The Erosion of Democracy and Rule of Law in Hungary
The following is Daniel Hegedus's testimony to the House Foreign Affairs Sub-Committee on Europe, Energy, the Environment and Cyber, before which he appeared on November 15, 2022.
Chairman Keating, Ranking Member Fitzpatrick, Distinguished Members of the House Foreign Affairs Committee, thank you for holding this important briefing on the erosion of democracy and the rule of law in Hungary.
The briefing is particularly timely for two reasons. First, because the European Commission and the EU member states—important allies of the United States—will decide in the coming weeks whether they impose financial sanctions on Hungary due to the systemic deficiencies in the rule of law in the country. Second, because since the full invasion of Ukraine on February 24, the regime of Prime Minister Viktor Orbán has undertaken continuous efforts to weaken Western responses to Russia’s war of aggression and hampered Ukraine’s self-defense.
In the first part of my testimony, I offer a comprehensive record of the concerning ties between Hungary, Russia, and China. In the second part, I shed light on the link between Hungary’s autocratization and its foreign policy positions that weaken Western unity. I then formulate policy recommendations as to how the United States should address these challenges.
Threat Analysis and Hungary’s Ties to Authoritarian Great Powers
The Orbán regime in Hungary poses a dual challenge to the Western alliance system.
First, its track record of autocratization undermines the democratic credentials of the West, including its democratic integrity and democratic credibility.
How can NATO credibly portray itself as the shield of Western democracies if democracy is not “the only game in town” among the alliance’s members? How can the European Union credibly impose democracy-related conditionality over candidate countries and neighbors if it is not able to tackle autocratization in its ranks?
We can legitimately call the Orbán regime an “autocratizing” or “semi-authoritarian” one, given that Hungary had its last free and fair election 12 years ago, in 2010, according to the main electoral watchdog of the northern hemisphere, the OSCE Office for Democratic Institutions and Human Rights.
There is a growing academic consensus on the non-democratic nature of the Orbán regime. The world’s two leading democracy-measuring institutions, V-Dem and Freedom House, now label Hungary’s political system an “electoral autocracy” and an “hybrid regime” respectively. European political institutions have also started acknowledging the nondemocratic nature of the Orbán regime. In its resolution on September 15, 2022, the European Parliament concluded that Hungary has become an “electoral autocracy.”
Second, besides the democratic challenge the Orbán regime poses, it also poses a geopolitical challenge for the Western alliance. Hungary’s foreign policy under Orbán deliberately aims to weaken the geopolitical and foreign policy positions of the country’s closest allies: the United States and the European Union.
The Orbán regime takes positions that favor Russia rather than Hungary’s allies. Since late February 2022, it has delayed the adoption of nearly every single EU package of Russia sanctions and it has softened several of them. The Orbán regime has also been blocking the NATO accession of Finland and Sweden since July 2022, and it has announced its blocking of the joint borrowing of the European Union that is indispensable to provide Ukraine the agreed €18 billion in financial aid in 2023.
For years, the Orbán regime has been blocking high-level meetings of the NATO-Ukraine Commission, even during the ongoing war, complicating official NATO-Ukraine political communication. Since the beginning of the war, Hungary has systematically refused to provide any sort of military aid to Ukraine, a position in strong contrast to that of other Central European NATO allies like Czechia, Poland, and Slovakia. Hungary has also refused to allow the transportation of military aid to Ukraine over its territory.
While the government claims to provide substantial support to Ukrainian refugees in Hungary, it in fact has recognized the temporary protection status of fewer Ukrainians (31,989 as of November 15, 2022) than, for example, Portugal (52,875), which lies further away at the western edge of the European continent. The number of Ukrainians having been granted temporary protection status is lowest in Hungary among the Central European countries.
Hungary is the only European country participating in the Russia-dominated International Investment Bank (IIB), which is colloquially referred to in the international media as the Kremlin’s spy bank. It continues hosting the IIB’s headquarters in Budapest, thus providing a safe haven for Russian human intelligence operations on the territory of a NATO member in a time of war in Europe.
Regarding China, Hungary has repeatedly blocked European Union positions and European Council resolutions critical of Beijing’s democracy and human rights track record in Xinjiang and Hong Kong as well as of its threat posture vis-á-vis Taiwan.
Since 2016, Hungary has continuously supported the Chinese position in the South China Sea dispute. The European Union was unable to adopt a joint position regarding the 2016 South China Sea arbitration due to blocking by Hungary.
Hungary is one of the staunchest supporters of Chinese engagement in Central and Eastern Europe, including through the 14+1 (formerly 16+1) cooperation format. It hosts Huawei’s regional hub and has agreed to host in Budapest a campus of the Chinese Fudan University, which will also provide a safe haven for Chinese human intelligence operations in Europe.
China’s funding of the construction of the planned Belgrade-Budapest railway line, through a $2.1 billion loan, is probably the least harmful tie between Hungary and China, as it threatens above all the financial interest of Hungarian taxpayers and not necessarily the strategic interests of Hungary’s Western partners.
The Link between Hungary’s Autocratization and its Anti-Western Foreign Policy
Hungary’s autocratization is embedded in a geopolitical and foreign policy strategy. The rationale and overarching aim is to create a favorable international environment for the Orbán regime’s authoritarian developments at home. The strategy aims at avoiding sanctions being imposed by the United States or the European Union in reaction to the deliberate erosion of democratic and rule of law standards in Hungary, and also at increasing the leeway of the government vis-à-vis any Western allies and partners that may criticize the country’s authoritarian development.
