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Hungary rolls out the red carpet for Russian ‘Trojan horse’ bank

Budapest, Hungary – The Russian International Investment Bank (IIB) will relocate its headquarters to Budapest in the second half of this year, sparking concerns about Hungary’s shift towards Russia and fears about the real reasons behind the move.

Although Hungarian Prime Minister Viktor Orban hailed the relocation of the IIB as the government’s push to turn Budapest into a major financial hub in the region, critics fear Russia might be using the bank as cover for espionage activities, gaining a foothold at the heart of an EU and NATO member state.

Opposition lawmaker Zita Gurmai billed the IIB as “Putin’s Trojan horse”. The U.S. State Department also warned that the bank could be used by the Kremlin to “expand its malign influence in Hungary and across the region”. The opposition Jobbik party said that the relocation of the bank to Budapest signals “a further slide toward being a Russian colony”.

Founded in the 1970’s as a Comecon financing agency, “the IIB is still perceived as a Cold War-era cover institution for the KGB”, writes the Financial Times. Although Russia remains the largest shareholder, former and current communist states including Hungary, Slovakia and the Czech Republic, but also Cuba and Vietnam, are still among the shareholders of the bank’s assets (Hungary briefly withdrew from the bank in the 1990’s, when Orban was already Prime Minister).

The International Investment Bank is suspected of close ties with the Russian intelligence services, and is feared to represent a major national security threat and be used as cover for Russian counterintelligence activities in Hungary and Central Europe: the father of IIB director Nikolai Kosov was a top KGB agent in Budapest in the 1970’s, while his mother was also a Soviet spy. Kosov, who worked himself at the Soviet Embassy in London, denies having every worked for the Russian secret services.

Critics also point to the extraordinary incentives and privileges offered by Hungary to woo Russia’s International Investment Bank. This includes diplomatic status for the bank’s building, employees and guests (meaning that Hungarian authorities will only be allowed to enter the building with the bank’s explicit approval); immunity from financial investigations and exemption from registration with authorities; as well as financial assistance for renovation and rental and security costs of the IIB headquarters – therefore funded with the Hungarian taxpayer’s money.

Some commentators argue that Hungary might be wooing the IIB to secure alternative funding channels, as EU funds are expected to drop over the next few years.

But, according to most, the scope of the granted privileges appears disproportionate compared to the bank’s relatively small size as a financial institution (it would only be the 17th largest bank in Hungary, and its total balance sheet represents roughly 2.5% of Hungary’s largest bank, OTP), leaving many people wondering as to why, exactly, did PM Orban and the Hungarian government go to such great lengths to attract the Moscow-based bank to Budapest.

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