Hungary Floats Using EU Funds to Cut Russian Energy Dependence


Hungary made a pitch to tap the European Union’s pandemic recovery fund as a way to wean itself off Russian energy, a senior advisor to Prime Minister Viktor Orban said, seeking to break a deadlock over billions in aid being withheld from Brussels.

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(Bloomberg) — Hungary made a pitch to tap the European Union’s pandemic recovery fund as a way to wean itself off Russian energy, a senior advisor to Prime Minister Viktor Orban said, seeking to break a deadlock over billions in aid being withheld from Brussels. 

The European Commission has approved the Covid-19 funding plans of all member states except for Hungary’s, citing concerns over the rule of law and graft within Orban’s administration. “Some parts” of the commission were receptive to the proposal, Balazs Orban, the Hungarian premier’s chief political adviser, said in an interview in Brussels on the sidelines of an EU summit. 

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“Right now we have a war situation, and the biggest geopolitical question is energy independence,” said the adviser, who’s not related to the premier, on the proposal to convert funding for Covid relief to energy assistance. 

Hungary’s currency has plummeted almost 10% against the euro since Russia’s invasion of Ukraine in February, the biggest drop in emerging markets after the Turkish lira. The prospect of having to go without EU funding has prompted investors to shun Hungarian assets. 

At risk is access to more than 37 billion euros ($39 billion) in EU funding, including almost 22 billion euros from the 2021-2027 EU budget as well as 15.5 billion euros in pandemic-recovery grants and loans. 

The commission has also previously taken issue with a plan to use part of the bloc’s money to finance universities following an overhaul that locked in the premier’s loyalists at the helm of educational foundations.

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Without an agreement with the EU by the end of the year, Hungary may lose a chunk of its the recovery money for good, according to the rules governing the funds. Hungary may seek an EU deal this year similar to one clinched by Poland, which agreed with the commission on disbursements being tied to meeting specific criteria, the political adviser said.

The commission, the EU’s executive arm, sent a formal letter to Budapest in late April outlining its concerns with Hungary, including “serious irregularities such as conflict of interest, fraud and corruption, indicative of breaches of the principles of rule of law.” 

While the EU letter seen by Bloomberg detailed its issues with Budapest, Balazs Orban said the Hungarian government was struggling to understand what it needed to deliver to unlock the funds. 

That suggested that the conflict between Hungary and the EU — which has been escalating since Orban expanded his influence over the courts, media, education and culture after his return to power in 2010 — is far from resolution.

“For me, it’s not clear what is the requirement from the EU side,” Balazs Orban said. “There are systematic problems with the rule of law — what does it mean?”

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