BUCSU, Hungary—At a bucolic border post, Western-trained Hungarian counterintelligence agents recently got word that a known operative of Russia’s foreign spy service was driving into Hungary, and asked headquarters for permission to pursue.
Permission denied, came the firm order from Budapest.
This kind of incident is a regular occurrence at Hungary’s frontiers according to two former intelligence agents, and fits a pattern. Russian involvement in Hungary is growing. Russian spies roam freely, using Budapest as a base to advance their aims in Europe, according to U.S. and Hungarian officials. Russian energy companies sign secretive deals that critics say aim to enrich and co-opt Hungarian oligarchs. Officials from the U.S. and European Union complain, but feel shut out by a government they view as more like Vladimir Putin’s than their own.
Welcome to Europe’s new disorder. The U.S. and EU-led alliance in Europe that grew stronger after the Cold War is now splintering. Russia is seizing chances to encourage this fragmentation and regain influence. This time, Moscow’s intellectual currency isn’t Marxism, but an authoritarian style of leadership that sneers at the pieties of liberal democracy.
Russia is finding local partners in Europe’s political rebellions that are challenging a liberal order meant to mark the end of history. These vary in form and strength, from nativist parties in France and Germany, to leftist opponents of EU-backed austerity in Southern Europe. On the continent’s edge, Turkey too is turning its back on the West. Europe’s hard-won unity is fraying.
Nowhere is the historical irony more acute than in the first country to pull down the Iron Curtain. Hungary’s August 1989 border opening set off a chain reaction that toppled the Berlin Wall. Now, this small nation is once again the focal point of another European revolt, this one triggered by the man the ruling party calls its “chief engineer,” Prime Minister Viktor Orban.
In his first stint as prime minister, from 1998 to 2002, the Oxford-trained former dissident focused on getting Hungary into the North Atlantic Treaty Organization and away from Russia’s orbit.
Since returning to power in 2010, the 55-year-old has bet on a different course, wagering that the post-Cold War order is ending, and that both Russia and its model of government on the rise. Western democracy is no longer Europe’s ideal, in Mr. Orban’s telling, and neither the U.S. nor Europe’s political establishment retain the resolve to defend the liberal democratic order they helped construct.
Mr. Orban says he is helping his country navigate a transition, from an American-led unipolar world, to a messier, multipolar era in which small countries must balance between great powers.
“Orban genuinely believes the West is on the decline, and the best days of the EU and NATO are numbered,” says David Koranyi, senior fellow at the Atlantic Council in Washington and a former Hungarian national-security official. “He’s pragmatic enough to keep Hungary in the EU and NATO for now, because the money coming in and the security umbrella still have their value. But he sees the 21st century as the rise of a competing governance model, that of the East.”
Or, as a confidant recalls Mr. Orban once lamenting: “American policy can change every four years.”
Elsewhere in the EU, the status quo faces unrest from voters in Italy or the U.K. who feel they haven’t prospered from the globalized economy that followed the fall of the Iron Curtain. In Hungary, modern Europe confronts a revolt from a nation that has. Wages have doubled since Hungary joined the EU in 2004. The state spends a meager 1% of GDP on its military, banking on NATO’s collective alliance to uphold its defense.
And yet Mr. Orban is posing the most brazen challenge to the common rules and values meant to unite Europe’s political order, as well as the officials sent to enforce them. Successive U.S. ambassadors have lectured him about his moves to cement power over courts, media, and the central bank.
“All this talk of democracy is bullshit,” one U.S. ambassador recalled him snapping back.
At NATO, Mr. Orban has blocked the U.S.-led military alliance from holding meetings with Ukraine concerning its conflict with Russia, over an obscure debate regarding Kiev’s treatment of the Hungarian language. Hungarian diplomats say they’ve been asked to limit and report any contact with American officials.
This summer on a Danube river bend, near the ruins of an ancient Roman border post, digging began on Mr. Orban’s biggest bet to date he can toggle between great powers: a €12 billion Russian nuclear plant worth a 10th of the Hungarian economy. Mr. Putin personally pitched it to Mr. Orban, who believed he could gain leverage selling Russian energy to German factories, calling it “the deal of the century.”
