Following the Czech Republic, Romania is also withdrawing from the Budapest-based, Russian-majority-owned International Investment Bank (IIB) due to Russia’s invasion of Ukraine, Telex reports, citing Adevarul.ro. Meanwhile, Hungary’s opposition parties demand Hungary’s withdrawal as well, calling on the Orbán government to expel the formerly Moscow-based institution from the country.
The Czech Finance Ministry said in a statement on Friday that as part of actions to punish Russia for its attack on Ukraine, the Czechs would speed up their planned departure from the IIB.
Following this, on Sunday, the Romanian government also announced they would initiate a procedure allowing for the country’s withdrawal from the IIB.
The International Investment Bank (IIB) was established in 1970 to promote the economic development of the Comecon member countries and Hungary was among its first members. After the dissolution of the Soviet Union, the bank lost its status and most of the member countries left it. Hungary officially withdrew from the bank during Viktor Orbán’s first term in 2000. The bank was revived by Vladimir Putin in 2012, with Nikolay Kosov appointed as president. Hungary rejoined the bank in 2015, gradually becoming its second-biggest shareholder. Despite condemnation from the U.S., the bank even moved its headquarters to Budapest from Moscow in 2019.
According to the Orbán government, moving the headquarters to Hungary was to further strengthen the role of the country and Budapest as an international financial center.
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But the decision proved extremely controversial, with many of the bank’s critics saying that it serves predominantly Russian interests. After all, Putin’s long-term goal is to establish a financial system that could operate as an alternative to the Western banking infrastructure dominated by the US.
The Hungarian state even granted IIB legal standing and immunity similar to that of diplomatic missions and offices of international organizations. IIB’s office and all material goods owned by the bank are immune to all restrictions, regulations, control, and moratoriums, and no executive or judicial power has the ability to decide otherwise. In addition, Hungarian authorities can only enter the bank’s premises if explicitly agreed upon by IIB. The regulation also ensures that IIB’s guests, business partners, experts, etc. are able to enter Hungary and the EU and obtain diplomatic immunity “with no regard to their citizenship.” For this, many went as far as to label IIB the “Trojan horse” of the Russian secret service, calling it a “spy bank.”
The financial institution rejected all of the accusations, arguing that as an international organization it has the same rights as other institutions of similar status. It also added that in “almost 50 years of IIB’s existence” there have been zero employees engaged in activities “incompatible with the status of an international official.”
The members of the Russian-led IIB include nine former or current communist countries including Bulgaria, Cuba, Czech Republic, Hungary, Mongolia, Romania, Russia, Slovakia, and Vietnam.
Russia has the largest stake in the organization, with Hungary now being the second-largest shareholder (with 17%). With the withdrawal of the Czech Republic and Romania, Russia’s stake will increase to over 50 percent. As IIB is registered with the UN, it is not subject to the Western sanctions imposed against Russia.
At this point it’s hard to tell whether Poland, Slovakia, and Bulgaria- which are also members- plan to leave as well.
As Telex highlights, even though the government emphasized that Hungary is supporting all common EU and other Western sanctions against Russia, whether the Orbán government would agree to withdraw from the IIB is an entirely different question.
Opposition parties demand Hungary’s withdrawal from IIB
At the same time, the united opposition parties, officially called United for Hungary, demanded immediate sanctions from the Hungarian government on Saturday, including the withdrawal from the IIB, because of Russia’s aggression against Ukraine.
Most recently, opposition green LMP- which is also a member of the united opposition- has called on the Hungarian government to immediately withdraw from the International Investment Bank and expel the formerly Moscow-based institution from the country, alleging that the bank was conducting spy operations in Budapest.
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“There’s no reason why we should be maintaining a spy network practically operating with KGB tools that poses as a bank,” Antal Csárdi, LMP’s deputy parliamentary group leader, said at a press conference in front of the IIB’s Budapest headquarters on Monday.
Concerning Russia’s attack on Ukraine, Csárdi said: “We mustn’t allow Russia to take our eastern neighbor’s independence away.” He said LMP condemned Russia’s aggression in the strongest possible terms, adding it was also causing serious damage to Europe and specifically Hungary. “Russia isn’t aiding but rather threatening our country’s independence,” he said.
The group leader then announced a demonstration would be held against the IIB’s operations in Budapest.
The protest will take place on Tuesday afternoon at 6 pm in front of the IIB’s Budapest headquarters. The demonstration will be addressed by Péter Márki-Zay, the united opposition’s candidate for prime minister, among others.
Featured photo by Balázs Szecsődi/PM’s Press Office/MTI