C. Ioana*

On 30.12.2021, Szijjártó Péter, Hungary’s Minister of Foreign Affairs and Foreign Trade, received the “Order of Friendship” in Moscow from his Russian counterpart Sergei Lavrov for his work on developing Russian-Hungarian ties. It is the highest award a non-Russian can receive.

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 has started a wide-ranging, multi-episode series on the political and strategic realities in the neighbouring country. We will try to unravel the recent developments in Hungary, focusing on the main characters and the team around them. In this issue, we will complete the dossier of the Budapest-Moscow relationship by evoking other dimensions of this deepening collaboration, beyond those covered so far in our series. The first part of this series can be read here, the second part here, the third here, the fourth here, the fifth here, the sixth here, the seventh here. The English version of this episode can be read HERE and the Hungarian version HERE. (LARICS).

  1. Russian involvement in Hungary’s financial system
  2. International Investment Bank of Russia/ International Investment Bank

On 15.03.2019, Hungarian MEP István Ujhelyi (from Magyar Szocialista Párt/MSZP) asked the European Commission a series of questions about the move of the International Investment Bank of Russia/IIB headquarters from Moscow to Budapest. The Hungarian official justified the request by pointing out a number of issues concerning the IIB with security implications:

  • According to the Hungarian Government proposal, the IIB will be fully exempt from all inspections by financial supervisory authorities, official registration, reporting standards, payment of duties and taxes, export-import restrictions and all legal proceedings in the Hungarian courts;
  • the Hungarian authorities may enter the IIB premises only with the express consent of the Bank;
  • Bank staff enjoy full diplomatic immunity, and the IIB’s “guests” can enter the country without proper screening;
  • there is a consensus among security experts that Russia will use the bank as a cover for Russian intelligence officials – apparently employees of the bank – to enter the EU and operate under the protection of immunity;
  • Nikolai Kosov, the father of the Chairman of the Board of Directors of the IIB, was head of the KGB office in Budapest until 1991, as long as Soviet troops were present in Hungary.

In this context, MEP István Ujhelyi called for the following answers from the European Commission:

  • whether they are aware of the planned relocation of the bank to Budapest? if so, what guarantees does it expect from Budapest to ensure that the bank’s relocation does not pose a security risk to the EU?
  • whether they are aware of other EU financial institutions where IIB enjoy similar privileges?
  • whether it will investigate the matter raised, paying particular attention to the possible security implications of the bank’s relocation to Budapest?

It should be noted in this context that Romania, the Czech Republic and Slovakia have exited as a group from the ownership of the IIB.

  • Russian banking giant VTB

In June 2018, international media reported that Russia’s VTB Bank was planning to create a joint entity with Chinese giant Alibaba. VTB has expressed interest in creating a digital platform to keep pace with Russia’s state-owned SberBank, which dominates the sector. For China’s Alibaba, a joint venture with the Russian bank could be a way for the company to avoid a tax on cross-border trade that would be prepared by the government to boost competitiveness, according to experts.

Hungarian media have highlighted that VTB President Andrey Kostin regularly reports to Russian President Vladimir Putin and is a long-time friend of Nikolay Kosov, the president of the IIB.

VTB is also one of the Russian companies that have been targeted by the sanctions that the US and EU have introduced in relation to Russia’s aggression in Ukraine and there are indications that VTB is involved in some of the IIB transactions.

At the same time, VTB has been involved in the Panama Papers scandal. Documents uncovered in connection with the scandal showed that people close to Vladimir Putin moved billions of dollars through shell companies and, according to an International Consortium of Investigative Journalists/ICIJ article, a Cyprus bank backed by VTB played a major role in the transactions.

International sources have also revealed (2017) that Russia funded Facebook and Twitter through a financial arm of the giant Gazprom and the state-owned bank VTB, according to the Paradise Papers. At the same time, the documents show that VTB bank invested a sum of $191 million in Twitter in 2011.

VTB chairman Andrey Kostin is a former spy and has been decorated several times by Russian President Vladimir Putin. The investments in Twitter and Facebook were made through a Russian tech tycoon, Yuri Milner, who also owns a stake in a company jointly owned with Kushner, Donald Trump’s son-in-law and former White House senior adviser. Also, worth mentioning here are the allegations that circulated in the American press and not only that Donald Trump managed to win the US elections with the help of Twitter… financed by VTB.

  • SberBank Magyarorszag Zrt – Russian subsidiary

SberBank Magyarorszag Zrt. is a subsidiary of Sberbank Europe Group, a Vienna-based group owned by Sberbank of Russia.

From the FinCEN Files (which came into the possession of investigative journalists of the International Consortium of Investigative Journalists/ICIJ, and were published on 20.09.2020), it appears that 4 Hungarian banks were involved in an international money laundering scandal. According to the documents, there were suspicious money transfers from Tanzania via India to Russia from Hungarian accounts. In the context, SberBank Magyarorszag Zrt. and Erste were each fined 19 million forints for deficiencies in their money laundering prevention supervisory practices. The reports showed that more than 200,000 suspicious financial transactions, valued at more than $2 trillion, took place between 1999 and 2017 at several global financial institutions. The suspicious transactions were carried out through: the Zurich branch of Habib Bank, Uralsib Bank, Sberbank in Russia, Ras National Bank in the United Arab Emirates and Raiffeisenbank in Romania.

  1. Government officials in the service of Moscow

Peter Szijjártó is officially a friend of Russia.

On 30.12.2021, Szijjártó Péter, Hungary’s Minister of Foreign Affairs and Foreign Trade, received the “Order of Friendship” in Moscow from his Russian counterpart, Sergei Lavrov, for his work on developing Russian-Hungarian ties. Founded in 1994, the Order of Friendship is awarded to foreign citizens by the President of the Russian Federation on the basis of their achievements in mutual cooperation between nations.

Szijjártó Péter’s frequent visits to Russia, as shown in the image gallery of the Hungarian Embassy in Moscow:

Szijjártó Péter’s most recent visits to Moscow:

  • 22.01.2021 – meeting with Russian counterpart Sergei Lavrov in Moscow, where he said that “Hungary has bought two million doses of coronavirus vaccine from Russia to vaccinate one million people;
  • 13.10.2021 – participation in the Russian Energy Week, talks with Deputy Energy Ministers Alexander Zakana (from Russia) and Zorana Mikhailovich (from Serbia), Russian Sports Minister Oleg Matyicin and Russian Health Minister Mikhail Murasko, with whom he agreed that Hungary will receive the technology to produce the Russian Sputnik V vaccine in the near future. According to the Hungarian official, according to the advanced negotiations, the Russian vaccine could be produced in Hungary from the end of 2022;
  • 31.01.2022 – meeting in Moscow with counterpart Sergei Lavrov, energy and economic issues were the topics of discussion: possible extension of the Russian-Hungarian long-term gas purchase agreement; expansion of the Paks nuclear power plant; food, space issues, cooperation in aviation and rail transport, etc.

Bearing in mind that Minister Szijjártó Péter is, as I have said before in this series, also head of the secret service, the fundamental question that must urgently be put to Bucharest, Brussels or Washington is this: in what capacity does Mr Szijjártó Péter go so often and meet with Moscow officials?

As foreign minister or as head of the secret service?

(to be continued)

*C. Ioana is a graduate of the Master in Security Studies of the University of Bucharest and a LARICS expert on Hungarian issues.