C. Ioana*
On the occasion of the parliamentary elections of April 3, 2022, important not only for Hungary, but also for Romania and the European Union, LARICS started an extensive series, spread over several episodes, about the political and strategic realities of the neighboring country. We will try to understand the recent developments in Hungary, with a focus on the main characters and the team around them. In this issue we will present the file of the relationship between Budapest and Kyiv, filtered by the special relations of the Orban regime with Russia and China. The first part of this series can be read here, the second part here, the third here, the fourth here. The English version of this episode can be read HERE, and the Hungarian version HERE. (LARICS).
Careful observers of Hungarian politics, of Hungarian origin, labeled this country as “a ferry-type country” (lost between two shores – East-West / Endre Ady “Ismeretlen Korvin-kódex”) (here and here).
As early as 2014, foreign policy experts reported that Viktor Orbán had decided to enter into an agreement with Vladimir Putin, which had strengthened Hungary’s place in Russia’s economic sphere. In addition, they warned that Putin’s substantial loan for the expansion of the Paks nuclear power plant could be used by Russia as a lever against Hungary if needed.
However, although the “Orbán ferry” anchored in the port of Russia, it also receives money from Brussels.
At the same time, the Hungarian media reported that during the Ukrainian crisis (2014), Orbán maintained a low profile, respectively he made a helicopter visit to the Ukrainian-Hungarian border in Záhony, ensuring that the event is properly promoted by the government media, quickly analyzed several documents, contemplated the territory on the Ukrainian border, went to a hospital where the injured were being cared for and encouraged the border guards for their work. All this was spread on the social network Facebook, while the servile state press adopted a pro-Russian attitude calling the Kyiv protesters “terrorists“, all information having as source “Russia Today“.
In this context, Gordon Bajnai, former Prime Minister of Hungary, said bitterly (March 13, 2014) that if the Orbán government continues to move in the same direction, Hungary could become the westernmost successor state to the Soviet Union: “If the current Fidesz government remains after the elections of April 6, 2014, Hungary will become a successor state of the state, Orbánistan, with Felcsút as its capital”.
Gordon Bajnai, then president of the Co-PM Alliance, called the decision on the Paks 2 issue the worst symbol of the Orbán government’s failure, which is a Russian government loan worth 3,000 billion forints and caused the greatest damage to Hungary’s independence over the last 25 years (here and here).
Today, things are clear. As can be seen, in the aftermath of the war in Ukraine, “Hungary is seeing its 40-year-old (since the 1980s) dream of doubling the capacity of its Paks power plant and becoming the energy hub of the Eastern European Union collapse. Everything that the Hungarians built with the Russians for 40 years collapsed on the morning of February 24. “
It is clear that, without dollars and euros, “Russia will no longer give any credit to Hungary, and ROSATOM will no longer be allowed to build power plants in the European Union. Budapest is forced to look for another builder for the two new Paks reactors or to abandon the entire project. And it still owes 320 million euros to Moscow (it has already drawn the first money from the 10 billion euro loan)”.
Viktor Orban bet on a dead horse.
I. Záhony-Čop / Ciop border crossing point, from a regional and minority perspective
- Location
Záhony is a town in Szabolcs-Szatmár-Bereg County, located in northeastern Hungary, on the border with Ukraine (Subcarpathian Ukraine, Uzhgorod – the capital), on the southern bank of the Tisza River, north of the Great Hungarian Plain / Nagy Alföld, with a population of 4,353 inhabitants / 2011 and is twinned with the cities: Ciop / Ukraine, Čierna / Slovakia, Ware and Hertfordshire / England. The mayor of the town is László Helmeczi and he ran as an independent.
- Smuggling and corruption in full swing on the Ukrainian-Hungarian border: towards a “smuggling weapons road”?
In 2015, Frontex, the EU supervisory body that monitors controls at the Union’s external borders, reported (in the Eastern European Borders Quarterly / 2015) that smuggling cases had been detected on the border with Hungary. According to Frontex, Záhony is known as a hotbed of organized crime and smuggling, with goods coming mostly from Transcarpathian Ukraine and 96.6% of smuggling activity undetected, as border guards on both sides are involved in bribery in order to ignore smuggling, and Ukrainians and Hungarians have formed various smuggling groups that compete with each other.
In times of war, things get very complicated. We must emphasize and underline that, in the context of the current war in Ukraine, there is a very high risk of trafficking in weapons, ammunition and explosives.
Beware of this possible smuggling route!
