07MOSCOW1653, RUSSIA-HUNGARY: WARMING TREND

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Reference ID Created Released Classification Origin
07MOSCOW1653 2007-04-12 08:48 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO2326
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHMO #1653/01 1020848
ZNY CCCCC ZZH
P 120848Z APR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 9163
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 001653 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 04/12/2017 
TAGS: PREL ECON ENRG HU RS
SUBJECT: RUSSIA-HUNGARY:  WARMING TREND 
 
REF: BUDAPEST 354 
 
Classified By: Pol/Min Counselor Alice G. Wells.  Reasons: 1.4 (b/d). 
 
1. (C) Summary: Hungarian Prime Minister Ferenc Gyurcsany's 
late-March visit to Moscow continued the warming trend in 
relations between Russia and Hungary.  Strong economic 
interests have been sufficient to overcome the historical 
legacy that dominates Russia's relations with some of its 
former satellites.  Nevertheless, Russia did not get a much 
desired endorsement from Gyurcsany of Gazprom's proposal to 
expand the Blue Stream gas pipeline to Hungary.  The two 
sides discussed diversifying trade, as well as a Russian 
proposal to construct a massive gas storage complex in 
Hungary, making it a hub for Moscow's expanding energy ties 
in Europe.  An effort by Hungarian activists to remove a 
Soviet-era monument is unlikely to undercut improvements in 
the relationship, given overriding Russian interests in 
reestablishing influence in a former satellite and current EU 
and NATO member.  End Summary. 
 
BEYOND 1956 
----------- 
 
2. (C) Hungarian PM Gyurcsany's March 23 visit to Moscow and 
meetings with President Putin, PM Fradkov and Gazprom Chief 
Aleksey Miller was billed by both sides as a working visit, 
with less of the ceremony that accompanied previous trips and 
more business-like talks.  References to the 1956 Hungarian 
uprising and subsequent Soviet crackdown did not grab 
headlines, as they did during Putin's 2006 visit to Budapest. 
 Economic and trade issues dominated the discussion. 
Aleksandr Olesov, chief of the MFA's Hungarian Affairs 
Section, told us that Moscow had seen "a marked improvement" 
in bilateral ties since Socialist PM Gyurcsany came to power. 
 In his view, there were a lot fewer anti-Russian statements 
in the Hungarian press.  "Both sides have gone beyond the 
difficult issues of the past and are now looking forward." 
 
3. (C) The improved relationship is due in part to Putin's 
2006 declaration in Budapest that Russians "feel some sort of 
moral responsibility" for the Soviet intervention, said 
Szabolcs Nagy, First Secretary at the Hungarian Embassy in 
Moscow.  That statement was designed to overcome an emotional 
issue in the relationship, and make way for larger economic 
cooperation, Olesov told us.  Another reason for the 
blossoming relationship is the fact that Hungary relies on 
Russia for about 80 percent of its gas needs, Nagy 
acknowledged. 
 
GAZPROM LEFT WAITING 
-------------------- 
 
4. (C) Despite the improved relationship, Russia did not get 
a public endorsement from Gyurcsany of Gazprom's ambitious 
proposal to extend the Blue Stream gas pipeline through 
Turkey, Bulgaria, Serbia, Croatia and western Hungary, Olesov 
said.  The Gazprom proposal had been criticized by many EU 
members as a project designed to undermine the EU-proposed 
Nabucco pipeline, which would carry gas from Turkey to 
Austria.  Gyurcsany had previously made public statements in 
favor of Blue Stream, though an official Hungarian position 
has not been announced.  In Moscow, Gyurcsany said Hungary 
would wait for more details on the two projects.  Putin told 
Gyurcsany that Hungary should consider both projects and 
select the one best suited to Hungary's needs, Nagy told us. 
 
5. (C) During the meetings with both Putin and Fradkov, 
Gyurcsany raised Hungary's desire to balance trade between 
the two countries, Olesov said.  Russia exports about USD 6 
billion to Hungary annually -- mostly oil and gas.  Hungary 
exports about USD 2 billion to Russia.  The two also 
discussed ways for Russia to diversify its exports to Hungary 
beyond hydrocarbons.  Putin raised the GOR's opposition to 
U.S. Missile Defense assets being deployed in Poland and the 
Czech republic, adding that the Russian side had been 
informed of U.S. plans but never consulted about them, Nagy 
said. 
 
A LOT OF GAS 
------------ 
 
6. (C) Gyurcsany also met with Gazprom Chief Miller to 
discuss not only the Blue Stream pipeline, but also a Russian 
proposal to build a massive gas storage facility, with the 
capacity for 10 billion cubic meters of gas, Nagy said.  The 
Russians promise to turn Hungary into a major European gas 
hub, Nagy said.  He added that construction of the storage 
facility would be contingent on whether Hungary agreed to the 
Blue Stream project. 
 
NO MONUMENTAL PROBLEMS 
 
MOSCOW 00001653  002 OF 002 
 
 
---------------------- 
 
7. (C) While strong economic ties (and Putin's shrewd 
acknowledgment in Budapest of past Soviet sins) have acted as 
a salve in the bilateral relationship, this doesn't mean that 
history can be entirely ignored.  One possible irritant are 
efforts by some Hungarians to force a referendum on the 
removal of a Red Army monument in central Budapest.  An 
Estonian initiative to remove a prominent World War II 
monument in central Tallinn has sparked angry Russian 
rhetori
c and threats of a deterioration in the relationship. 
While any effort to remove the monument in Budapest would 
provoke an outcry in Moscow, political commentators are 
doubtful that Russia's overall relationship with Hungary 
would suffer, given its strong economic underpinnings. 
 
COMMENT 
------- 
 
8. (C) The Russians have made a conscious effort to overcome 
historical differences with Hungary and concentrate on 
building a forward looking relationship, albeit one based 
largely on Budapest's reliance on Russian oil and gas. 
Moscow sees Hungary's dependence on Russia as an opportunity 
to influence a member of NATO and the EU.  Russia's desire 
for gas storage facilities in Hungary is part of its efforts 
to reduce the leverage that Belarus and Ukraine have on gas 
transiting to Europe.  Russia views the Blue Stream extension 
as key to preventing Caspian and Central Asian gas from 
reaching Europe via non-Russian controlled routes and will 
work hard to ensure that Hungary is offered the sort of 
economic incentives that will encourage Budapest to 
accommodate Moscow's interests. 
BURNS

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