The outcome of the elections in Hungary, with the ousting of incumbent prime minister Viktor Orbán, has been hailed as a defeat for Vladimir Putin. It is certainly true that Moscow will miss Orbán’s obstructive presence within the European Union, but the real implications are far more subtle.
One key question is whether Russia will lose its informal backdoor into the Western financial system. Hungarian banks have been playing this role, with Orbán turning a blind eye. Could Orbán’s successor change this, not least to demonstrate that he is different to the man he follows?
Péter Magyar, the likely new prime minister, used to be a member of Orbán’s Fidesz party and is a conservative and nationalist – he once criticised Hungary’s restrictive immigration policies as too liberal.
Although committed to a much more positive relationship with Brussels, including lifting Orbán’s veto on a £78bn support package for Ukraine and increasing defence spending, Magyar has already spoken in favour of negotiations with Russia and against allowing Ukraine accelerated entry into the EU.
Many Hungarians voted for Magyar’s Tisza party precisely because they felt it offered “Orbánism without Orbán” rather than a dramatic policy shift, and Magyar will be constrained by the country’s practical situation as well as an electorate who, in many ways, were simply bored of Orbán after 16 years in power and alienated by the corruption around him.
As it is, Hungary is likely to remain dependent on Russian oil and gas for the foreseeable future, limiting any chance of it pushing back strongly against Moscow, even if it wants to.
Budapest is locked into contracts to buy gas from Russia until 2036, currently to the value of around £1.9bn a year, and these are so-called “take or pay” deals that commit the Hungarians to paying even if they don’t take the gas. The new government could cancel some deals worth around £750m a year, but it would have to buy more expensive alternatives at a time when the economy is shaky.
Orbán managed to secure a carve-out from the EU’s 2022 ban on the import or transit of Russian oil, and while Magyar may be willing to go along with plans to fall in line with the rest of the bloc next year, the impact will affect Budapest more than Moscow.
This is a trade in theory worth £4.5bn a year for Russia, but it depends on the Druzhba pipeline flowing through Ukraine, which was closed in January. Moscow blames Ukrainian sabotage, Kyiv a Russian strike. It is unlikely to be reopened soon, making any Russian losses largely theoretical.
A more complex question is the future of the Paks 2 nuclear power project currently being built by Russia’s Rosatom agency, much to the chagrin of Hungary’s neighbours, who wonder how many of the “engineers” involved are spies. However, if Magyar cancels it, Hungary will have to repay a loan of almost £9bn that Moscow provided. Hungary also needs the electricity Paks 2 is due to produce.
While there’s no doubt that Putin would have preferred an Orbán victory, Russia has been surprisingly sanguine about his defeat.
Moscow may lose some of its energy revenues, but not a serious amount, and while Magyar will be more amenable to Brussels, the Kremlin had always factored in that, one way or another, the European Commission would likely find a way to pass the Ukraine support passage, even over Orbán’s objections.
That doesn’t mean the election isn’t a blow to Putin, however. The pugnacious Orbán was a continual irritant and distraction for Europe, complicating and delaying efforts to support Ukraine. More to the point, he turned a blind eye to Hungarian banks acting as a channel for Moscow’s financial activities abroad, bypassing sanctions and making it easier for Russian companies to continue to operate in the West.
While technically a matter for the independent Hungarian National Bank, rather than the new government, in practice this is one area that Magyar could bring pressure to bear. But like the efforts to wean the country off Russian energy supplies, this would also mean short-term costs for Hungary.
Rightly or wrongly, Moscow does not see this as some watershed defeat of “illiberal democracy” in the West. Russian foreign policy commentator Fyodor Lukyanov called it the outcome of “Orbán fatigue” but also a triumph of Hungarian self-interest, with the implication that Budapest will come to realise that this also means continued co-operation with Russia.
It is true that Magyar is likely to be much more amenable to Brussels, not least as part of efforts to unblock around £26bn in EU funding that had been frozen as a response to Orbán’s democratic backsliding. Yet, he is still ultimately a Hungarian nationalist, and many of his voters are genuinely concerned about Brussels interfering in domestic policy, about Ukraine’s treatment of its ethnic Hungarian minority, and above all about an economy that only grew by 0.3 per cent last year and is saddled with the region’s highest levels of public debt.
Putin will expect Magyar to speak in different tones to Orbán, but will strongly believe that the realities of Hungary’s situation will remove the threat of any dramatic changes in how the country acts towards Russia.
