Comrades in Corruption

Image: EPP | CC BY 2.0

KleptoCast 16: Casey Michel talks to Zselyke Csaky of Freedom House about Hungary’s descent into cronyism under Victor Orban.

By Casey Michel

There’s nothing mysterious about Hungarian Prime Minister Victor Orban’s end-goal in Budapest. Where other regressive heads-of-state – in Ankara, in Moscow, in Astana – have at least nodded to the pretense of liberal democracy, Orban has moved explicitly in the opposite direction. As the former anti-communist firebrand announced in mid-2014, he would spend his time as Hungarian head pushing for an “illiberal state,” citing Russia, China, and Turkey as models worth emulating.

In the three years since Orban’s proclamation, there’s little to suggest he’s moved away from his goal of planting illiberalism firmly within the European Union’s confines. Moreover, it’s increasingly clear that he’s turned to Moscow for tools, suggestions, and policies to implement in Hungary, rolling back the liberal gains of the past quarter-century. As the American Enterprise Institute’s Dalibor Rohac wrote in Foreign Affairs, “Comparing Orban to [Russian President Vladimir] Putin might once have been hyperbole. But … it is hyperbole no longer.” Indeed, just as the Kremlin succeeded in snuffing Russia’s nascent post-Soviet democracy, so, too, has Orban pushed to unravel the democratic inroads Hungary has enjoyed – although, if recent protests are any gauge, support for Orban’s slate of policies may finally be slowing.

Russia’s European Union

While his 2014 comments gained outsized attention, Orban’s illiberal direction was clear from the outset of his premiership. Rising to prime minister in 2010, Orban and his Fidesz party rapidly targeted the constitutional underpinnings of Budapest’s post-communist democracy, utilizing a two-thirds super-majority to push through hundreds of new laws at dizzying pace.

Some of the laws were simple blowback to recent pieces of progressive legislation passed in neighboring European states, such as barring same-sex marriage. Others, however, pointed to the direction Orban would later admit, and borrowed heavily from the illiberal regimes littering the post-Soviet space. As journalist Colin Woodard catalogued, Orban during those first few years oversaw “an erosion of the independence of the judiciary, the packing of courts with political loyalists, [and] a wholesale political purge of the civil service and the chief prosecutor’s office.” Checks and balances quickly eroded as Orban’s close allies soon ran the state prosecutor’s office and the central bank alike.

Likewise, Orban’s allies targeted the country’s independent news outlets, passing legislation to issue damaging fines against any outlets that a government-appointed panel found were “not politically balanced.” As Anton Shekhovtsov and Peter Pomerantsev wrote, Orban’s government further forced parties to campaign solely through public media, “which, of course, is heavily influenced by Fidesz.” Such anti-media pressures culminated a few months ago with the closure of Hungary’s largest opposition paper. Orban’s coalition even targeted myriad religious organizations, a move that, as Woodard added, “literally politicize[d] the decision of which denominations are considered legitimate.”

It didn’t take long for Moscow to take note. As post-Crimea sanctions roiled relations between Brussels and the Kremlin, Orban came to Russia’s defense time and again, with Budapest denouncing the sanctions as “useless.” As sanctions stood set to expire in mid-2016, Orban sidled next to Putin, asserting that “there will be no easy way to prolong sanctions. Russia is not an enemy of Hungary. It’s our partner.” Observed European Democracy Lab’s Ulrike Guerot, “Hungary is a clever, noiseless go-between for Russia in the EU.”

To be sure, Hungary’s willingness to buck Brussels in defense of Moscow makes a certain fiscal sense, with Budapest receiving nearly all of its crude oil, and over half of its natural gas, from Russia. Likewise, Moscow has agreed to expand Hungary’s Soviet-era nuclear power plant, loaning Budapest nearly $11 billion to cover most of the project’s cost. Such economic exposure – as well as Orban’s regressive leadership – was one reason GLOBSEC Policy Institute, a Slovakian think tank, described Hungary as “far and away the [Visegrad country] most politically susceptible” to Russian influence.