It could also leave his country indebted and dependent on Moscow, just as it was when he was young, per the reservations of his own ministers who advised against it. Hungary’s government-commissioned assessment says the plant will make a profit—if electricity prices nearly double, something energy experts don’t expect.
Mr. Putin has his own geopolitical agenda, pro-Western Hungarian officials warn: to co-opt political and business elites in EU countries, helping to weaken a bloc he views as an obstacle to Russia’s great-power restoration.
Kremlin spokesman Dmitry Peskov rejects that analysis. “It’s modern to blame everything on Russia and Russian intelligence,” he says, adding that EU countries “have to solve their internal problems on their own.”
Mr. Orban believes he can predict and outsmart the machinations of a fellow cynic and demonstrate to his liberal critics that his small country can counterbalance big powers.
It is a high-stakes gamble for a country that has spent nearly all of the past 500 years under the yoke of one empire or another.
“I don’t think he can sustain this dance between East and West without breaking his legs,” said a well-connected Hungarian banker.
Mr. Orban began his rise by defying liberal ideas on how to deal with Moscow. Shortly before speaking at a televised 1989 ceremony, opposition figures warned him to stop short of challenging the Soviet troops stationed here. Mr. Orban stood before the crowd and demanded those soldiers go home.
The provocation made a local sensation of Mr. Orban, who won a scholarship at Oxford, where he studied under the same influential professors as Bill Clinton. Elected as prime minister in 1998, he visited the White House, where Mr. Clinton praised his “vigorous and progressive leadership.”
Mr. Clinton now accuses Mr. Orban of “Putin-like leadership.” Mr. Orban says he and the Hungarian people “deserve more respect” from Mr. Clinton.
The future Hungarian leader took time to find his political bearings. The son of an authoritarian father who beat him, his modest origins in a nondescript village left him feeling awkward in Budapest, a grand and genteel capital on the Danube. Liberal Budapest politicians treated him as lacking sophistication; one mockingly fixed his tie in public.
The young prime minister could become the new Václav Havel, a symbol of liberal democracy in Central Europe, like the Czech intellectual, Hungary’s then-ambassador to the U.S. told him. “I’m not interested in that. I want to win elections and hold on to this office,” Mr. Orban replied, according to the ambassador.
An election defeat in 2002 inflicted a deep shock on Mr. Orban, who blamed media hostility, according to Andras Kosa, author of a new book on Mr. Orban’s career. He also grew mistrustful toward the U.S. He felt humiliated by the George W. Bush administration, which criticized him for not denouncing anti-Semitism, and for backing out of an arms deal.
“He sensed that the U.S. may not be the best friend of Europe,” said a former cabinet minister.
Out of power, Mr. Orban complained that the U.S. didn’t do more to help Hungary secure non-Russian sources of gas. When Russian troops poured into Georgia in 2008, he denounced “the raw imperial power politics” of Mr. Putin, expecting a hard line from the incoming U.S. president.
Instead, Barack Obama attempted a reset to mend relations with Russia. Meanwhile, the global financial crisis and Europe’s dithering response to it left Mr. Orban skeptical about the West’s attachment to political pluralism and globalization, say former officials. “He interpreted it as a failure of the Western system,” says Mr. Koranyi of the Atlantic Council.
In 2009, he got an invite from a world leader nursing similar doubts about the durability of Europe’s Western-led order. Mr. Orban was climbing in opinion polls, and Mr. Putin wanted to meet him.
The Hungarian traveled to St. Petersburg with a small delegation. Mr. Putin walked in with a room-filling coterie of ministers and aides whom he lectured and scolded in front of Mr. Orban. The show of authority impressed the Hungarian opposition leader, according to people familiar with the conversations. The two men agreed to put past animosities aside and show each other respect. Mr. Putin gave Mr. Orban a lift back to the airport.
“That meeting is the turning point,” said Andras Racz, former security fellow at the Hungarian Institute of International Affairs.
