Tusk Slams Door in Hungary’s Face To Kick Off EU Presidency

The Polish EUCO Presidency begins badly for Viktor Orbán. The EU just took away €1 billion, with Polish Commissioner Piotr Serafin saying Budapest has ‘not done enough’ to earn the funds. Russia’s gas stop also means further energy costs for Hungary 18 months before elections, while its economy enters a third quarter in recession. Poland uninviting the Hungarian ambassador, after Budapest granted political asylum to a fugitive Polish politician, is just the start of the payback.

Poland snubs Hungary to start new EUCO presidency – and far-right FPÖ might get its chance to form government in Austria 

GLOBAL/REGIONAL

• PM Donald Tusk opened Poland‘s European Council (EUCO) Presidency last week by calling on allies to ‘do everything to make Europe strong again.’ This echoed a widely repeated campaign focus on security, including pressure on Russia, support for Ukraine, and strengthening of EU defence and borders.
• Not everyone was on campaign lines, however, as President Andrzej Duda made the decision to skip a visit from EUCO President Antonio Costá – to go on a skiing trip.

• The gala opening in Warsaw made headlines after FM Radosław Sikorski uninvited the Hungarian ambassador to Poland – in retaliation against Budapest’s decision to grant fugitive ex-minister Marcin Romanowski political asylum.
• According to an IBRiS poll conducted for Radio ZET, 70% of Poles disapprove of the decision by Romanowski to seek asylum in Hungary in order to evade prosecution.
• The move represents a very public snub that follows months of political dispute between the two countries’ leaders. It also underscores some of the deepening political disunity across Europe – just as it confronts major global challenges.
• READ HERE: Our latest quarterly brief, on why the European Democracy Shield Needs Defence Posture.

• Former Law and Justice (PiS) PM Mateusz Morawiecki will likely be the next chief of the right-wing European Conservatives and Reformists (ECR) and has already expressed hope to join forces with the conservative European People’s Party (EPP) and far-right Patriots for Europe – in an interview with Politico.
• He said the upcoming legislature of the European Commission (EC) opens up chances for ‘practical’ and ‘technical’ cooperation between these groups given ‘commonalities about how the EPP is changing its view on the real economy.’
• This includes hacking away at green legislation, slashing ‘red tape,’ and joining Meloni and Hungarian PM Viktor Orbán in acting as ‘Europe translators’ for Trump.

• Austrian president Alexander Van der Bellen has said he will meet the leader of the far-right Freedom Party (FPÖ), Herbert Kickl, on 6 January – amid rumours that the pro-Kremlin, anti-Islam party will be tasked with forming a government.
• Kickl, who cites Orbán as a role model, has often used Nazi rhetoric and railed against migrants. He has also said FPÖ will only join a coalition if he is chancellor.

• Georgia fell into a deeper political crisis last week after former footballer Mikheil Kavelashvili was inaugurated as the country’s new president. Incumbent Salome Zourabichvili maintains that she is the only legitimate leader, and has joined thousands of people across the country protesting the ruling Georgian Dream Party.

Ukraine marks historic closing of Russian gas transit – and Zelenskyy accuses Fico of trying to open second energy front

UKRAINE

• The transit of Russian natural gas through Ukraine to the rest of Europe stopped on 1 January 2025 – marking the end of an era spanning several decades, as well as a means by which Russia gains a hold over dependent governments.
• This prospect has long unnerved EU nations who, in the wake of Russia’s war on Ukraine, failed to sever their energy ties to Moscow – not only Hungary and Slovakia.

• In 2024, only Slovakia paid for more Russian fuel than France, followed by Hungary, Austria and Spain. A recent report from the Centre for the Study of Democracy concludes that ‘Although Russian fossil fuel exports to the West have decreased, glaring loopholes in the sanctions’ regime persist.’
• Moreover, Russia will still be a major supplier of oil and seaborne gas to member countries. New EU Energy Commissioner Dan Jørgensen intends to put forward a plan to end that dependency in the first few months of the coming year but sanctions are likely to be vetoed by Hungary and Slovakia, naturally.

• Slovak PM Robert Fico sent an open letter threatening Ukraine with electricity cuts, before later threatening he would also reduce aid to Ukrainian refugees.
• Ukrainian President Volodymyr Zelenskyy responded by saying Fico was opening a ‘second energy front’ against Ukraine on the orders of Russia.
• This seems to be more domestic narrative damage control than a real threat, however. After all, Slovakia’s gas supplies – and those of its neighbours – are secure thanks to healthy reserves in underground storage and alternative sources of supply.
• More likely to be hurting Fico and his political capital is the loss of Slovakia’s own revenues from the reselling and transit of Russian gas – totalling around $1.5 billion/year according to Politico.
• Gazprom sells Budapest even more gas so that traders in Hungary can profit from resale to third countries, and so the government can collect a huge share in taxes.

• In contrast, Poland is ready to boost its energy production and exports to Ukraine should Fico deliver on his threats – a high-ranking official told Bloomberg.
• It would only be able to do this with the help of Hungary and Romania, however. In 2024, 35-45% of electricity delivered to Ukraine came from Hungary, 15-30% from Romania, 15-25% from Slovakia and 10-20% from Poland.

