HUNGARY: DEAL NEEDED ON OECD ENLARGEMENT AND

C O N F I D E N T I A L BUDAPEST 000736

SIPDIS

SIPDIS

PARIS FOR OECD

E.O. 12958: DECL: XM+25-1 HUMAN
TAGS: ECON OECD EUN HU
SUBJECT: HUNGARY: DEAL NEEDED ON OECD ENLARGEMENT AND
FINANCING REFORM

REF: STATE 62464

Classified By: Political/Economic Counselor Eric Gaudiosi for Reasons i
n E.O. 12958 Sections 1.4 (b) and (d)

1.(C) Laszlo Varkonyi, Director General for Trade Policy at
the Ministry of Economy and Transport, shared his optimistic
views for OECD expansion in a May 9 meeting. Varkonyi
stressed that he believes both enlargement and financing
reform agreements are likely at the May 15-16 ministerial
meeting, but that further negotiations on all issues are
needed. Hungary will not block Russia, but does not
particularly support Russia, believing, in any case, that
Russia would not actually meet the criteria to join for a
"very long time." He reported that, in May 9 discussions
with Polish and UK counterparts, that Poland was floating the
idea of blocking Russia. However, he did not believe Poland
would actually follow through with this.

Different Views on Likemindedness

2.(C) Hungary philosophically differs with the U.S., though
possibly not enough to block specific nominations, on
likemindedness. Varkonyi expressed deep reservations about
China, Brazil, South Africa, and India because Hungary wants
to see an OECD view on "global issues from a unified
perspective," not a "global perspective on global issues,"
saying the OECD is not the appropriate forum for the possible
introduction of North/South issues. In his view, these
countries are not likeminded enough: the danger of premature
entry into accession negotiations is that it puts pressure on
these countries to join even when they are not truly ready.
Europe generally would like to avoid "premature" expansion,
because they can see the complicated situation they have
invited through Turkey's long-term accession negotiations.
The "mood" would have to change in accession countries, and
stringent expectations made clear: Varkonyi recalled that
Brazil as an OECD observer had already made a lengthy and
inappropria
tely timed intervention about human rights/equity issues in
debt forgiveness.

EU-8 Complicated, Estonia not a Great Option

3.(C) The European Commission plays a complex, frustrating
role in this process, according to Varkonyi, and Hungary
finds it difficult to understand which negotiating posture
the Commission would prefer to take until it is "too late."
Hungary is uncertain of the EU role in developing common
positions on OECD expansion and financing issues. He
realizes a deal will need to be made on EU-8 expansion, but
criticized vehemently the selection of Estonia and Slovenia.
Hungary strongly supports Slovenia, but sees the Estonia
proposal as harmfully divisive among Baltic countries.
Furthermore, he fears Estonia would be uniquely outspoken
against Russia in the OECD (e.g. not likeminded),and simply
entangle Russia into ongoing Estonia-Russia issues. Varkonyi
gave no indication Hungary would break with a common EU
position on the EU-8, even as he expressed "the EU-8 will not
be a deal-breaker."

Current Financing Proposal Not Acceptable; Fairness a Concern

4.(C) The UK has been promoting the current finance reform
proposal, but meeting resistance in small countries,
according to Varkonyi. Hungary would "even have to
apologize, embarrassed, to Chile" rather than accept the
current financing reform proposal as a condition of an
enlargement agreement. Hungary and other small states find
it uniquely unfair that they would have to, as he sees it,
underwrite the enlargement for dramatically larger countries.
Despite this, Hungary acknowledges the need for finance

reform, and is looking for a new proposal to support in this
area. Varkonyi seemed particularly confident on this point,
and it appeared that this confidence grew out of his recent
discussions with the Poles and the UK. He will be in
Brussels starting May 10, fully planning on further
discussions there.
FOLEY