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The EU, Russia and the Eastern Partnership seen from Hungary

The EU, Russia and the Eastern Partnership seen from Hungary. Strategic CIS-research Institute for World Economics, HAS Budapest, 7 May , 2009. What is Hungarian view like?. Our heritage and geopolitical location: b alancing between the big partner Russia, and our biggest neighbour, Ukraine

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The EU, Russia and the Eastern Partnership seen from Hungary

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  1. The EU, Russia and the Eastern Partnershipseen from Hungary Strategic CIS-research Institute for World Economics, HAS Budapest, 7 May , 2009.

  2. 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

  3. 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

  4. 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!

  5. Hungarian-Russian trade relations, 2000-2007

  6. 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

  7. 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.

  8. 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

  9. 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)

  10. 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

  11. 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?

  12. 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…)

  13. Dynamism in Hungarian-Ukrainian trade turnover

  14. Most important trade partners of Ukraine from the EU, 2007

  15. 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!)

  16. 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

  17. Thank you for your attention! www.cisproject.hu

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