This blog is provided by the Common Sense Society of Budapest as an online, English-language platform for the publication and exchange of diverse and differing perspectives about Hungarian politics, economy, and culture. The views represented here are those of the authors and do not necessarily reflect the opinions of CSS. The Common Sense Society does not receive funding from any government entity or political party.
Since Prime Minister Viktor Orbán announced the “eastern opening” as the country’s new foreign policy paradigm in November 2010, observers and analysts have been trying to make sense of the timing, rationale, substance and driving force behind it all. After more than four years, it’s time to take a step back and try to summarize the costs and benefits of this new approach.
The logic behind the new paradigm is straightforward. The official line of argument says that Hungary is too dependent (75-78%) on the stagnant economies of the European Union (especially Germany), therefore the country needs to diversify its export/import and FDI portfolio outside Europe. An aggressive push into the (mostly semi-free but fast growing) markets in Asia and the Middle East, facilitated by the government, would provide a more stable economic footing for Hungary’s foreign and domestic policy. As PM Orbán says, “why stand on one foot when we have two?” After all, the United States went through the same reorientation with its “Pivot to Asia” and the “Reset with Russia” led by Hillary Clinton, so what’s the problem?
At a conference CSS co-hosted last week, former ambassadors who served in Russia, the Balkans and Turkey assessed Budapest’s pivot to the East mostly from a realist, and purely economic point of view.
Former Hungarian Ambassador to Russia, István Ijgyártó argued that “Hungary is and has been a part of the West and is very integrated into the European economy” but it would be foolish not to try its strength in different markets as well. József Pandur, former Hungarian Ambassador to Bosnia said that there was certainly much hype about the country’s eastern opening which probably isolated Hungary a little internationally, but the policy needs to be judged on its own merits “not political impressions”.
Hungarian leaders are now frequent flyers to authoritarian countries (Russia, Kazakhstan, Azerbaijan, UAE) and communist states (China, Vietnam, Cuba) as they attempt to strike grandiose but rather suspicious investment deals. Given this fact, Western criticism is to be expected. Some of the criticism even appears unfair. Take for example the zealous coverage of Putin’s visit to Budapest in the international press and the relatively little attention given to Italian Foreign Minister Renzi’s trip to Moscow.
So first let us go beyond the rhetoric about “eastern winds”, look at the numbers, the facts and the merits of the policy as such. What happened in the last five years on the eastern front? What are the major achievements?
- With the world’s most populous and powerful communist country, the People’s Republic of China, relations have never been better. Direct flights between Beijing and Budapest will start again this May four times a week. Hungary’s export to China hit an all-time record last year with 2,2 billion dollars, an 8% increase since 2013. The number of Chinese tourists to Hungary doubled in the last four years hitting the 90,000 mark in 2014. And Foreign Minister Szijjártó now oversees one of the largest Hungarian foreign missions in China operating in Beijing, Shanghai, Chungking and Hong Kong.
- The world’s most active aggressor in Eurasia, the Russian Federation, is also Hungary’s second largest import partner after Germany. The numbers don’t look as rosy partly due to the economic sanctions which hit Hungary-Russia trade by 14% or 450 million dollars. The largest economic achievement of course was the expansion of the Paks nuclear power plant for EUR 12 billion 80% of which will be financed by “very favorable” Russian loans and the recently announced gas deal which will keep the bilateral energy cooperation on track for the next four to five years despite a global recession in natural gas prices. Hungary also announced the establishment of four trading houses to be established in Jekatyerinburg, Kazan, Rostov, and Saint Petersburg and a new fund to help small and medium size businesses to get access in the Russian markets.
- Turkey, which is the third largest trade partner (16% share in Hungary’s eastern opening trade flow), banked the second largest increase between 2010 and 2013, almost 300 million dollars in export value, but it’s still not in the top 10 of Hungary’s main export partners. Hungary will open a new trade representation in Istanbul, established a 50 million dollar investment fund to spur bilateral trade relations, and offered 150 state sponsored scholarships for Turkish students to study in Hungary.
Elsewhere, Hungary has established investment funds in Kazakhstan where 40 Hungarian companies are now operating. The Emirates launched a direct flight between Budapest and Dubai. A direct flight now also operates between the Belorussian capital and Hungary. Some of Vietnam’s kindergardens now use Hungarian technology to purify their drinking water. And 200 Azeri students will study for free in Budapest.