- Hungarian financing in Subcarpathian Ukraine
Approximately 150,000 Hungarians live in western Ukraine, mainly in Subcarpathian Ukraine / Transcarpathia / Kárpátalja / Zakarpattia Oblast. The Hungarian issue has taken on a political dimension in recent years, with some Hungarians there opposing government regulations on the use of the Ukrainian language, especially in education. The National Security Service of Ukraine / SBU has recently launched investigations (2019-2021) into Hungarian cultural organizations, looking for clues to a separatist movement.
According to the Investigative Journalism for Europe / IJ4EU’s Investigation Support Scheme, the Orbán government has significantly increased funding for Hungarian communities abroad, not only in Ukraine but also in Slovakia, Romania, Croatia, Serbia and Slovenia..
- Orban’s sovereignty is … Chinese! The Záhony Project – a Hungarian government initiative in the service of a Beijing-controlled project
On December 11, 2009, government procurement sources announced the launch of the Záhony project, entitled “Gateway between Europe and Asia – Záhony: the mainland port”, noting that the Hungarian and EU governments are developing the Záhony region along the eastern border, through an investment of over 37.5 billion forints. The purpose of this complex economic development program was to stimulate trade in goods between Asia and Europe and to create an attractive economic environment for investors throughout the region. The region has one of the largest rail transshipment capacities along the EU’s eastern border.
On October 15, 2021, it was announced on the website of the Hungarian Government that one of the government’s objectives is for Hungary to have the most developed transport infrastructure in the region and to make the most of its geographical position.
The government communiqué included statements by Levente Magyar (Secretary of State for Relations with the Parliament, Hungarian Ministry of Foreign Affairs and Foreign Trade), given at the opening of the conference of the Association of Logistics Service Centers in Hungary / Magyarországi Logisztikai Szolgáltató / MLSZKSZ, according to which the country’s economic situation is good, the economy grew by 18% in the second quarter of 2021, thanks to logistics players and the construction of the Záhony motorway junction will soon begin. The Hungarian official stressed that it is appropriate to build the huge logistics capacity in Záhony, as this development has a geopolitical significance, namely “putting Záhony back on the world map”, connecting Europe and the greater Far East. In this context, it was also mentioned that one of the main objectives of Hungary would be to be able to deliver goods from Eastern Europe through Western Europe, arriving in Greek ports (here and here).
In fact, it is a single port, Piraeus, which today is only Greek in name, being de facto Chinese. So, if there is Chinese control over the port of Piraeus, who has effective control over investment in Zahony? The only reason for this zonal center to exist is for Chinese goods. What happens if the flow of goods is stopped at some point, for whatever reason? Does Orban or his government really control this foreign investment?! So, the idea is that the Zahony project is absolutely dependent on the flow of goods from the Chinese, therefore it deepens Hungary’s dependence on China.
The high-speed rail line, which is currently being developed, will also pass through the Visegrád / V4 Group countries (Poland, Hungary, the Czech Republic, Slovakia) and open up new perspectives in rail transport.
Currently, the Visegrad Group tends to turn into a V 2 + 2, due to the growing divergences between Poland – Hungary and Slovakia – Czech Republic. This possible separation was highlighted (04.01.2022) by the Czech Minister of EU Affairs, Mikuláš Bek: “Hungary and Poland are currently in a serious dispute with the rest of the EU, while the Czech Republic and Slovakia do not have this approach”, the new minister for the Czech daily Hospodářské Noviny said. For both Warsaw and Budapest, Visegrad cooperation has served as an important diplomatic tool at a time when the two capitals are increasingly isolated. The analysts’ profile concludes that the leaders of the four countries often participate in high-level meetings together and use the Visegrad format to try to project more influence in EU political debates than they would do alone. However, this alliance now seems shattered (here and here).
The project “The Development of the Railway Infrastructure in the Region of Zahony” benefited from a total budget of 88,832,400 euros, the EU Cohesion Fund contributing with 75,507,500 euros for the period 2007-2013.
- Sino-Hungarian consortium
Within the Central European Logistics and Industrial Zone / CELIZ program, on June 23, 2020, under the leadership of MÁV-REC Kft., a consortium called Záhony Logistics and Industrial Zone was set up, which includes the Hungarian company Záhony Port Zrt. and the Chinese company CECZ Central European Ltd (established in 2006, object of activity: handling of goods).
The aim of the consortiumis to prepare and implement an innovative logistics and freight transport hub, as part of the Chinese Government’s “Belt and Road” initiative.
The project involves technological and industrial development, which will have a significant impact on EU-China rail freight traffic and also on Sino-Hungarian economic cooperation.