Mr. Orban won a landslide the next year. An aide asked Mr. Orban if taking power in the midst of a global financial crisis, with Hungary reeling, worried him. “No. I like chaos,” Mr. Orban replied, “because I can build a new order from this chaos. An order than I want.”
After rewriting the constitution, redrawing voting districts, and giving his party control over institutions from media regulators to the courts, Mr. Orban began changing the way his country secured its main source of energy, Russian gas.
Under a secretive arrangement begun in 2011, gas entering Hungary was sold inexpensively to an energy-trading company controlled by Hungarian and Russian oligarchs. The trading company, MET, then resold the gas to customers for hefty profits. A MET spokesman says the deal was “standard market practice.”
Government edicts citing “security” restricted pipeline use by other gas importers, curbing competition. The EU made Hungary open up the market in 2015, after a whistleblower leaked details.
A new Hungarian business elite emerged, politically dependent on Mr. Orban—not unlike the oligarchical network around Mr. Putin. Among the winners: Lorincz Meszaros, a former pipe-fitter from Mr. Orban’s village, who would become Hungary’s second-richest man, with construction and media interests. Tens of millions of dollars in EU public works contracts were awarded to a company controlled by the prime minister’s son-in-law, an EU fraud investigation found. When one oligarch bought a billboard company without Mr. Orban’s permission, the prime minister stopped talking to him until he sold it, a person familiar with the matter said.
Messrs. Meszaros and prime minister’s son-in-law, Istvan Tiborcz, couldn’t be reached for comment.
Mr. Orban became more explicit about his vision. “The new state that we are building is an illiberal state, a non-liberal state,” he said in a speech soon after re-election in 2014. He expressed fascination for “systems that are not Western, not liberal, not liberal democracies, maybe not even democracies, and yet [are] making nations successful.” Russia, Turkey, China and other non-Western countries were now the “stars of international analyses,” he said.
“We are searching for, and we are doing our best to find, ways of parting with Western European dogmas.”
U.S. diplomats still believed that Mr. Orban remained committed to bringing his country deeper into the West. A test loomed in the form of four nuclear stacks.
Hungary needed to replace its Soviet-era reactors near the Danube river town of Paks, which supply some 40% of the country’s electricity, and were due for decommissioning by the late 2030s. Westinghouse Electric Co., then owned by Toshiba Corp., and France’s Areva SA were invited to bid in a competitive and open public tender, which EU rules require.
“This was supposed to be the way to wean them from their Russian grip,” said a former U.S. diplomat. “Then we had the rug pulled under us.”
In early 2014, Mr. Orban flew to Moscow, where Mr. Putin sold him on two massive new reactors from Russia’s Rosatom for €12 billion, funded with a long-term loan from the Russian state. Russia would supply the rods, dispose of them, and construct the plant. The details were classified for the next 30 years.
The bypassing of public-tender rules triggered an EU investigation. Mr. Orban was prepared. He had cultivated key German officials and lobbyists with promises of lucrative subcontracts for German industry.
At first, the European Commission rejected Hungarian arguments for the no-bid contract. Then, under German pressure, it accepted those arguments, in order to find a “global political solution,” per one email between European Commission departments.
Back at home, Hungarian bankers and energy analysts warned Mr. Orban had miscalculated. The government’s energy estimates had been based on 2008 figures; the cost of wind and solar energy have crashed since then, casting severe doubt on whether the mammoth plant can ever turn a profit.
Construction on a transformer station for the new mega-plant, known as Paks 2, began this summer. A growing number of officials in Budapest fear that Russia is playing Mr. Orban. The Russian loan carries interest of around 4%, considerably above what Hungary would now pay on international bond markets. Hopes that Hungarian companies could perform about 40% of the construction work is fading as few are qualified. And the plant’s final cost could balloon far beyond €12 billion, based on experience in the nuclear sector, where little goes according to budget.
“We thought we had done the best negotiations,” a Fidesz official said. “But it seems like maybe on this one, the Russians were the winners.”
—Anita Kömüves in Budapest and Bojan Pancevski in Berlin contributed to this article.
Source : WSJ