Identifier
Created
Classification
Origin
08BUDAPEST940
2008-09-24 15:42:00
CONFIDENTIAL
Embassy Budapest
Cable title:  

DAS MERKEL'S CONSULTATIONS IN BUDAPEST

Tags:  PGOV PREL EPET RS GG UP HU 
pdf how-to read a cable
VZCZCXYZ0013
PP RUEHWEB

DE RUEHUP #0940/01 2681542
ZNY CCCCC ZZH
P 241542Z SEP 08
FM AMEMBASSY BUDAPEST
TO RUEHC/SECSTATE WASHDC PRIORITY 3418
INFO RUEHZG/NATO EU COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0096
RUEHKV/AMEMBASSY KYIV 0132
RUEHMO/AMEMBASSY MOSCOW 0645
RUEHSI/AMEMBASSY TBILISI 0257
C O N F I D E N T I A L BUDAPEST 000940 

SENSITIVE
SIPDIS

DEPARTMENT FOR EUR/NCE JAMIE LAMORE, PASS TO NSC DAMON
WILSON

E.O. 12958: DECL: 09/23/2018
TAGS: PGOV PREL EPET RS GG UP HU
SUBJECT: DAS MERKEL'S CONSULTATIONS IN BUDAPEST

Classified By: P/E Counselor Eric Gaudiosi, reasons 1.4 (b,d)

C O N F I D E N T I A L BUDAPEST 000940

SENSITIVE
SIPDIS

DEPARTMENT FOR EUR/NCE JAMIE LAMORE, PASS TO NSC DAMON
WILSON

E.O. 12958: DECL: 09/23/2018
TAGS: PGOV PREL EPET RS GG UP HU
SUBJECT: DAS MERKEL'S CONSULTATIONS IN BUDAPEST

Classified By: P/E Counselor Eric Gaudiosi, reasons 1.4 (b,d)


1. (SBU) Summary. During his September 9-11 visit to
Budapest, Deputy Assistant Secretary for Russia David Merkel
focused on energy and the Russia/Georgia conflict with a
broad range of senior Hungarian officials. Encouraging
greater visible support for Nabucco and a slow
down/suspension of South Stream negotiations, as well as
strong support for Georgia and other countries in the region,
DAS Merkel heard the Hungarian response ) Nabucco first,
South Stream second, no business as usual with Russia ( but
"no harsh reaction." On MAP, "Hungary is with the majority"
but Ukraine needs to get the message that "you have to help
yourself if you want help from others." End Summary.

--------------
ENERGY ) IT,S THE ECONOMY
--------------


2. (C) In meetings with the Hungarian Energy Company (MOL)
Group CEO, the Prime Minister's Security Policy and Foreign
Affairs Advisor, the Chairmen of the Parliamentary Foreign
Affairs and European Affairs Committees and MFA State
Secretary for Russia, the dominant Hungarian message was
clear ) diversification is important and Nabucco is our
first priority, but with limited resources in gas and oil,
South Stream has a role to play. Only Zsolt Nemeth, Fidesz
Chairman of the Foreign Affairs Committee, called upon the
Government to suspend South Stream negotiations with Russia
and give priority to Nabucco. Refering to the "Nabucco is
dead" message in EU media, Nemeth said that the U.S. needs to
push momentum - encouraging DAS Bryza to further engage on
the issue - as "Russia,s aim is clear - to kill Nabucco."
Matyas Eorsi, the European Affairs Committee Chairman,
disagreed with Nemeth,s call for a freeze on negotiations,
commenting that if South Stream is built and Hungary suspends
negotiations "there is a danger that we will be left out )
South Stream could bypass Hungary completely." (Note: Eorsi
has reiterated these comments to us in subsequent
conversations, arguing that "Hungary cannot do anything

alone.")


3. (C) MOL Group CEO Gyorgy Mosonyi told DAS Merkel that the
problem with Nabucco is that "it is like a theater with
different actors playing games ) their words are different
than their actions. However, this is not the case for
Hungary ) Hungary and MOL are aggressively pursuing Nabucco,
but we are more or less alone." Mosonyi highlighted the
"problems" with Nabucco: Central Europe is too fragmented and
the EU's traditional powers have reached accommodations with
Moscow. Nabucco can only work if third parties sign up to
use the capacity and if it takes Russian gas as well.


