DAS QUANRUD'S VISIT TO BUDAPEST

C O N F I D E N T I A L BUDAPEST 000855

SIPDIS

DEPARTMENT FOR EUR/CE JAMIE MOORE. PLEASE PASS TO JEFF
HOVENIER AT THE NSC

E.O. 12958: DECL: 11/29/2014
TAGS: PGOV PREL NATO ENGR AF HU
SUBJECT: DAS QUANRUD'S VISIT TO BUDAPEST

REF: A. BUDAPEST 847

B. BUDAPEST 845

C. STATE 120288

Classified By: Political Officer Jon Martinson, reasons 1.4 (b,d)


1. (SBU) Summary. During a November 24-25 visit to Budapest,
EUR DAS Pamela Quanrud met with the Prime Minister, other
senior Hungarian government officials, the opposition party's
senior foreign policy expert, and media representatives to
discuss USG priority issues. The Prime Minister indicated
that he hoped to raise in his December 4 meeting with the
Vice-President: Hungarian support in Afghanistan; current
budgetary challenges; energy security, and regional issues.
The MFA's Political Director presented a "food for thought"
proposal to strengthen the Visegrad Four-U.S. relationship,
and the former, and likely-to-be, future Fidesz Foreign
Minister outlined an outward-looking foreign policy if Fidesz
wins the election in 2010. End Summary.

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PRIME MINISTER'S DECEMBER 4 VISIT
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2. (C) Prime Minister Bajnai told DAS Quanrud that he looks
forward to his December 4 meeting with the Vice-President,
where he will underscore the "value-based," pro transatlantic
policies of his administration (ref A). The PM mentioned
that he planned to raise the following areas for discussion:
continuing Hungarian support for operations in Afghanistan;
Hungarian acceptance of a Guantanamo detainee; the steps his
government has taken in response to the economic crisis that
called for enormous sacrifice of the Hungarian people; the
Western Balkans; energy; and plans to meet with President
Putin in the near future to discuss areas of disagreement.
Bajnai specifically mentioned to DAS Quanrud that, if
possible, a positive statement from the Vice-President's
office on the measures taken by the Bajnai government to
address the economic crisis 'would be helpful."


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AFGHANISTAN
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3. (C) In DAS Quanrud's meeting with Prime Minister Bajnai
(underscored in separate meetings with the PM's Foreign
Policy Advisor, MOD and MFA interlocutors) Bajnai said that
Hungary is waiting for the President's announcement on Afghan
strategy and is ready to be as positive as possible, but the
primary factor in determining the level of support will be
the current economic crisis. MOD State Secretary Jozsef Bali
reiterated his concerns expressed to the Charge November 24
(ref B),that Hungary will be hard pressed to increase its
Afghan troop levels over the projected 450 in 2010.


4. (C) Addressing the issue of caveats, DAS Quanrud said that
more needs to be done and allies need to step up. She asked
the Hungarians to seriously consider removing caveats on
their PRT and OMLT in Baghlan Province. Responding, Bali
noted that, first and foremost, the question of caveats is a
political issue, but there are also technical issues related
to equipping Hungarian soldiers that would have to be
addressed as well. MFA State Secretary and Political
Director Gabor Iklody separately reconfirmed the strong
Hungarian political support for operations in Afghanistan,
commenting that Hungary looks forward to the President's
Afghan strategy in order to determine how it can best respond
and restructure its military and civilian presence in
Afghanistan.

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ECONOMY - THE FIRE IS OUT; TIME TO REBUILD
--------------


5. (C) Assessing Hungary's current economic situation,
Hungarian National Bank Governor Andras Simor told DAS
Quanrud that as a result of the reforms undertaken by the
Bajnai government, "the fire has been extinguished," but
added that "now the house must be rebuilt." Given Hungary's
reliance on economic recovery in Germany and elsewhere in
Western Europe to boost Hungarian exports, Simor predicts
that "Hungary will be slower to emerge from the economic
crisis than most of its neighbors." That said, he noted that
structural reforms enacted since the crisis have put the
country on a more sustainable economic path, and could have
Hungary achieving growth rates of three to four percent by

2011. For this reason, he agreed that Fidesz, the likely
winner of next April's national elections, will be the
primary beneficiary of the Bajnai government's reforms.
Despite growing rhetoric from Fidesz leaders that Simor
describes as "not very encouraging," Simor told DAS Quanrud
he remains "cautiously optimistic" that the macroeconomic
policy of a Fidesz government will not differ radically from
that of the current government.