On July 10, 2020, in the presence of the Chinese Ambassador to Hungary, Duan Jielong, the Secretary of State of the Ministry of Innovation and Technology, László György, presented the sponsorship agreement of the Záhony Logistics and Industrial Zone consortium represented by MÁV-REC Kft. , Róbert Homolya, General Manager of MÁV Ltd. and László Horváth, General Manager of LAC Holding, detailed the purpose of this consortium.
According to official statements, bilateral cooperation between the governments of Hungary and China is currently at an optimal level, and both countries have met targets to deepen the “One Belt One Road” initiative, which also provides a framework for promoting the Zone / CELIZ Central European Logistics and Industrial program.
CELIZ aims to modernize the railway infrastructure in Eastern Hungary and is supported by both the Hungarian and Chinese Governments. The Belt and Road Promotion Center of China’s National Development Commission has added it to its list of “priority cooperation projects”.
China Railway Signal & Communication Co.Ltd./CRSC will contribute to the implementation of the CELIZ project in the field of railway equipment, and MÁV-REC Kft. will conduct research to identify other opportunities in the region.
The Chinese company CRSC was founded in 1953 and has become a world-renowned player in the field of railway control and monitoring systems in recent decades. The company has been involved in a number of major investments in the development of China’s railways, such as the development of high-speed rail lines between Beijing and Tianjin, as well as Beijing and Shanghai. It also built 100 subway lines for more than 20 cities. In addition, CRSC has participated in several international missions in Asia and South America and has been an important partner in the construction of the Serbian section of the Budapest-Belgrade railway project. The latter project is not ready, the deadline has been extended to 2025. As stated in the article “From Budapest to Belgrade: a railway line increases Chinese influence in the Balkans”, it will take Hungary 979 years to pay the debt – Hungary’s part is worth 2 billion euros, and Serbia is 1.8 billion. Hungary is financing the cost of 85% of the project with a loan from … the Chinese. The costs of this loan are not known as the contract was secreted in 2020 for a period of 10 years with the possibility of extension…
- Orbán’s sovereignty is also … Russian! Záhony – Austrian-Russian-Hungarian intermodal terminal for Chinese goods, under Russian protection
In December 2021, a joint association agreement on China-Europe rail freight was signed, with which Záhony Logistics and Industrial Belt will start operations on China-Europe rail freight services.
Representatives of the Hungarian company CER Cargo Holding SE, the railway company RZDL Europe Kft. (founded in 2021, Budapest, object of activity: rail freight, subsidiary of the Russian company RZD Logistics / RZDL) and the Hungarian subsidiary of the Austrian group Austrian Rail Cargo Group – Rail Cargo Hungaria Zrt. signed (December 14, 2021) in Budapest a letter of intent to set up a joint company specializing in rail freight transport between China and Europe.
It should be noted, in passing, that the RZDL Europe Kft. Railway Company, which is affiliated with this project, is in fact a subsidiary of the Russian company RZD Logistics, which in turn is a subsidiary of Russian Railways. The rhetorical question we need to ask in this case as well is: How is Russia’s association with Hungary reconciled and will it be reconciled in the context of international sanctions? And another question: In the context of Hungary’s massive energy dependence on the Russian Federation, is Hungary’s dependence on Russia in rail transport now encouraged ?! All this under the auspices of the – sovereignist, how else? – regime of Viktor Orbán! …
At the signing ceremony on 14.12.2021, Hungarian Finance Minister Varga Mihály stressed that the establishment of the Záhony railway and freight hub is of strategic importance not only for Hungary but also for Europe, as it will link Eastern countries to the EU. With the development of the Budapest-Belgrade railway and the logistics center in Záhony, Hungary’s role will become crucial in managing East-West trade, the Hungarian official said.
The document was signed by: Laszlo Horvath – Chairman of the Board of CER Cargo Holding SE (Hungary), Clemens Foerst – General Manager of Rail Cargo Group (Austria) and Dmitri Murev – General Manager of JSC RZD Logistics (a subsidiary of JSC Railways Ruse).
According to Minister Varga Mihály, Hungarian exports to China increased by 24% in 2020 compared to 2019, while imports increased by 26%. China’s total investment in Hungary has exceeded $ 5 billion, and Chinese companies operating in Hungary have about 16,000 employees. At the same time, he stressed that Hungary’s most important partner in Asia is Kazakhstan, where exports in 2020 were 58% higher than a year earlier.