But financial excuses can only explain so much; after all, the EU is currently projected to provide Hungary with substantial structural funds, equivalent to some 4 percent of the country’s GDP. Likewise, the nuclear deal came steeped in backroom discussions. As Paul Hockenos wrote in The New Republic, “Orban favors such secretive deals, including one to build a new metro line in Budapest, because they open the door for kickbacks and other sorts of high-level corruption – the kind that has cemented both [Orban’s and Putin’s] grip on power.”

Populist Pals 

But where others may have been chastened by such close affiliation with Moscow, Orban has only dug that much deeper through the Kremlin’s illiberal toolbox in the time since. For instance, Orban’s government recently pushed a new law targeting domestic NGOs receiving non-Hungarian funding. Mirrored on Russia’s much-maligned “foreign agents” law, Budapest’s proposed legislation would force NGOs to declare themselves as “foreign-funded organizations” if they receive more than $24,700 from non-domestic sources. The move would stigmatize organizations like Transparency International, which ranked Hungary 57th internationally in its most recent Corruption Perceptions Index – a drop of 10 slots in only two years, tying it with Jordan and Romania and just beating out the likes of Cuba and Saudi Arabia.

All told, per Amnesty International, Budapest’s campaign against NGOs has led to a “chilling effect on civil society” in the country. Or as the former American ambassador, heavily critical of Orban’s illiberalism, said, “to Orban, Hungarian freedom meant freedom from the influence of anyone who wasn’t Hungarian.”

Elsewhere, and much like Orban’s move to stack state institutions with close, servile associates, the prime minister oversaw a growing nexus of corrupt economic packages, swiping Moscow’s model of state capture. In one instance, a series of foundations created by Hungary’s national bank, all set up in 2014, received some $1 billion in grants and properties, with financing remaining a secret. Soon, the foundations – one of which had the national bank’s governor as the chairman of its board – began awarding grants to pro-government journalists, even funding the national bank’s governor’s former chief of staff. As The Economist noted, “One [foundation] funded the publication of a six-volume heroic history of Hungary, written not by a historian but by an oncologist. … Many of the foundations’ beneficiaries are allied to or connected to Fidesz.”

Of course, such rank cronyism didn’t necessarily beget the vibrant, humming economy that Orban would have potential investors believe. Much like the sputtering economies in any number of post-Soviet kleptocracies, Budapest’s fiscal underpinnings are faltering. “Hungary is becoming a sort of Potemkin economy,” Jozsef Peter Martin, head of Transparency International in Budapest, told Bloomberg a few months ago. “It looks good from the outside, but is deteriorating inside.” A former minister of education, Balint Magyar, is even more blunt, saying in 2015 that Hungary had become “a mafia state, like Russia or Azerbaijan.”

But just as we’ve seen sudden, substantial protests flare across Russia – complaining most especially about the rank corruption and cronyism helping stall out Russians’ economic prospects – it also appears Orban’s illiberalism may finally have found its limits. Following Moscow’s model once more, Orban’s government recently targeted the country’s foremost educational institution, the Central European University (CEU). Mixing conspiracy with claims of competitive disadvantages, Fidesz attempted to scapegoat George Soros, the Hungarian-born financier, in a sudden push to neuter the CEU wholesale – paralleling Russia’s move against St. Petersburg’s European University in March.

Yet with protests now rolling through Budapest, Orban may have misread apparent support for any further liberal rollback. “With Hungary’s targeting of Central European University, the political tide has started to turn,” wrote POLITICO. With crowds of up to 70,000 Hungarians – including a May Day rally where protesters chanted “Europe, not Moscow!” – the combination of economic doldrum and Kremlin-modeled illiberalism has brought some of the most public pushback Orban has seen since 2010. EU regulators further threatened a lawsuit against Budapest for its proposed moves against the CEU.

Now, as an analysis from the Carnegie Endowment found, “Fidesz is running out of ideas and may feel vulnerable before the election.” And any pressure on Fidesz will transfer directly to Orban. For those who want to nip Budapest’s budding autocracy, the blowback can’t come a moment too soon – not only so that Hungary can return to its path toward liberal democracy, but as further confirmation that the “illiberal state” Russia has perfected is, especially in the long-term, profitable only for those cronies closest to the ruling regime, and few others.

Casey Michel has worked as a researcher and journalist in the United States and former Soviet Union.