6. (C) Regarding euro adoption, both Simor and Finance
Ministry State Secretary Almos Kovacs agree that the
government's continued fiscal consolidation in response to
the economic crisis is helping Hungary move closer to meeting
the Maastrict criteria. Given Hungary's history of setting
and then missing euro adoption target dates, however, Kovacs
noted that the government will not set a specific target date
until Hungary is close to meeting ERM-II requirements. Simor
speculated that if the next government focuses on euro
adoption as a priority, Hungary could join the Eurozone by

2014.

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ENERGY - BETTER THAN LAST YEAR
--------------


7. (C) The Prime Minister's Security and Foreign Policy
Advisor, David Koranyi, told DAS Quanrud that Hungary is in a
better position than last year to face any potential gas
shut-off from the Ukraine. Although Koranyi doubted that
Russia would shut off gas supplies to the Ukraine before
national elections, which in his view would "hurt pro-Russia
candidates," Koranyi said that Hungary currently has a 70 day
reserve and "we are much better off than last year." He
stated that Hungary is also ready to help Serbia through any
potential gas shutoff shortage, commenting that Prime Minster
Tadics was in Budapest two weeks ago and the GOH promised to
arrange a contractual agreement for such support. However,
Koranyi raised concerns about Bulgaria's and Bosnia's ability
to weather a winter gas cutoff and the need for a broader
regional approach to address concerns.


8. (C) As such, Koranyi said that Hungary will continue its
proactive engagement on energy issues in the region,
planning, as the current Visegrad Four (V-4) President, an
energy conference for January 2010. He said that the V-4
will also invite Croatia and Slovenia to participate. DAS
Quanrud suggested that the group also invite Bulgaria and
Romania, and expressed support if the V-4 requested USG
representation. During a luncheon with representatives from
the four major political parties, Janos Koka, the Free
Democrats' faction leader who heads Parliament's Nabucco
Committee, told DAS Quanrud that he is working within the V-4
structure to establish an international Nabucco Board, and
encouraged U.S. participation.

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V-4/U.S. RELATIONS
--------------


9. (C) In his meeting with DAS Quanrud, MFA Political
Director Iklody presented a "food for thought" proposal to
strengthen V-4-U.S. relations. The proposal contains three
basic focus areas: high level contacts to include meetings
between the V-4 Foreign Ministers and the Secretary; yearly
structured political dialogue at the Political Directors
level modeled on the U.S. Baltic and Nordic countries
meetings; and closer thematic cooperation in such areas as
the Western Balkans, the Eastern Neighborhood, the new NATO
strategy, energy security, and seminars and conferences on
the advancement of V-4-U.S. relations.

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OPPOSITION THOUGHTS
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10. (C) DAS Quanrud also met with former Foreign Minister
Janos Martonyi, who is expected to again serve in that
capacity in the anticipated Fidesz-led government in 2010.
Thanked by the DAS for Fidesz's quiet support to accept a
Guantanamo detainee, Martonyi said it was the right thing to
do, although he did not know why some in the party were not
supportive. Turning to broader issues, Martonyi said that
Hungary's transatlantic relationship is maturing and now is
time, 20 years after the political transition, for the
country to look outward, specifically mentioning assisting
the Balkans in their integration efforts. He also suggested
that Hungary needs to strengthen regional "north-south"
connectivity in energy, transportation, and politically, with
the V-4 providing a stronger voice for central European
countries in the EU - a voice with which France and Germany
"have a problem." He expressed strong support for Turkey's
integration in the EU, but doubts that it will happen any
time soon. On Russia, Martonyi said that, while there will
be commercial relations with emphasis on transparent
investments, Fidesz has redlines concerning foreign policy
and intervention in internal political affairs.


11. (U) DAS Quanrud cleared this cable.
LEVINE