by Kaisa Stucke, CFA
Hungary has seen increasing domestic civil unrest over centralization of power and international criticism over potential changes in its democratic process. Hungary’s Prime Minister Viktor Orban supports the creation of an “illiberal democracy,” noting that countries with restricted democracies have been the rising stars on the international front. He is also one of the first European leaders to turn friendly toward Russia, noting that geopolitics are changing and that Eastern European countries should redefine their international policies according to these changes.
His actions have caused many Western leaders to call Viktor Orban an autocrat, a dictator and a destroyer of democracy. We do not believe that autocracy is the ultimate goal of Viktor Orban, but that he is attempting to secure the best outcome for Hungary under a set of changing geopolitical circumstances that he believes are forthcoming, while making sure his Fidesz party stays in power. Orban believes that Russia will become increasingly belligerent and the West will be too entangled in its own crises to turn its full attention to its Eastern front. All of Eastern Europe has also watched the West’s handling of the Ukraine crisis and the lack of response is making the regional powers ask, “What will the West fight for?” As a result, Hungary has pursued a multi-dimensional foreign policy, trying to re-assess its bargaining power with Europe and Russia, taking from each the most for Hungary while keeping both at arm’s length. Historically, Hungary has tried to pre-emptively align itself with regional powers that are gaining strength. Hungary’s current foreign policy shift toward Russia could be a signal of changes in Eastern European geopolitics.
In today’s geopolitical commentary, we will explore the differences between the rules of the geopolitical game that is played by Hungary, the West and Russia. We will also describe the history of Hungary’s balancing act between the powers of the East and the West and how this history has affected the current politics of Hungary. We will discuss the most likely outcomes and the international significance of these outcomes. As always, we will conclude with market ramifications.