Thursday

7th Jul 2022

Opinion

Orbán's overtures to Moscow are distasteful and detrimental

  • Hungarian prime minister Viktor Orbán (l) with Russian president Vladimir Putin, prior to the invasion of Ukraine (Photo: Viktor Orban Facebook page)
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Hungarian prime minister Viktor Orbán's overtures to Moscow and Beijing are as distasteful as they are detrimental to Hungary's national interest. The most recent case in point? Hungary's veto of the proposed embargo on the EU's imports of Russian oil.

What makes the current clash stand out is the conspicuously muted reaction of the rest of the EU.

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On Hungarian television, Orbán's chief propagandist Zsolt Bayer even suggested that, while lambasting Budapest, German officials are hoping Hungary does indeed stick with its veto since permanently higher petrol prices would prove too much of a political liability, potentially blowing up "the whole rotten EU."

Of course, this is not the first time that Orbán is threatening to derail a policy on which there appears to be wide agreement across the bloc. In the past, however, Orbán's initial salvo typically led to begrudging negotiations and a compromise claimed by both sides as a victory.

Yet, the window for reaching such a compromise is small and it will probably close for good with the upcoming European Council next week (30-31 May). In principle, it is easy to imagine a combination of carve-outs and side-payments that would enable Hungary's oil refining monopolist, MOL, to modify its infrastructure to process other types of oil than those coming from Russia.

Hungary has been even offered, quite generously, until 2024 to make the needed adjustments. The price tag requested by the Hungarian government to make needed changes — of the order of €15-18 billion — was, of course, completely unreasonable.

Complacency is misplaced, whether it takes the form of expecting that, like in the past, Orbán will be bribed into acquiescing at the last moment or resigned to the possibility of no embargo.

The remaining EU members can implement the embargo on their own and should threaten do so, effectively cutting Hungary off any assistance provided as part of moving collectively from Russian oil.

A partial embargo at EU-26 could be implemented simply by coordinated national measures or within the confines of 'enhanced cooperation', an institution created by the Lisbon Treaty used by coalition of member states to pursue policies that are not shared across the EU as a whole.

There are complicating factors, to be sure.

Could oil products, originating in Russia and processed in Hungarian refineries, be legally excluded from the EU's single market? Yet, if other EU governments feel strongly about the need for an oil embargo — and they should — they can move ahead and let legal challenges play out in courts, meanwhile bleeding the Russian economy of hundreds of billions of euros.

For all the Western self-congratulation over sanctions, the sad truth is that the existing measures have not been nearly as destructive as one would have hoped. If past is any guide, their effect on the Russia's economic performance is likely to dissipate still as economic actors adjust and find new ways of doing business.

Russia — hit, but not hurt

In the first quarter of 2022, Russia's economy managed to grow at 3.5 percent and S&P expects a recession of 8.5 percent this year. That is a significant decline. Yet, during the eurozone crisis Greece endured a similarly sized contraction for four consecutive years, leaving a large social and human toll yet not quite destroying the legitimacy of its governing institutions.

Inflation in Russia is high, almost hitting 18 percent in April, but both the financial sector, public finances, and the rouble appear stabilised, at least for now.

The reason is simple.

Notwithstanding the largely symbolic US embargo on Russian oil and the EU's sincere efforts to diversify its energy mix away from Russian sources, Western sanctions have largely spared Russia's oil and gas sector.

A real, durable decline in demand for Russian oil, in contrast, would have far more debilitating consequences.

Once Russian storage capacities are full, temporarily halting production, particularly of crude oil, risks shutting oil wells down for good, especially without access to Western technology — thus permanently reducing Russia's oil output.

If the West's aim is to inflict maximum damage on Russia's economy and its ability to threaten its neighbours, that would be a welcome development.

The fact that the EU and other Western allies are not pursuing this goal single-mindedly, and over the heads of the likes of Orbán, suggests that the accusations made by Bayer may not be completely unfounded.

For one, some German refineries would also suffer if they were cut off from Russian oil. The flipside of reducing Russia's oil supply permanently, furthermore, would be an increase in prices for final consumers, carrying obvious downside risks for elected politicians.

Secondly, some Western European politicians are reviving the chimera of a negotiated settlement that would bring the war to the end without the need of further escalatory pressure in the form of oil sanctions.

None of this makes the current, half-hearted approach towards sanctioning Russia look any better — nor does it shed any favourable light on the cravenness of Hungary's current government.

It does, however, suggest that Europe's challenge of confronting Russia effectively involves far more than just putting Orbán and his ilk in their place.

Author bio

Dalibor Rohac is a senior fellow at the American Enterprise Institute in Washington DC and a research associate at the Martens Centre in Brussels.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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