VIENNEAST COMPASS: Hungary punching above its weight in regional SEE politics

VIENNEAST COMPASS: Hungary punching above its weight in regional SEE politics
The incoming president of the European Commission, Ursula von der Leyen, took an unexpected decision and nominated Hungarian Laszlo Trocsanyi as commissioner for regional enlargement
By Marcus How of ViennEast September 23, 2019

The signals were mixed, to say the least. After having pledged to implement an EU-wide mechanism for monitoring the rule of law, the incoming president of the European Commission, Ursula von der Leyen, took an unexpected decision: she nominated Hungarian Laszlo Trocsanyi as commissioner for regional enlargement.

Trocsanyi is an irregular choice given his profile. He served as the Hungarian justice minister between 2014-2019, during which time he was instrumental in the development of legislation that further undermined judicial independence and the rule of law in Hungary. Given that Trocsanyi would spearhead the EU’s engagement with aspiring member states, all of which will need to conduct institutional reforms, the precedent set is muddled.

As such, the European Parliament will very likely either reject or disrupt Trocsanyi’s candidacy during his hearing, which is due for 1 October. Nonetheless, Prime Minister Viktor Orban celebrated the announcement, adding that Trocsanyi would be his proxy in the Commission; a noteworthy statement, since commissioners are not supposed to represent the interests of their respective member states. Further enlargement is desirable, Orban remarked, because the admission of Western Balkan states such as Serbia, North Macedonia and Albania into EU will strengthen the bloc’s defences against migrant inflows.

A confident voice on a quiet stage

Orban’s comments reflect the extent to which Hungarian policy in its neighbourhood has changed since the re-election of Fidesz in 2010. Initially, Orban doubled down on previous policy, championing in particular the empowerment of ethnic Hungarian communities in Serbia, Romania, Slovakia and Ukraine. The purpose of this post-Trianon hangover was narrow: granting automatic citizenship and generous funding to ethnic Hungarians secured Fidesz a constituency that is totally loyal.

Since then, Hungary has been able to punch above its weight in its neighbourhood to the extent that it is developing its own geopolitical strategy. Where before the Hungarian voice expressed itself in concert with its Visegrad partners, Fidesz has now effectively hijacked the format for its own ends – and is projecting its influence into the Western Balkans with increasing depth.

This has been helped by the fact that the US and EU have lost interest in the Western Balkans. With the exception of the North Macedonia name agreement, the Juncker commission largely took its eye off the ball. Austria, another influential actor in the region, tends to pursue narrow economic interests while towing the EU line. Elsewhere, doubts increased: the French and Dutch governments have held up the launch of EU accession negotiations with North Macedonia and Albania, citing concerns over the rule of law – and are likely to do so again. The goal is therefore wide open for Hungary, which has flown below the radar in spreading its influence.

An unmissable opportunity

Economically, this is logical for Hungary given the considerable benefits enlargement will provide. Trade connectivity will broaden the commercial opportunities for Hungarian capital, which is increasingly embedded in the region. Its flagship oil company, MOL, and its largest commercial bank, OTP, have a significant presence. The low-budget airline, WizzAir, now provides direct flights to most major airports.

Infrastructure development will also serve the Hungarian domestic market, while allowing for deeper commercial penetration of the Western Balkans. Hungary was already banking on the development of improved railway links, in particular the construction of a second railway line to Slovenia’s Port of Koper and a high-speed connection between Budapest and Belgrade – although both projects have admittedly been poor in their execution, resulting in a loss of interest on the part of the Hungarian government. Nevertheless, the processes towards enlargement will create a space for other such projects, such as the modernisation of the Tirana-Podgorica-Belgrade railway, and the construction of direct highways from Budapest to Sarajevo and Tirana.

Yet the Orban government and its affiliated oligarchs have a deeper agenda, which seeks to leverage Hungarian influence within the region and, by extension, the EU, while reaping the low-hanging fruits that deepening commercial connectivity will provide.

Consolidating a narrative

Seizing the enlargement agenda secures Orban even greater influence with his allies in the region. By increasing interdependency between Hungary and Western Balkan states, while also lobbying for their interests on the EU level, Orban is broadening his nationalist-conservative bloc. The “illiberal” tendency is already observable across the region: presidents Aleksandar Vucic and Milo Dukanovic remain unchallenged in Serbia and Montenegro, respectively, while the right-wing opposition in North Macedonia and Albania remain competitive despite their current dysfunction.

