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Foreign Policy

Will Hungary’s Foreign Policy Encourage a Neutral Europe?

Feb 26 , 2019

When US Secretary of State Mike Pompeo visited Budapest during his tour of Central and Eastern Europe, he did not, like some of his European Union colleagues, express concern over the state of liberal democracy in the region. However, he did warn Hungary of privacy and security threats related to Chinese telecommunications equipment and advised against Russian energy dependence. Nonetheless, Budapest remains neutral and continues to develop economic relationships with both Beijing and Moscow, but will neutrality spread to other capitals of the EU?

Why Does Chinese Tech and Russian Energy Worry the US?

The Trump administration is not bothered by illiberal trends in Europe’s central and eastern democracies. However, at a Munich Security Conference earlier this month, Vice President Mike Pence urged security partners to “be vigilant and to reject any enterprise that would compromise the integrity of our communications technology or our national security systems.” Despite this, Chinese telecommunications firms are gaining a foothold in Hungary.

Huawei plans to establish a major logistics hub in Hungary and currently serves approximately 70% of the local population. Hungary is also China’s number one trading partner in Central Europe, and out of the Visegrád Group (V4), Hungary receives the most Chinese direct investment.

However, Washington fears that Huawei hardware integrated into European 5G networks risks information leakages or data deliveries to Chinese intelligence and threatens the overall unity and effectiveness of the NATO military alliance. Beijing denies a supervisory relationship with Huawei and claims it does not pose a security threat.

Liu Mingli, Deputy Director at the Institute of European Studies at the China Institute of Contemporary International Relations, states that "it's very hard for Budapest to refuse Huawei's 5G construction, because it is in Hungary's national interests." Liu further argues that Huawei’s network would improve the country’s internet capacity and improve the overall standard of living.

The risks associated with Huawei are unclear, and the US and EU disagree on their significance. Germany, along with France, Portugal, and the central and eastern EU nations, requested proof of Huawei threats from the US, which they are have yet to receive. Even solidarity within the Five Eyes intelligence community has come into question given that UK and US conclusions differ. The National Cyber Security Centre, part of the UK intelligence service, further undermined the American-led campaign to banish Huawei after it reported limited risk, but Australia and New Zealand already blocked mobile carriers from using the firm’s hardware for 5G networks.

Concerning energy, Washington advises Europe against dependency on Russian resources, suggesting that deals with Moscow could include political sway. Hungary is currently involved in a deal with Russia’s state-owned nuclear energy company, Rosatom, to build a $13.6 billion power plant, which will be funded with through long-term loans from Moscow. It is predicted that, and in 2019, Russia will provide approximately 75% of Hungary’s oil and 60% of its natural gas. As suggested by Pompeo’s recent statements, the USWashington hopes to decrease these figures and shift Hungarian dependency to US gas and oil, but according to Liu suggests that Central Europe is a battleground for world energy exporters and that Hungary deals with Russia because “importing natural gas from Russia is much cheaper than from the U.S,." setting Central Europe up to be the next battleground for world energy exporters.

Another concern for the Trump administration is the Russian backing of the Nord Stream 2 Pipeline, which would increase Europe’s overall reliance on Russian natural gas and further hurt neighboring Ukraine. During his regional tour, Pompeo reiterated that deals with China and Russia would leave Hungary and Central Europe “indebted both politically and economically.”

According to Hungarian Foreign Minister, Peter Szijjarto, Hungary is “eager to deepen ties with the U.S.” on topics like defense, but will continue its economic and energy policies with the East. Back in January, reports emerged that Prime Minister Orbán rejected US demands to distance Hungary from Russia and China and repeatedly told US diplomats that he would pursue a neutral foreign policy. He also allegedly voiced disapproval of EU regulations, suggesting a preference for expedient bilateral partnerships with centralized leadership.

Will Europe’s Eyes Rest East or West?

In its National Security Strategy published in December 2017, the Trump administration labels both China and Russia as revisionist powers that “use technology, propaganda, and coercion to shape a world antithetical to our interests and values.” The document also states that “China is gaining a strategic foothold in Europe by expanding its unfair trade practices and investing in key industries, sensitive technologies, and infrastructure.” Ironically, President Trump also criticized the EU, stating that “in a trade sense, they’ve really taken advantage of us.”

However, while China and the EU have differing perspectives on political and human rights issues, due to decades of declining investment, Brussels is open to taking Chinese money. Within their relationship, the EU is concerned with economic reciprocity and a the liberalization of the Chinese economy, while Beijing seeks mutual respect, equality and to cement the “One-China principle” as the most important foundation for China-EU relations.” The EU would also like China toa reducetion in state involvement in its the Chinese economy while  and allowing European firms to enjoy equal market opportunities. for European firms.

Currently, China and the EU trade nearly $600 billion every year, and the Belt and Road Initiative ensures a lasting Chinese influence in the 16+1 states through its heavy investment in infrastructure and energy. Chinese takeovers of banking and energy sectors in the V4 states also contributes to European disunity on subjects ranging from Huawei to the BRI.

However, Europe will inevitably face future strategic opportunities to partner with both Moscow and Beijing, and will undoubtedly agitate Washington should it prefer its eastern allies for deals concerning energy, technology, infrastructure, or investment. As Hungary prides itself on proclaimed neutrality and Budapest’s  already engages in a mixed foreign policy takes a mixed approach between the West and the East and prides itself on proclaimed neutrality, but will Europe follow suit? Due to its geography and market size, Europe will face choices to either remain close to Washington or look to the East, but how will its responses actions shift geopolitics and the world economy?

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