Hungary goes to Russia with a bottle of vodka

A few people asked me what I thought of Hungary’s Prime Minister Orban’s visit to Russia. To be honest, I was working away under a tight deadline and didn’t have time to follow it. But now as I’ve been trying to catch up on it, probably the best view of the meeting came from one of Hungary’s opposition politicians.

Prime Minister Viktor Orbán‘s recent visit to Russia was a flop, Socialist Party deputy chairman László Kovács told reporters on Thursday. Kovács said the visit did not result in any agreement and it shows defects in preparations.

Apparently, what the Hungarians showed up with to exchange for Surgutneftegaz’s 21% stake in MOL was a bottle of vodka. Which, if you are Russian, you might have some already handy. Actually what they were offering was,

the option to build a $4 billion commerce hub in Hungary in exchange for Surgutneftegaz’s stake and also offer Russian companies the chance to take part in the expansion of the Paks nuclear plant and may sell stakes in natural gas storage facilities to Russia. (BBJ)

Now the Russians are probably already in the forefront to build the Paks expansion, and with the current unpredictability of Hungarian energy and tax policy (demonstrated through further ratings downgrades), there are probably even fewer companies interested now. And in regards to the ‘commerce hub’ which is actually a rail hub it would equally benefit Hungary. So besides the gas storage facility, which is filled with Russian gas, the Russians wouldn’t gain much by participating in this swap.

I think in this situation they would have been better off offering nothing and seeking instead of finding some common ground to build on – which is how they tried to spin it after no agreement was reached. As I have already described how the Surgutneftegaz holding in MOL is going nowhere fast. The Russians are not in a strong position either – unless they Hungarians put them there, which they are. Apparently, it was remarked according to Magyar Hirlap, that

in Orbán, Russia felt “we have someone with whom we can negotiate”, citing an unnamed diplomatic source.

It is always good to negotiate with someone that offers you a stronger negotiating position than you have. With Orban’s negative attitude towards Western institutions, he just may view Russia in a too favorable light and a viable partner for Hungary. Particularly when the criticism from western partners mount against Hungarian economic and social policy. If the description put forth by the head of the Hungarian Monetary council is correct, that only Venezuela has gotten rid of institutions (specifically the monetary council) then Hungary in the future may draw on this budding friendship for further stability.