• Ukrainian forces have launched several surprise assaults against Russian positions in the western Kursk region – in an apparent attempt to regain the initiative on the battlefield before Donald Trump’s return to the White House.
• Ukraine’s general staff have said that 42 combat clashes took place on 5 January in the Kursk area, with 12 continuing, but reports on their outcome remain mixed.

• Russian forces meanwhile continue to launch attacks near the strategic Ukrainian city of Pokrovsk. The capture of the road and rail hub in the eastern Donetsk region could cut off supply routes to Ukraine’s troops in the East and allow Russia to reinforce and advance its front Westwards.

• Russian drone strikes on New Year’s Day also targeted Kyiv and its administrative buildings – following widespread and widely criticised drone strikes on Christmas Day.

• In a recent interview, Zelenskyy emphasised that strong security guarantees for Ukraine require US involvement, with NATO membership the best option.
• He also expressed hope that Donald Trump’s decisive nature could help Ukraine stop Putin and confirmed that elections will only take place after the end of active warfare, stressing the legitimacy of the current government.

• The idea of a peacekeeping contingent of EU countries in Ukraine is also gaining momentum. Security spokesman for Germany’s main opposition party (the CDU) Roderich Kiesewetter said last week that Germany, as the largest economy in the EU, should participate in such a mission if one is formed after the end of the war.

• A new Ramstein format meeting will take place on 9 January at the Ramstein Air Base in Germany, chaired by US Secretary of Defence Lloyd Austin. Zelenskyy has said ahead of the meeting that he will urge allies to boost Ukraine’s air defences.

• Lviv Mayor Andriy Sadovyy led a delegation visit to Taipei, during which the Taiwanese government pledged funding for the reconstruction of the UNBROKEN National Rehabilitation Centre. In the absence of formal national ties, this is an example of Taipei strengthening relations via municipal governments.

• The head of the Ministry of Foreign Affairs Andriy Sybiga met with the new Syrian leader Ahmed al-Sharaa in Damascus on 30 December – becoming one of the first foreign officials to visit Syria since the fall of Bashar al-Assad’s regime.
• His Syrian counterpart said the new Syria would like to build ‘strategic relations’ with Ukraine, with a particular interest in Ukrainian agricultural products.

• In 2024, Ukraine reached the same level of agricultural exports as before the start of the full-scale war – $24.5 billion, amounting to 59% of total exports. This is the second historical record (in 2021, the corresponding amount was $27.7 billion).
• In total in 2024, Ukraine exported 78.3 million tons of agricultural products. The largest share is sunflower oil with 21% (almost 6 million tons exported for $5.1 billion). In second place is corn with 21% (29.6 million tons exported for $5 billion). In third place is wheat with 15% (20.6 million tons for $3.7 billion).

Orbán and Fico disappear over New Year – and will PiS get its funding? 

CZECHIA

• Trade and Industry Minister Lukáš Vlček has announced that Czechia is ready to provide Slovakia with gas transmission capacity on its territory. However, PM Petr Fiala has distanced himself from Slovak PM Robert Fico and his visit to Moscow, praising the suspension of intergovernmental consultations between the two nations.
• ‘Our foreign policy is heading in the opposite direction, which is why we have taken a number of measures over the past two years to wean Czechia off Russian crude oil and gas deliveries,’ Fiala wrote to the ctk news agency.
• Czech FM Jan Lipavský was less diplomatic, saying Czechia wanted independence from Russian energy ‘so that we do not have to grovel before a mass murderer.’

• Czech households are expected to overpay by approximately CZK 10 billion on energy bills in 2024. This primarily affects customers with open-ended contracts, who make up about half of all electricity customers in Czechia.
• However, the Energy Regulatory Office forecasts that energy prices will decrease in 2025, with electricity for the average household expected to be 10.1% cheaper year-on-year, and gas 8.5% cheaper. Households without fixed-rate contracts are projected to save CZK 1,000 annually compared to 2024.

• The overall conditions in Czech manufacturing in December recorded the most pronounced deterioration since July, with the PMI manufacturing index falling to 44.8 points from a score of nearly 60 points in January 2022 – ING reports.
• The index has been drifting in contractionary territory for longer than two and a half years, suggesting that the prolonged malaise cannot be attributed to a business cycle justification but rather to broad-based and deeply rooted structural issues.
• Challenges in the European car industry represent the main source of the trouble with suppressed output, declining new orders, and wrecked confidence. Firms have continued to reduce their workforces in the light of lower production requirements.

• The Ministry of Defence (MoD) has put forward an amendment to enhance recruitment efforts and retain personnel in the Czech army, proposing changes like better recruitment benefits and relaxed criminal record requirements for enlistment. The MoD estimates the annual cost to be CZK 375 million.
• As of early 2024, the army comprised 27,826 professional soldiers and 4,266 active reserve members, but MoD data warns of a sharp decline in reservists – with two-thirds of the one million reservists over 45 years old and 40,000 ageing out annually. Plans aim for 30,000 professionals and 10,000 active reservists by 2030.

• The Ministry of Interior published an overview of cases of Russian influence operations in the country, including the collection of information from military officers, explosions in ammunition depots, cyber attacks, elite capture and propaganda information operations involving disinformation channels.

HUNGARY