would not be easy to ignore. While it remains certain that Hungary would maintain its relations with China, Turkey and other non-western powers in an unamended way, the post-war European/transatlantic context may force some modifications of its behaviour.