The EU, Russia and the Eastern Partnership

seen from Hungary

Strategic CIS-research

Institute for World Economics, HASBudapest, 7 May , 2009.

What is Hungarian view like?

Our heritage and geopolitical location: balancing between the big partner Russia, and our biggest neighbour, Ukraine

Balancing between a proper policy towards Russia and the need /or desire to develop ENP/EaP!

The Russia issue is a hot domestic political issue Neither common, nor consistent Hungarian

approach towards Russia We are Germany and Poland at the same time

Periods in Hungarian-Russian relationship I.

During the nineties: post-soviet space has been forgotten, new foreign policy priorities (EU, NATO)

In the 2000-ies: a pragmatic approach (reasons: Russian GDP growth, after EU-membership: new foreign economic priorities) A success story with questionmarks well- institutionalised relations (more than 60 bilat. agreement, 40

regional agreement, joint committees, 2007. Dec.: Joint Action Plan with main directions of bilateral coop.: energy, public transport, nanotechnology, nuclear energy etc.)

Way for periodisation: based on the different governments

Periods in Hungarian-Russian relations II.

I. period – 1990-1998: new frameworks to be created instead of the old ones, new foreign policy priorities „Russia, the neglected”

II. period – 1998-2002: new conservative government, Russian economic crisis „Russia as a threat” (politically and in economic sense)

III. period – since 2002 - : pragmatism, economic success story „Russia as our important economic partner” approach: Russia is a big power, our biggest energy

supplier – be careful and friendly in dealing with it!

Hungarian-Russian trade relations, 2000-2007  2001 2002 2003 2004 2005 2006 2007

Billion HUF

Export 135,3 117 146,7 184,8 233,2 422,8 544,6

Import 679,8 588,5 643,5 690,1 970 1314,8 1196

Balance -544,5 -471,5 -496,8 -505,3 -736,8 -892 -651,4

previous year =100

Export … 86,5 125,4 126,0 126,2 181,3 128,8

Import … 86,6 109,3 107,2 140,6 135,5 91,0

percentage in total, %

Export 1,5 1,3 1,5 1,6 1,9 2,7 3,1

Import 7,0 6,1 6,0 5,6 7,4 8,1 6,9

Features of Hungarian exports in the 2000-ies

Increasing trade in goods Favourable export structure: machines represent 60% But: the role of TNCs is determining with a share of 75%

(2007): vehicles (Suzuki), mobile phones

The high export dynamism is due to their activity, the growth rate of Hungarian export regarding other company circles is much lower! The success story: pharmaceutical industry

Increasing exports in services In creasing Hungarian presence in the regions

Features of Hungarian imports

One-sided import structure: the share of oil and gas is above 90%

Other important products: supplies to nuclear power plant, Paks

Others: mainly products with very low value added, raw materials, semi-finished products etc.

Mutual FDI movements

Relatively weak presence on both sides Hungary has not been an important target-country for Russia,

however an opportunity to entry EU-market Exact numbers for Russian FDI cannot be given (round tripping

through Cyprus!), but still rather marginal, though relatively diversified Russian presence – engine building, financies, energy etc.) Lukoil: more than 70 petrol station with plans to 100-150

Some big scandals: 1.Russian trial to buy Hungarian chemical works during the

conservative government, a hard Hungarian refusal 2.During the period of very good relations, Spring 2009:

unfriendly buying out of Hungarian oil company, MOL 3. MALÉV – Hungarian Airlines

Hungarian FDI in Russia

Relatively small amount, around or below 1% in total Hungarian OFDI (priorities: neighbouring countries)

Diversified structure Biggest success story: pharmaceutical industry

Richter Gedeon – factory near Moscow, Yegoryevsk, with Russain raw materials, employing more than 200 persons

MOL – in Zapadnij Malobalik oil field since 2005***

Successful Hungarian involvement in so-called Russian national projects (house-building, health industry)- overall value of construction with Hungarian contribution totals to more than 2 billion euro)

Hungarian dependence on Russian energy

The share of Russian oil in total imports (consumption) is very high, above 90% regarding crude oil (oil product imports are rather diversified)