But according to a detailed analysis by portfolio.hu the eastern opening of Hungary in real terms is “much ado about nothing”. Since 2010, the contribution of Asia to Hungary’s export increase is barely more than 5%. According to their numbers, the share of Asian countries in Hungary’s exports did not grow at all, and even without all the regional and unusual tendencies in the market, the eastern opening did not produce anything special in our external trade.
To make things clear, Hungary’s top export partners are still Germany, Romania, Austria, Slovakia, and Italy—this is unlikely to change anytime soon given the existing volume, historical commercial ties, and the structure of Hungary’s export portfolio. The primary sources of Foreign Direct Investment is still firmly rooted in the West, 75% coming from the EU-28, mostly from Germany, Luxembourg, The Netherlands, Austria, and the UK. IN terms of FDI, China, Russia, Turkey, and the UAE are nowhere in sight. In the last 10 years, the share of Asia in our exports has been slowly increasing, but in total, it is still around 5%, America’s share has been fluctuating but it is still steadily above 10%, the rest is still Europe.
So, is this whole Hungarian pivot to Asia really all smoke and no fire? In real economic terms so far, yes. The aggressive but so far rather fruitless efforts to turn Hungarian diplomacy, an elaborate and sophisticated profession, into a trade promotion agency—to make diplomacy the “serving maid” of external trade—is a misconceived notion for geopolitical reasons as well.
Hungary has a rather bad historical track record in forecasting strategic risks, properly analyzing geopolitical situations, and making the right choices in times of regional and world crises. Think the failure to unify internally to prevent the Turkish occupation, the failure after WWI and the devastating Trianon Peace Treaty, the ill-fated alliance with the Axis Powers in WWII, vanished hopes of the West intervening in 1956, and most recently the country’s rapprochement with Russia at a time when all of our strategically significant neighbors realize that the Ukraine crisis is the time for choosing, not swindling.
Hungary, like every nation, has the right to form its own foreign policy based on its own national interests – as Prime Minister Orbán regularly reminds Hungarians. The question is: does the current “realist” foreign policy doctrine serve Hungary’s national interest? Is the aggressive promotion of trade between free and unfree people a stabilizing course of action in the long term? Does the “freedom fight” against the world’s superpower—a country that never had the intention to occupy Hungary—bring any strategic advantage?
Hungary remains a nation that, according to opinion polls, is still more trustful of the European Union than its own government, a nation that feels more at ease with the West than the Rest, a nation whose overwhelming majority would choose to align itself with the United States rather than Russia. Such a nation understands the importance of markets but also appreciates values in international relations.
When the Prime Minister keeps the perfectly peaceful US Ambassador to Hungary in the waiting room for two months for no good reason other than to show that he can do it; when the Russian President who effectively started a proxy war against our neighbor can decide when and under what circumstances he wants to pay a visit to Europe under Hungarian auspices; when our V4 friends and most importantly our closest friend, Poland handles us as the black sheep of the family; when we open new consulates all across Asia but none in the US which has the largest ethnic Hungarian population outside of Hungary; when our regional partners from the Baltics to Bulgaria reap the security benefits of additional military and training support while our military – which according to PM Orbán is incapable of defending the country – assistance gets cut; when the penetration of Russian intelligence into Hungarian politics is now just a casual joke and matter-of-fact issue in everyday politics … we must ask the question: which country’s national interests does all this serve?
Who does it benefit that Hungary’s once unabashedly anti-communist leader now stands idly by as a former KGB agent calls Hungary’s occupation a liberation and when the same freedom fighter expresses his admiration and respects to the unique development of China under the Communist Party’s rule while habitually using Washington as a swear word?
Opening towards new markets and balanced external trade relations is a healthy strategy if it is a result of careful cost/benefit analysis of long-term trends and strategic considerations of the country’s size, leverage, and position on the world stage. No one wants Hungary not to “dream big”. At the same time, Hungary may act like Germany but it is not Germany. The costs of running against our Baltic allies, of being the odd-one-out in the V4 group, of acting like the country that is the single most important guarantor of our hard security—the US—is Budapest’s chief enemy will have long term effects on our foreign policy leverage, on our trustworthiness, and thus on our strategic outlook.
Hungary’s so-called “eastern opening” is at best a miscalculated foreign policy tactic without much substance. At worst it is a strategy that narrows our geopolitical room for maneuver and, at the end of the day, hurts our national interest at a time when geostrategic choices matter most.
—Vera Molnár is a political analyst residing in Budapest, Hungary. She holds a degree in political science and international affairs.