Nor is the tendency confined to the Western Balkans. Within the EU’s Southeastern space, the Croatian Democratic Union (HDZ) may have rebranded itself as a moderate European party but its latent nationalism keeps it a prospective ally for Hungary. Orban also maintains close ties with Slovenian former prime minister Janez Jansa, whose populist right-wing Slovenian Democratic Party (SDS) is currently locked out of power by a centre-left coalition despite being the largest single party in the country.

The Hungarian state and its affiliated oligarchs are keenly aware of, and have sought to strengthen, this tendency. The more leverage they have in the region, the greater their leverage over the EU. So far, Hungarian interests have acted through unofficial if not illicit channels. In November 2018, the leader of North Macedonia’s opposition VMRO-DPMNE party and former prime minister, Nikola Gruevski, sprung from prison, where he was serving a two-year sentence for corruption. Escorted by Hungarian diplomatic vehicles, Gruevski fled to Budapest, where he filed for political asylum and has remained ever since despite the issuance of an international arrest warrant.

State-sponsored oligarchic interests have also sought to expand into the media sector in the region. In 2018, two former executives from the Hungarian public broadcaster set up companies that subsequently acquired large or controlling stakes in nine media outlets in Slovenia and North Macedonia, respectively. All of these outlets support the nationalist right-wing in both countries. These acquisitions are still isolated, but they do serve as indicators for a possible expansion of the Hungarian media model into the rest of the region, where the information environment is already of poor quality.

A beautiful goal

More generally, the expansion of Hungarian influence in the region provides an opportunity for Orban and his inner circle to export their business model and capitalise on new markets. A staging post in this regard is football, which is the burning passion of Orban and an informal forum in which strategic decisions are made and patronage afforded.

Hungarian sponsorship of football has already left a footprint in the region. Since 2013, the Hungarian state has channelled some €49.5mn to clubs and associations controlled by ethnic Hungarian businessmen in Serbia, Romania and Slovakia. Private acquisitions have also occurred: in 2016, Lorenc Meszaros – Orban’s childhood friend and Hungary’s wealthiest businessperson – purchased Croatia’s NJ Osijek football club, for which he began the construction of a football stadium 18 months later.

The export of Fidesz-linked capital is not only confined to football: since April 2018, Elios, a company then partially owned by Orban’s son-in-law, Istvan Tiborcz, repeatedly secured major public contracts to install street lighting in various municipalities in Serbia – notwithstanding the fact that the European Anti-Fraud Office (OLAF) suspected Elios of the fraudulent appropriation of EU funds in Hungary.

Elsewhere, OTP Bank has bought up assets in the region over the last year, acquiring most of Societe Generale’s assets in Serbia, Croatia, North Macedonia, Montenegro, Albania and Bulgaria. Subsidiaries owned by Austrian banks are currently being eyed, such as Raiffeisen and Addiko Bank’s units, the latter of which was the spinoff of the notorious Hypo-Alpe-Adria. French and Austrian banks were early movers in the region, with the latter in particular reinforcing its financial backbone. The Hungarian banking sector will gain significant influence indeed if it can build a similar network.

The Orban government is never far behind its oligarchs. According to Croatian media, in August 2019, Orban visited the CEO of OTP Bank, Sandor Csanyi – a powerful tycoon with whom he has good relations – on a private island in the Adriatic leased by the bank. One month later, the bank held its board meeting at a football stadium in Montenegro. Orban was in attendance, despite the trip not having been organised by the ambassador. There can be no doubt that the Hungarian state has given its blessing to the international expansion of Hungarian domestic capital.

Greater Hungarian limits

Regardless, Hungary remains a supporting player in the region as opposed to a leading one, not least because it simply does not have the financial resources. The EU retains clout despite its distance, which is precisely why Orban has targeted the regional enlargement brief. Meanwhile, China has secured considerable leverage in the Western Balkans with its near matching of EU funding levels, even if its Belt and Road Initiative projects have underwhelmed despite the initial fanfare. The Russian wildcard is also never far away.

Therefore, it would exaggerate the situation to speak of a ‘Magyar wave’ in the region: Hungarian expansion remains a collection of tentative indicators. Yet in a region where the balance of interests is so delicate, nothing can be taken for granted. The emergence of Hungary as a serious player will further muddy its outlook, as the Orban government plays all sides – while the Fidesz public-private nexus quietly accrues greater influence and wealth.

Opinion

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