Hungarian Prime Minister Viktor Orbán and European Commission President Ursula von der Leyen (D. Aydemi/AA/File)

Sunday’s Coverage: Zelenskiy — Russia’s $300 Billion Assets Abroad Must Be Seized

Map: Institute for the Study of War

UPDATE 1144 GMT:

Construction on the long-planned mega-pipeline Power of Siberia 2 from gas fields in western Russia to China is likely to be delayed, says Mongolia’s Prime Minister Luvsannamsrain Oyun-Erdene.

The Kremlin is counting on the 3,550-km (2,206-mile) pipeline, which will cross Mongolian territory, to cover the sharp decline in gas exports to Europe during Vladimir Putin’s invasion of Ukraine.

Oyun-Erdene had expected his construction to begin in 2024, but he says Russia and China are yet to agree on critical details of the project.

Those two sides still need more time to do more detailed research on the economic studies. The Chinese and Russian sides are still doing the calculations and estimations and they are working on the economic benefits.

Russia’s Deputy Prime Minister Alexander Novak wrote last week, in the State magazine Energy Policy, that the timing on construction will be confirmed after signing binding agreements with Chinese partners.

Russia has repeatedly expressed readiness to launch the project, but China has been conspicuously silent.

UPDATE 1056 GMT:

Ukraine Defense Minister Rustem Umerov says his officials have detected “numerous violations” in a review of contracts, terminating them and returning money to the state.

Umerov was appointed in September 2023, with a pledge to “clear the system”. His predecessor Oleksii Reznikov resigned amid high-profile cases of corruption within the Ministry, including overpriced tenders for sub-standard food and supplies.

One of Umerov’s initial actions was the establishment of a new agency to oversee procurement of food, clothes, fuel, and all other non-lethal products in accordance with proper procedure for open tenders.

On Sunday, Ukraine’s SBU State security service said Defense Ministry officials had conspired with employees from a Ukrainian arms firm to embezzle almost $40 million in summer 2022.

The funds were earmarked to buy 100,000 mortar shells. Five people have been charged, and one detained trying to cross the Ukrainian border. Each faces up to 12 years in prison if found guilty.

UPDATE 0910 GMT:

With the EU consider a cut-off of funding to Hungary over its veto of aid to Kyiv (see Original Entry), Ukrainian Foreign Minister Dmytro Kuleba is meeting Hungarian counterpart Peter Szijjarto in western Ukraine on Monday.

Balázs Orbán, the chief political aide to Hungarian Prime Minister Viktor Orbán, says Budapest sent a proposal to the EU on Saturday, accepting use of the bloc’s budget for the Ukraine aid package and issuing common EU debt to finance it provided other, unspecified “caveats” are added.

He complained on social media today, “Brussels is using blackmail against Hungary like there*s no tomorrow, despite the fact that we have proposed a compromise.”

UPDATE 0821 GMT:

A Moscow District Court has arrested several Russian activists in absentia.

Those charged are Maria Pevchikh, the Chairman of the Board of Directors of the Anti-Corruption Foundation; Kira Yarmysh, the press secretary of imprisoned politician Alexei Navalny; Dmitry Nizovtsev, the host of the Popular Politics YouTube channel; and Anna Biryukova, the head of the FBK sociological service.

Pevchikh, Yarmysh, and Nizovtsev are accused of spreading “fake news” about the Russian army. Pevchikh is accused of organizing an “extremist” community, and Yarmysh, Nizovtsev and Biryukova are accused of participating in an “extremist” community. Pevchikh is charged with vandalism, and Biryukova is charged with justifying terrorism.

UPDATE 0728 GMT:

The Ukraine Air Force says air defenses intercepted all eight Iran-made attack drones launched by Russia.

The UAVs were downed over the Mykolaiv, Dnipro, Khmelnytskyi, and Rivne regions.

Russia also fired an Iskander-M missile and three S-300 missiles.

ORIGINAL ENTRY: The European Union is considering a cut-off of funds to Hungary over Prime Minister Viktor Orbán’s block on aid to Ukraine.

Last month Orbán, a long-time ally of Vladimir Putin, vetoed the EU’s allocation of €50 billion to Kyiv through 2027.

See also Ukraine War, Day 682: EU Preparing Alternatives for €50 Billion Funding for Kyiv

A leaked document by a European Council official, seen by London’s Financial Times, urges member states to shut off all funding to Budapest if Orbán does not back down.

The European Council convenes in a special summit on February 1 to discuss the funding package.

Countering Orbán’s “Blackmail

In the document, the officials, criticizing the “unconstructive behaviour of the Hungarian PM”, set out a framework for the funding cut-off and “spooking the markets, precipitating a run on [Hungary’s] foreign currency and a surge in the cost of its borrowing”. The effect would shake investor confidence in the country’s ability to create jobs and drive growth.

The official cites the vulnerability of Hungary to pressure, with its “very high public deficit”, “very high inflation”, weak currency, and the EU’s highest level of debt servicing payments as a proportion of GDP.

Three EU diplomats told the FT that many countries backed the plan. “The mood has got harsher,” said one. “What kind of union do we have if we allow this kind of behavior?”

Another said, “The stakes are high. It is blackmail.”

Hungary’s EU Affairs Minister Janos Boka said Budapest was not aware of the document, declaring that it “does not give in to pressure”: “Hungary does not establish a connection between support for Ukraine and access to EU funds, and rejects other parties doing so.”

The EU has also considered the “nuclear option” of revoking Hungary’s voting rights if it vetoes the aid package at this week’s European Council summit, according to Politico.

European Commission President Ursula von der Leyen said earlier this month that she “strongly preferred” unananimous approval, but that the EU will pass the package with 26 of its 27 members.

Budapest has signalled that it might lift the veto if the aid is reviewed on a yearly basis. Some EU countries oppose this as it gives Orbán leverage to seek concessions through recurrent vetoes.

The EU is holding up about €30 billion in support funds for Hungary because of the Orbán Government’s violations of rights and rule of law.

Before Orbán’s veto last month, Brussels offered the release of €10 billion in return for Budapest allowing the assistance to Ukraine and the start of negotiations for Kyiv’s accession to the bloc.

The negotiations were approved when Orbán briefly left the room, removing the threat of his veto.

See also Ukraine War, Day 659: EU Pays Off Hungary to Ensure Aid to Kyiv