While pursuing these strategic goals, the Orbán regime’s foreign policy follows two basic principles. The first is free-riding. Hungary reaps the benefits of membership in NATO and EU without making any real contribution to either and without real commitment to the values they were founded on and to the goals they jointly agreed. The second can be called “geopolitical disloyalty,” given that Hungary has built close relationships with Russia or China,
There is a dual rationality in the Orbán regime seeking close or even strategic relationships with these two authoritarian powers.
First, it is rewarded in terms of strategic corruption and foreign direct investment (FDI) for representing Russian and Chinese interests in NATO and the European Union. Hungary’s trade with Russia and China remains moderate, while South Korean and Japanese FDI exceeds Chinese FDI in the country. Nevertheless, there is an obvious connection between Hungary’s pro-Chinese foreign policy positions and certain Chinese FDI decisions as rewards, like the creation in Budapest of the Huawei regional hub and of the Fudan University campus, or the recent $7.4 billion investment decision of China’s Amperex Technology to create a battery manufacturing plant in Hungary.
Second, besides getting rewarded for acting as Russia’s and China’s Trojan Horse, the Orbán regime creates leverage over Hungary’s Western partners, including the United States, through establishing close ties to Moscow and Beijing. It tries to use these ties to signal that Hungary has strategic alternatives outside of the Western alliance system.
The fact remains that neither Russia nor China is able or ready to cover the Hungarian economy’s substantial need for external financing, which is currently covered by the European Union through financial transfers worth about 3 percent of Hungary’s GDP a year. However, the Orbán regime has been able to use its ties to the two authoritarian great powers to influence Western perceptions and decision-making with regard to Hungary, and through this to raise the price of its cooperation with its Western allies.
The message of the Orbán regime to Hungary’s Western allies is simple and crystal clear: it is a troublemaker whose loyalty and cooperation must be bought on a case-by-case basis. And if the United States or the European Union try to discipline the regime, it can raise the political cost of confrontation for them by blocking crucial or even strategic decisions by abusing the unanimity rule for decision-making in NATO and the European Union. This is what Hungary has been doing recently with its blocking of the NATO accession of Finland and Sweden and of the EU’s €18 billion financial aid package for Ukraine.
The Orbán regime’s use of foreign policy to support its domestic autocratization is not only a pragmatic choice—it has an ideological core as well. Orbán deeply believes in the demise of the West, and this has guided Hungarian foreign policy for more than 12 years now. It explains why he still believes in Russia’s victory in its war against Ukraine and why he seriously underestimated Western responses and Ukrainian opposition to Russia’s aggression.
Having set out above the conceptual prism through which to understand Hungary’s foreign policy positions with regard to Russia and China, the question is what can the United States do to mitigate the threats posed by the Orbán regime to the joint interests of the West?
First, there should be a common understanding among Western allies and partners that the Orbán regime pursues an authoritarian foreign policy that deliberately undermines Western positions on a broad spectrum of issues—and also that Orbán, just like Russia’s President Vladimir Putin, perceives compromises and appeasement as signs of weakness.
Between 2016 and 2020, the United States pursued a diplomacy of effectively offering “carrots” to Hungary, refraining from any criticism of its autocratization in exchange for a less friendly approach to China. However, that policy did not work and US expectations remained unfulfilled—in fact, Hungary’s rapprochement with China has accelerated. It is time for the United States to try a diplomacy of “sticks” that acknowledges that Orbán only responds to strength.
Second, the United States should recognize that the democracy and foreign policy challenges posed by the Orbán regime are not a bilateral issue but a multilateral one that should be addresses in all appropriate institutional formats. The Congress and the Administration have to take all necessary steps to firmly anchor the discussion about Hungary in the transatlantic framework: within NATO, in US-EU relations, and in bilateral exchanges with key European partners with a vested interest in the issue, such as Germany, France, Poland, The Netherlands, and Czechia.
Third, the United States with the Global Magnitsky Act has an appropriate legal tool to apply pressure on the Orbán regime and alter the cost-benefit calculation of Hungarian elites with regard to their support for the regime’s anti-Western foreign policy. A determined use of the Global Magnitsky Act against members of the Orbán regime may also influence the perception and political leeway of the European Commission, creating a political environment in which European Union institutions and member states might be able to address strategic corruption, autocratization, and rule-of-law backsliding in Hungary in a more straightforward and committed manner.
The United States should therefore impose Magnitsky sanctions against high-level members of the Orbán regime who maintain close ties to Russia and are implicated in strategic corruption in Hungary. Targeted sanctions initially against a small number of high-level regime stakeholders would send the signal that a potential extension of the list of sanctioned individuals is only matter of time, triggering enhanced compliance with US foreign policy and anti-corruption priorities by a broader circle of regime stakeholders.
Fourth, considering the crucial role of civil society in opposing autocratization and external authoritarian influence in Hungary, as well as the shrinking space experienced by civil society organizations in the country, it is crucial that the United States maintain continuous financial support to the country’s civil society and free media.
Against this background, it is essential to maintain the bipartisan support of the Congress behind its annual appropriation to strengthen democracy and civil society in Central Europe, including for transparency, independent media, the rule of law, minority rights, and combating anti-Semitism.
Coming to the end of my testimony, please allow me just a couple of closing words.
There are several politicians outside Hungary, including in the United States, who sympathize with the regime of Viktor Orbán as a result of his illiberal values and his positioning in the “culture wars.” These politicians must realize that, in doing so, they are not endorsing a conservative government but a semi-authoritarian regime with a geopolitical strategy based on disloyalty to the United States and the West. It must be recognized in the United States in a bipartisan way, and in the European Union too, that Hungary is an allied country that is now run by a hostile regime.
Chairman Keating, thank you.