4. (C) Queried as to Austrian OMV,s 20 percent shareholding
in MOL and concern over Gazprom,s interest, Mosonyi
responded that Russia's ambition is to own all of MOL through
OMV channels. While the 20 percent stockholding "is out of
our control," Austria has to have a sense of "reality" about
Russia and we are sending our message to the Austrian
politicians ) "it is our biggest worry." Additionally,
although Austria is managing the Nabucco project, they are
slowing down because of the Russia/Austria relationship.


5. (C) In separate meetings with Karoly Banai, Foreign
Affairs and Security Policy Advisor to the Prime Minister,
and Gyorgy Gilyan, MFA State Secretary for Russian affairs,
DAS Merkel stressed the importance of focusing attention on
diversification to decrease dependence on Gazprom, as well as
the need to slow down/suspend South Stream negotiations in
response to the Russian military intervention in Georgia.
Banai responded that Hungary needs energy, but "we are
discussing whether we can slow down and wait." He asked if
the U.S. has raised the issue with Italy as the biggest
shareholder in South Stream ) are they willing to share
their view on slowing down? Banai commented that Hungary
cannot step out on its own, but "we would participate" and
provide influence if Italy would initiate a political level
meeting. Continuing, he highlighted Hungarian efforts on
diversity: an October 3 regional energy conference and the
Nabucco summit in January 2009, stating "we need U.S. help to
push the conference in other capitals." Responding to DAS
Merkel,s comments that Hungary can play a role in helping to
shape EU consensus and to secure a commitment to President
Aliyev on markets, Banai, referring to Prime Minister
Gyurcsany,s recent trip to Azerbaijan and Kazakhstan, stated
"that,s why we went: to tell them we are interested in
buying gas." Banai underscored that the January Nabucco
conference is a good opportunity to express commitments to
buy Azeri and Kazak gas.


6. (C) Gilyan, an economist by training, sketched a lengthy
table-top diagram of Hungary,s energy sources, reiterating
Hungary,s limited resources in oil and gas. While stating
that "Hungary must have stable economic relations with Russia
for energy and exports," Gilyan outlined the recent
parliamentary resolution on energy that addressed three areas
) security, reliability and sustainability, noting that the
document places priority on Nabucco first and South Stream
second. Gilyan commented that the Prime Minister,s recent
visit to the Caucuses was a "strong statement of support for
Nabucco." Sitting in on the meeting with DAS Merkel, MFA
Russia and Balkans Director Marianne Berecz commented that it
is "not business as usual with Russia, we are pushing the EU
for a common energy policy." That said, Gilyan also noted
that they are currently preparing the "founding document" for
South Stream with an end-of-year 2008 deadline.

-------------- ---
RUSSIA/GEORGIA CONFLICT ) A BIT SLOW IN REACTING
-------------- ---


7. (C) Moving to a discussion of the Russia/Georgia conflict
with Banai, DAS Merkel highlighted three important areas for
Hungarian consideration: maintaining international community
support for Georgia; bolstering countries in the region to
include a clear path for Ukraine to EU and NATO membership;
and ending "business as usual" despite Russia,s perceived
energy influence. While expressing appreciation for the
Prime Minister,s firm statement on Georgia, DAS Merkel
emphasized that a single statement is not sufficient ) more
statements, more often, are needed. The goal is not to
isolate Russia, but Russia's own actions have done that.


8. (C) Banai acknowledged that "we were a bit slow in
reacting in the first few days ) not because we were in
favor of the Russian action - but due to our crisis
management response process." Continuing, Banai said that
while Georgia made a tactical mistake, Russia committed a
strategic mistake in the size and scope of its intervention -
making a very dangerous argument to "protect Russian citizens
wherever they may live." Banai stated that "as a question of
principle, we belong in the same club ) if it were a black
and white issue, there would be no doubt of Hungary,s
position ) full support and solidarity with Georgia." He
highlighted the political symbolism of opening the Hungarian
Embassy in Tbilisi three months earlier than planned as a
firm message to Russia on solidarity with Georgia.


