Hungary blocks EU’s Ukraine arms package after Kiev sanctions OTP bank

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Hungary has vetoed EUR 500mn worth of arms funding from the EU to Ukraine, Italian media first reported on Monday, which the government spokesperson’s office then confirmed.

The funding would be the eighth transfer from the European Peace Framework (EPF) to finance arms shipments to the country since Russia invaded on 24 February 2022.

Hungary has said it will also block the vote on the EU’s eleventh sanctions package. On Wednesday, 17 May, Hungarian Foreign Minister Peter Szijjarto cited several reasons for the veto, after a meeting with Austrian Foreign Minister Alexander Schallenberg on Wednesday.

Speaking from the Hungarian Embassy in Vienna, Szijjarto said “Tough discussions have been ongoing in Brussels about sanctions, the European Peace Framework, and new economic and financial sacrifices to support Ukraine.

“All this in the shadow of the blacklisting of Hungarian banking chain OTP, the closing of Hungarian schools in Transcarpathia, and the Ukrainian president’s threat to blow up the Druzhba (Friendship) pipeline.”

According to Szijjarto, the main sticking point is the inclusion of OTP in Ukraine on the list of war financiers.

Szijjarto conceded however that “we managed to achieve that there are no longer any measures affecting the nuclear industry in the sanctions package”.

Hungary claims OTP blacklisted due to misunderstanding

The Council of Foreign Ministers of the EU member states on 5 May approved the joint purchase by EU countries of 155mm calibre artillery ammunition and rockets for Ukraine, the EU Foreign Affairs Council announced 12 May.

However, one day prior to the council’s decision, the Ukrainian National Agency for the Prevention of Corruption (NACC) included OTP Bank in the list of international war sponsors. NACC said the decision was justified by the position of the bank’s de facto recognition of the so-called “people’s republics” of Donetsk and Luhansk, Hungarian business outlet Portfolio wrote.

“This is scandalous, unacceptable, Ukrainians should not allow themselves to do this. OTP has not violated any kind of legislation in Ukraine, it has not violated any sanction measures, so there is no legal basis for the Ukrainians to put the OTP on such a list,” Szijjarto said.

Until the Ukrainians remove the Hungarian bank from the international list of war financiers, Hungary will not cooperate, he added. OTP said it considers this as due to confusion between the Donetsk region in Ukraine and the Russian settlement of Donetsk.

“As long as the Ukrainians do not remove the OTP from the list of international sponsors of the war, Hungary obviously cannot participate in decisions related to the European Peace Framework and sanctions,” he added.

“We cannot support the allocation of another half a billion euros from the EPF for arms shipments to Ukraine as long as OTP is on this list, and the same is true of sanctions, which would obviously mean another economic sacrifice for Europe,” Szijjarto said.

Szijjarto also bemoaned that “about 80% of the peace framework planned for 7 years is used by the EU for arms deliveries to Ukraine”, adding that the Hungarian government has also demanded that the EPF will maintain its global horizon in the future and not only be used to arm Ukraine.

Hungary upset at Friendship pipeline comment

Meanwhile, on the subject of the Friendship pipeline, the dispute between Hungarian energy giant MOL and the Ukrainian pipeline operator regarding transit fees could also lead to the ceasing of transit, Portfolio wrote.

A recent US intelligence report quoted Ukraine President Volodymyr Zelenskyy as calling to blow up Hungary’s section of the Friendship oil pipeline leading some weeks ago.

“Ukraine is behaving more and more hostile towards Hungary, hostile decisions and measures are being taken and serious threats have been made against Hungary in recent days,” Szijjarto said, adding that the EU and its member states “try to ignore serious threats and hostile actions”.

“If more crude oil does not come to Hungary through this pipeline, then Hungary’s crude oil supply could not be solved quite simply physically. Such a threat is against Hungary’s sovereignty,” Szijjarto said.

A statement by the Hungarian foreign ministry said: “Serious proposals have been put forward in Brussels that expect European citizens to make more sacrifices without bringing any inch closer to peace”.

China, Hungarian schools in Ukraine also sources of tension

Szijjarto called the sanctions package the European Commission wants to subject eight Chinese companies to export restrictions “extremely serious and worrisome”. He said the “measure would certainly poison the relationship between the EU and China, even make it impossible”.

He argued that China’s weight in global GDP has increased to 18%, while that of the EU has fallen to 17%. According to him, Hungary is an exemplar of European cooperation with China.

Szijjarto signed off with a comment on the mooted closures of Hungarian-language schools in Transcarpathia. Until the Hungarian minority in Ukraine gets back the rights they held before 2015, Ukraine’s EU accession negotiations cannot begin, he said by way of conclusion.