Hungary is an extreme country within the EU regarding gas – a double dependence on Russian gas Role of gas in energy mix is outstanding – 45% (also high in

household heating) 80% of gas is imported Share of Russian gas in total gas imports is very high Only marginal, not essential transit diversification option (Győr-

Baumgarten pipe – but Russian gas arrives from West as well Future: new pipe connections to Romania, and Croatia Hungary:not having new long-term agreement (the old one is

valid) But: developed storage capacities – solidarity capacity

Hungarian approach within the EU

Hungary belongs to the group of „friendly pragmatists” But main turn into „unfriendly pragmatist” after the next

election… Energy is in the focus of Hungarian decision making

Hectic Hungarian behaviour (Nabucco versus South Stream – „we are interested in all possible new pipeline projects”)

Is it selfish approach undermining common EU energy policy or just a pragmatic one?

Hungarian-Ukrainian relations

Politically stable relationship (outside the domestic political crisises) The first country to recognise the independent Ukraine!

Dynamically developing economic relations: the success story of Hungarian exports (everage yearly growth rate: 40%, diversified and favourable structure, recent Hungarian surplus, but: the role of TNC-s is significant, developing trade in services) Position in Hungarian exports: 14., imports: 21. (2007)

Ukrainian WTO-membership creates favourable conditions for Hungarian exports

Relatively strong Hungarian presence regarding FDI (TNCs, regional TNCs - OTP, MOL, and SMS companies) Hungary is among the 15 most important investor-countries regarding

Ukrainian FDI-stock (with 1,5% share) Special role of Transcarpathia

???: What impacts will recent economic crisis have on mutual economic relations? (OTP in troubles…)

Dynamism in Hungarian-Ukrainian trade turnover

1858

,4

1263

0

200

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800

1000

1200

1400

1600

1800

2000

1992. 1993. 1994. 1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007.

30

40

50

60

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80

90

100Export Magyarországról Ukrajnába (MUSD)

Export Ukrajnából Magyarországra (MUSD)

Ukrán GDP-%, 1990=100

Most important trade partners of Ukraine from the

EU, 2007  EXPORT IMPORT

 

value (million

USD)previous year=100

percentage, %

value (million

USD)previous year=100

percentage, %

Total 49248,0636 128,4 100,0 Total 60670 134,7  

EU total 13916,8321 117 28,3 EU total 23048 137,2 38,0

Italy 2675,1651 106,9 5,4 Germany 5830 136,6 9,6

Germany 1644,5192 128,1 3,3 Poland 2920,5 138,5 4,8

Poland 1636,938 121,8 3,3 Italy 1789,3 121,9 2,9

Hungary 1235,0875 130,5 2,5 France 1330 134,4 2,2

Netherlands 765,7387 108,1 1,6 Hungary 1240,9 154,7 2,0

Slovakia 645,2023 117,4 1,3 Czech Republic 1154,6 139,9 1,9

Romania 628,5853 100,4 1,3 United Kingdom 886,43 142,8 1,5

Spain 557,4008 125,2 1,1 Netherlands 881,02 137,4 1,5

Bulgaria 554,0173 93 1,1 Austria 799,18 146 1,3

France 485,6068 138,2 1,0 Romania 778,86 174,6 1,3

Hungary and the ENP

ENP is a priority within Hungarian foreign policy issues because of Ukraine More or less consensus on this between different parties,

but with different emphasis (big economic partner versus country where Hungarian ethnic group lives)

Hungary is not really active in developing ENP, few Hungarian initiatives regarding Ukraine „Hungary is not visible in Ukraine” – according to an

Ukrainian expert in EU-Ukraine relations Now, MFA is keen on involving Hungary into EaP initiatives

(Hungary is active in Moldova (not an awkward issue!)

Conclusions: Hungary, Russia and Ukraine

Recent Hungarian leadership gives priority to Russia over Ukraine (this may turn into the opposite…)

Ambivalent Hungarian behaviour: for developing ENP and for giving Ukraine the „membership perspective”, but without being really active towards this aim

Thank you for your attention!

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