International Investment Bank (IIB), revived by Russian president Vladimir Putin, has decided to move its headquarters to Budapest. At Tuesday’s debate in the National Assembly, it was revealed that IIB would enjoy diplomatic protection, potentially spurring controversy.
IIB was first established in 1970 and Hungary was one of 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 left the bank during 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 and soon became its third-biggest shareholder. In December, IIB’s board of governors decided to relocate the bank’s headquarters to Budapest. News of the relocation came the same week as the announcement of CEU’s departure. Some found the change symbolic: Americans and liberals going out, Russians and “illiberals” coming in.
As revealed in the Parliament, the Hungarian state would grant 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 will be immune to all restrictions, regulations, control and moratoriums and no executive or judicial power will have the ability to decide otherwise. In addition, Hungarian authorities can only enter the bank’s premises if explicitly agreed upon by IIB. What is more, the regulation also ensures that IIB’s guests, business partners, experts, etc. will be able to enter Hungary and the EU and obtain diplomatic immunity “with no regard to their citizenship.”
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While Hungary’s participation can open up alternative financial resources and increase Budapest’s importance in the financial world, critics also note that the bank 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. Although the bank’s international importance is still in its infancy, in the meantime, it can also serve intelligence and political purposes, critics note. In addition, as a multilateral institution, it’s unaffected by the sanctions introduced against Russia for its annexation of Crimea. In the eyes of many critics, IIB may also serve Fidesz’s interests by providing financial support for projects the EU is not willing to fund.
At the Parliamentary debate held on Tuesday, State Secretary of the Ministry of Finance Gábor Gion insisted that IIB aims to promote social and economic development, prosperity and economic cooperation for the member states by providing medium and long-term loans for development projects and investments. Since the IIB is registered at the United Nations as a multilateral development bank, it’s entitled to receive all privileges and immunities granted to the other five banks based in the EU of its kind, he added. Gion also claimed that five EU member states (Bulgaria, the Czech Republic, Slovakia, Romania, and Hungary) hold 50.16% of IIB’s shares, while Russia only holds 40.03%.
MSZP MP Zita Gurmai, however, called IIB “Putin’s trojan horse,” and said there are no guarantees that this won’t grant people who pose a risk to national security access to Hungary. She claimed the text of the law proves that “Fidesz succumbed to the will of Russia and is now rolling out the red carpet for Putin’s people.” Gurmai also noted that IIB’s balance-sheet total is only 2.5% of Hungary’s largest bank, OTP, which makes IIB the 17th largest bank in Hungary. Yet, no other banks are granted such special immunities.
The Hungarian economy's sustainable and balanced growth is prized by Russian investors and bilateral business ties are expected to further intensify, Mihály Varga, Hungary's finance minister, said in Moscow after talks with his counterpart Anton Siluanov and Nikolay Kosov, head of the International Investment Bank.
The finance ministry in a statement on Thursday cited Varga as saying that Russia is a leading economic and trade partner and it has a determining influence on Hungarian energy security.
Farming, the food industry, pharmaceuticals, water management and tourism are also the driving forces of bilateral ties, he added.
Varga noted that declining trade on the back of the EU embargo was followed by a 30 percent increase in two-way trade in 2017 and by a 20 percent increase in the first 11 months of 2018.
The minister said the performance of Hungarian companies in Russia is encouraging, especially energy company MOL's investment of more than 1.3 billion euros and the rapid spread of Hungarian agricultural and health technology in Russia.
The Budapest headquarters is scheduled to open in the second half of 2019, but the entire relocation will take up to three years.
featured image via MTI/PM’s Press Office/Balázs Szecsődi