9. (C) Commenting that he got the "no business as usual"
message, Banai stated that the GOH is considering a slowdown
in annual consultations with Russia on trade, commercial
issues and technology cooperation scheduled for December in
Moscow. He expressed his belief that it will not take place,
as now "is not the appropriate time to shake hands and smile
for the public. Although we do have commercial relations
with Russia, this would send the wrong message. We need to
send message to our allies that we are all in the same boat
and we have to engage NATO/EU to keep Russia on the right
economic, political, and democratic path ) but Russia could
retaliate."


10. (C) During Russia/Georgia discussions at the MFA, Berecz,
noting Hungary,s geographic closeness to Russia, emphasized
the importance of working to initiate measures which unite
EU/NATO partners to "deplore the invasion action." At the
same time, she stressed the importance of engaging Russia in
negotiations in international fora, as "Hungary is a small
country and shouldn,t be alone in pressing them. Rather than
sanctions, the international community needs to get Russia to
create a culture of meeting commitments, and we are not in
favor of a harsh reaction ) that would put both sides in a
corner."


11. (C) Both Parliament Committee Chairmen expressed
significant concerns with the six point agreement. Eorsi, a
frequent visitor to Georgia with the Council of Europe, said
the plan already was a mistake ) from the beginning it was
not about territorial integrity. Nemeth commented that the
French President had set no conditions related to South
Ossetia and Abkhazia ) this was a mistake, as the status of
the two areas should be a pre-condition for normalization of
relations with Russia. Continuing, he said "we need to find
something for revenge ) we need to respond to Russia with
NATO membership for Ukraine and Georgia and move ahead on the
Nabucco pipeline. We need to step up now and tell Russia
that you are not going to close this door." Eorsi also told
DAS Merkel in reference to official South Ossetia and
Abkhazia representation at the Geneva Conference on refugees
that "no one should sit down with them ) Geneva should not
be their introduction into international institutions."

--------------
MAP FOR UKRAINE AND GEORGIA?
--------------


12. (C) In meetings with Banai and Gilyan concerning MAP
offerings for Ukraine and Georgia, DAS Merkel stressed the
importance of moving forward on MAP in December.
Acknowledging that we all need to overcome Germany,s
position that MAP is not the final door to membership )
Russia,s provocative steps cannot have a voice in alliance
decisions. Banai responded that Hungary was probably the
first country to ratify the NATO membership documents for
Croatia and Albania, sending a message that enlargement is
not finished. Continuing, he said that Hungary wants to
maintain close, friendly relationship with Ukraine ) citing
three PM meetings in 2007. He was not happy to see turmoil
in Ukraine as we approach a decision on MAP, and Ukraine
needs to get the message that "you have to help yourself if
you want help from others." Gilyan, agreeing that Hungary
agrees that MAP is a process rather than the final step
before invitation, stated "Hungary is with the majority."
(Comment. Gilyan,s bland commitment to the MAP process
tracks with Hungary's views prior to the Bucharest Summit
-never ready to lead, always ready to follow. End comment).


13. (C) Meeting with members of the Prime Minister,s Foreign
Policy Advisory Board, DAS Merkel encouraged Hungary to play
a role in shaping a clear, united, and principled EU stand on
Russia, on Georgia, and on energy security. Following
Russia,s "strategic ambush" in Georgia, only a strong
European commitment to "no business as usual" will
demonstrate that Moscow,s "overreach" is unacceptable.
Trans-Atlantic values should not be sacrificed for European
consensus.


14. (C) Hungarian attendees cited the accelerated plans to
open an Embassy in Tbilisi as an important signal of
Hungary,s commitment, but expressed concern over the deep
divisions within the EU and the perceived risk of a broader
spill-over in relations with Russia. Although they
recognized the importance of continued engagement with
Tbilisi, they were noncommittal regarding MAP invitations for
Georgia and Ukraine and shied away from his suggestion that
Budapest work in concert with other capitals to slow or
suspend progress on South Stream, emphasizing that "all
options are important."


