Balazs Horvathy Adrienn Nyircsák
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- Hungary’s foreign trade and energy sectors are deeply affected by the unfolding “sanctions war” between the European Union and Russia. Russia’s counter-action which places a ban on food import from the EU constitutes a considerable hindrance to the realization of mid-term sectoral strategic objectives regarding the export of Hungarian fruits and vegetables to the region.
- Hungary has reacted to the unfavourable situation by issuing state measures to support producers. The government has also repeatedly expressed its determination to pursue its economic policy goals despite the restrictive environment.
- The Hungarian government has opted for intensifying bilateral relations with Russia: trade negotiations aim to obtain assurance to maintain Hungary in its previous trading positions, while ongoing plans to continue the South Stream pipeline project despite the suspension of all related activities at EU level reveal intentions to secure Hungary’s gas supply.
- The pursuit of national (economic) interest appears as an explicit goal for the Hungarian government which is to be attained over all other political considerations. The complete disregard for objectives behind the EU sanctions raises the question whether the Hungarian strategy challenges fundamental principles of loyalty and solidarity enshrined in the Treaties.
The escalation of the crisis in Ukraine reached a tipping point in March 2014, when the annexation of Crimea by the Russian Federation, following a referendum widely deemed illegitimate, triggered a concerted response from the EU in the form of a series of restrictive measures labelled “economic sanctions”. After the evaluation of the legal and political framework of the EU sanctions and the counter-measures by Russia presented in the first part of our analysis, we now turn to the discussion of the repercussions of the sanctions on the national level and the political expression of the perceived clash between Union and national interests.
Direct effects of the Russian counter-sanctions on the Hungarian economy
Hungary is among the EU member states that are the most gravely affected by the trade restrictions. Russia is Hungary’s most important trading partner outside the EU and it is also the country’s chief supplier of gas and oil. These material dependencies place Hungary in a vulnerable position in times of political turmoil between Russia and Europe. Therefore Hungary has clearly identifiable economic interest in maintaining good partnership with Russia despite the restrictive trading environment. The Russian counter-measure which places a ban on the import of foodstuff from the EU constitute a serious hindrance to the long-term sectoral strategy of market expansion in the region, which aims at increasing the export volume of fruits and vegetables to Russia in order to reach 30% of the total export by 2020. Apple producers are among the most affected: dealing with surplus is a problem shared by other EU member states as well, such as Poland (the Polish government has recently proposed at the European Commission to take Russia to the WTO Dispute Settlement Body, implying that the food ban is in violation of WTO law). Hungary has so far opted for three solutions that could potentially mitigate the negative effects of the ban: launching a promotion programme which compensates farmers and supports apple consumption (independently from CAP); increasing the share of processed food in export (as restrictions only apply to fresh or frozen produce); and finally, the initiation of bilateral negotiations with Russia to secure Hungary’s trading positions in agriculture.
The last step represents a move beyond simple indemnification, as it signals the attempt to carry an autonomous foreign trade policy outside the common European framework which can be regarded as potentially countervailing European efforts to freeze ongoing cooperation programmes and other diplomatic activities with Russia. The same phenomenon can be observed with regard to energy policy. In an effort to secure steady gas supply, the Hungarian government has resumed negotiations with Gazprom, the Russian state-owned energy giant, about the construction of the South Stream pipeline, despite the fact that the European Commission called on Member States to halt the project due to concerns over “ownership unbundling” (the problem being that Russia would be both the owner of the pipeline and the supplier of gas) which has been pronounced in breach of EU law; and that Bulgaria has been pressured into suspending the construction process.
Pursuit of economic interests emerging as the prime national interest: a challenge to the principle of loyalty?
Indeed it seems that the Hungarian government is determined to protect its immediate economic interests even if this means overriding broader political goals of punitive diplomacy and in certain cases, risking the violation of Treaty provisions. While the mitigation of negative effects on foreign trade resulting from the restrictions is considered a reasonable policy objective within the context of EU law, it is only legitimate as long as the instruments used to achieve it do not interfere with the system of competences. In other words, any measure is acceptable which remains in the realm of member state competence. In this regard, bilateral trade negotiations between Russia and Hungary which aim at obtaining guarantees for differential treatment regarding import bans, however meagre they may be, are in clear violation of the Union’s exclusive competence to negotiate on this matter. However, the question gets more complex when it comes to bilateral negotiations on energy supplies. The suspension of energy talks with Russia and the abandon of the South Stream project fall under the CFSP domain, which is largely determined by high politics as the Treaty framework is elusive. While member states conserve the right to take measures in order to assure their energy supplies (Art. 194 TFEU), the facts that the European Commission has found earlier plans of the pipeline to be incompatible with the EU’s “third energy package”, and has decided to suspend the process, makes the decision of the Hungarian government susceptible to being interpreted as counterproductive vis-à-vis European foreign affairs positions. It even suggests the possibility of a deliberate action to undermine common European interests.
As a political message, the intensification of bilateral relations with Russia fits very well within the overall foreign policy strategy of the Hungarian government, according to which the current crisis should be approached from an economic perspective above any other considerations. While government officials, such as Tibor Navracsics, former minister of foreign affairs and trade and Hungary’s candidate for the European Commission, acknowledge the complexity of the issue and give credit to concerns other than economic held by other member states (for example the Baltic states’ approach to the situation as a matter of national security), they regard Russia above all as a business partner, not an aggressor of a neighbouring country. In his speech held at the annual reunion of senior diplomats, prime minister Viktor Orbán explicitly denounced “value-driven foreign politics” in favour of the pursuit of economic interests, and the new minister of foreign affairs and trade, Péter Szíjjártó, reiterated this principle by placing an equation mark between national and economic interests.
This political discourse on the national interest represents on one hand a reinforcement of what has been at the core of the government’s external action for the past years, but at the same time the articulation of the national interest as of exclusively economic nature free from ideological considerations raises some questions in the EU context. It is especially interesting to challenge such a brute declaration from the perspective of the principle of loyalty enshrined in the EU Treaties, which calls for the support of Union action in its external activity in the spirit of loyalty and mutual solidarity between member states (Art. 24(3) TEU ). Moreover, it seems to follow from the Treaties that it is not sufficient to avoid explicit violation of the rules: an active engagement is required. The ultimate answer to this dilemma would call for a dubious venture into a largely political terrain which cannot be captured within the boundaries of this article, as it leads to several implications ranging from analysis of domestic political dynamics and discourse to theoretical considerations about the European political community in the context of common foreign policy.
Conclusions
Considering legal-institutional factors behind restrictive economic measures and individual member state responses to the “war of sanctions” between the EU and Russia, both sides of the analysis point towards the need for the European Union to recognize and pre-empt more accurately the effects of the counter-action of the country under embargo when deciding over collective measures. Furthermore, it is also important to have a more comprehensive understanding of the fact that member states are not affected to the same extent by the sanctions and the retaliatory actions and that their political perceptions of the situation (e.g. addressing the problem in terms of economic loss or physical threat) can considerably diverge case by case. If the individual concerns of certain member states are not sufficiently addressed, it is hard to expect them not to seek separate ways to avoid the adverse effects of the crisis. The case of Hungary demonstrates such an autonomous behaviour and shows that attempts to bypass the situation established within the EU framework can not only violate the principles of loyalty and solidarity within the EU, but might undermine long-term political objectives of the sanctions as well in favour of specific national interests.
The views expressed above belong to the author and do not in any way represent the views of the HAS Centre for Social Sciences.