Russian president Vladimir Putin visited Budapest on Tuesday. The visit was largely devoid of substance but made clear the Russian leader was not as isolated in Europe as most Western governments would have liked.
Hungary’s nationalist prime minister, Viktor Orbán, said his ambitions for the summit with Putin were modest. He assured European ambassadors that he would not try to mediate between Russia and the West over the standoff in Ukraine where the former supports a separatist uprising against the Western-backed administration in Kiev.
Rather, Orbán said he planned to negotiate a new long-term gas supply contract that would allow him to reduce energy bills.
“There is no guaranteed gas supply to Hungarian households after 2015. I need to solve this issue,” he said in a radio interview earlier this month.
Hungary relies on its former Soviet master for most of its oil and natural gas. Russia also loaned the country almost $30 billion last year to shore up its public finances and help pay for the construction of a nuclear power plant.
The new plant should cover about 40 percent of Hungary’s electricity needs. Russia pledged to cover up to 80 percent of the construction costs, equivalent to 11.5 percent of Hungary’s annual economic output.
Before last year’s parliamentary election, in which Orbán’s support dropped 8 percent, the premier forced energy companies to cut their rates, driving up consumer confidence and his party’s popularity but causing business confidence to fade.
Orbán shares Putin’s disdain of Western liberalism and supported the ill-fated Russian South Stream pipeline that was canceled under European pressure last year. He has also expressed reservations about the economic sanctions European countries imposed after Russia occupied and annexed the Crimean Peninsula from Ukraine. He might expect more favorable terms for oil and gas supplies in return even if falling petroleum prices worldwide should reduce Ukrainians’ utility bills anyway.
Hungarian living standards are a third lower than the European Union average. Since coming to power in 2010, Orbán has nationalized Hungary’s private pension scheme, introduced sectoral surtaxes on energy and telecommunications firms as well as supermarkets and weakened the independence of the judiciary. Constitutional reforms enacted in 2011 limited the supreme court’s powers and annulled all its previous rulings.
In a scathing 2013 report, the European Commission said Hungary’s business climate had “constantly deteriorated” since Orbán became prime minister, blaming his nationalist economic program and repeated changes in regulations. American rating agencies downgraded Hungary’s sovereign bonds to junk status, citing the Central European nation’s “erratic” and “unorthodox” economic program as well as concerns over the independence of the central bank. Orbán changed the rules so that he could personally appoint central bank board members.