The Minister for Innovation and Technology, László Palkovics, declared that the development of the railways would be a priority in the coming years: “Climate requirements are also becoming increasingly important for transport, and emissions requirements cannot be met without a well-functioning rail network. In addition to infrastructure, rolling stock needs to be improved and cooperation is needed to ensure highly efficient transport”
In a statement, representatives of CER Cargo Holding announced that administrative and operational preparations for the establishment of the joint venture in the letter of intent are already underway and that this company is expected to start operations in the first half of 2022. The company will focus mainly on rail transport of Chinese goods imported into Europe and on export goods to markets in Asia and the Far East.
At the signing ceremony of this document, along with Varga Mihály, the following also participated: Vladimir Tokarev, Deputy Minister of Transport of the Russian Federation, Sergey Pavlov, Deputy General Manager of JSC Russian Railways and László Palkovics, Minister of Innovation and Technology of Hungary. They believed that in the context of a sustained increase in trade between China and Europe, the establishment of such a joint venture would create a competitive and reliable rail freight service for customers in China, the CIS and the EU.
According to representatives of the Russian company RDZL, this joint venture will provide logistics services for the shipment / coordination of shipments of goods from the Chinese provinces, through Russia and Hungary, to the countries of Southern Europe, the Balkan countries and vice versa.
The activity of the Russian Railways / Russian Railways holding company on the creation of the joint venture with Hungarian and Austrian partners is coordinated by the Russian Ministry of Transport and is one of the elements of the foreign business strategy of the Russian Railways holding company.
László Palkovics, the government commissioner for the Economic Development Zone of North-East Hungary, said: “Hungary can become the center of freight, logistics and distribution of Central Europe, according to our plans, between Europe and Asia. Due to the increased capacity for rail transport from Záhony, from China to the mainland, it is worthwhile to create an inland transport route to the Győr-Sopron area, bypassing the capital. ”
Another Orbán regime bet on a dead horse! Let’s not forget that Russian Railways has been on the list of sanctions adopted by both the EU and the USA since the end of February!
- The first China-Hungary connecting train started operating by Rail Cargo Group in March 2020
Goods from China to Central and South-Eastern Europe are mainly transported by sea through the port of Piraeus and the Adriatic ports.
The transport launched by Rail Cargo Group on the route Jinan – Budapest, creates an attractive alternative, on the ecological railway, all with a transit time of 12-14 days.
The train departs directly from Jinan, the capital of Shandong Province, to the RCG BILK terminal (Budapest), via Mongolia and the Záhony-Eperjeske transshipment station on the Ukraine-Hungary border. It is not only one of the important TransNET nodes, but also a central hub for conventional and intermodal transport to and from Central and South-Eastern Europe.
On the official website of the Hungarian company MÁV-REC Kft. it was announced (November 28, 2021) that the 100th container train, operated by Rail Cargo Operator, indicates that the CELIZ project is in the care of experts and is moving in the direction correct (here and here).
- Logistics and industrial investments for the development of the Záhony region
The Hungarian government has allocated from the state budget the net amount of 3,997,950,000 forints (10,669,227.04 euros), necessary for the preparatory phase according to the following program:
- 2,498,975,000 forints (6,668,950.75 euros) – in 2020;
- 1,498,975,000 forints (4,000,276.29 euros) – in 2021.
Within the project, investments will be made in infrastructure, technology and industrial development in the Záhony catchment area, with the participation of Hungarian and Chinese actors.
Investments will focus on two main areas:
- development of the Záhony transshipment area along the border;
- industrial-technological development on the territory of Eastern Hungary, by creating a modern industrial park that would provide a construction favorable to the production activities of companies established in China.
Objectives of the development activities of the Záhony region:
- modernization and expansion of the railway network;
- digitization and development of a unified IT system;
- commissioning of shunting locomotives equipped with modern remote control, which are even able to operate electrically (hybrid) inside the hall;
- commissioning of highly automated loading and unloading equipment;
- the development of a targeted infrastructure capable of managing the transshipment needs of containers at several levels;
- the establishment of a modern educational center capable of transferring modern knowledge;
- construction of an autonomous test railway.
László Horváth, President and CEO of the Hungarian company LAC Holding Zrt., Stated that the development of this region will be implemented through a collaboration between LAC Holding Zrt. (established in 1996, Budapest, object of activity: accounting and auditing activities; tax consultancy), MÁV-REC Kft. and a Chinese partner company. László Horváth estimated (2020) the value of the total investment at about 100 billion forints (266,867,445.53 euros), and 30 companies have already taken an interest in the industrial park being built in the area.
(to be continued…)
* C. Ioana is a graduate of the Master of Security Studies at the University of Bucharest and a LARICS expert on Hungarian issues.