15. (C) DAS Merkel emphasized that the goal should be "a
two-way relationship" with Russia that serves our interests
and advances our values. The region faces critical decisions
as Moscow attempts to assert a sphere of influence: the
trans-Atlantic community must send a clear message of support
to the states of Central Asia and the Caucasus. Bearing in
mind that MAP is a process, we believe that an invitation is
"the right decision" at a critical time and hope Europe will
be prepared to think creatively and to act decisively to
support regional security.


16. (C) In a closing meeting with MFA Political State
Secretary Gabor Szentivanyi, the State Secretary commented
that the EU is at a crossroads. Specifically citing point 11
of the EU document on the Russia/Georgia conflict, he said
that the EU must deeply examine its relationship with Russia.
Noting similarities between post-Cold War Russia and
post-World War One Germany ) collapsed central governing
system, collapsed economy ) followed by a concerted effort
to regain influence at the same time NATO/EU is expanding,
Szentivanyi commented that "the U.S. and the EU will need a
cooperative, constructive relationship with Russia in the
struggle with China. (Note: This novel reference is at odds
with both the personal fascination of PM Gyurcsany in China
and the sharp increase of Chinese investment here. End
Note.) It is better to have a democratic, cooperative Russia
) one that fits into the trans-Atlantic community." The
question remains as to whether the current situation is a
temporary "malfunction" or a longer term issue.


17. (C) Queried as to whether the EU is placing economic
interests ahead of common values, with a danger that Russia
will view the EU as nothing more than an economic union,
Szentivanyi responded that "there should be red lines to make
Russia aware it is impossible to violate." Noting that the
November EU-Russia summit will potentially provide such an
opportunity for the EU to find an accommodation with Russia,
Szentivanyi questioned who can influence Russia more - "the
EU is eager to see how the U.S. reacts; the U.S. should find
an arrangement with Russia; if there are common interests an
accommodation can be found." In response, DAS Merkel
commented that if the EU is quiet on the Russia actions in
Georgia, Russia will judge the EU as having no leverage. The
EU,s way forward must reflect what has happened and bolster
Georgia, Ukraine and their neighbors. Szentivanyi
highlighted his hope that the EU will come up with a strong
platform that reflects "no business as usual," speeding up
development of a common energy policy, as well as the Eastern
Neighborhood initiative ) which he cited as "more important
than Sarkozy,s Euro-Mediterranean dialogue." He closed with
the consistent Hungarian message on MAP offerings for Georgia
and Ukraine, stating "we support MAP and are willing to join
the consensus."


18. (C) Comment. These discussions provided a useful window
into the Hungarian Government,s thinking on energy and
relations with Russia. While all of the interlocutors
expressed support for diversification and the Nabucco project
in principle, it is clear that Hungarian decisions are
considerably influenced by their current dependency on
Russian gas supplies ) the media comments by Economic
Ministry State Secretary Abel Garamhegyi following DAS
Merkel,s interview in the daily Nepszabadsag, and Ambassador
Foley,s opening remarks at a Freedom House event on
September 11, capture the Hungarian bottom line on the issue
) "Hungary will not suspend negotiations on South Stream."


19. (C) Comment continued. The Russia/Georgia conflict
highlights the foreign policy challenges Hungary faces when
reality intervenes on its efforts to balance "Western values
and Eastern interests." At the dinner meeting with DAS
Merkel, Klara Akots of the Prime Minister,s Foreign Policy
Advisory Board commented that economics is the "principled
issue" in relations with Russia. Although Banai told DAS
Merkel that we would hear more statements from the Prime
Minister on the Georgian conflict, Gyurcsany remains
relatively silent. Opposition party leaders, such as Viktor
Orban and Zsolt Nemeth of Fidesz and Matyas Eorsi of SzDsz
have been more openly critical of Russia. The Hungarian
Government's diplomatic approach continues to rely on working
within the EU and NATO rather than a direct approach to
Russia ) underscored by the consistent statements on MAP,
where Hungary is reluctant to lead but "willing to join the
consensus." End comment.


20. (U) This cable has been cleared by DAS Merkel.
Foley