Hungary withdraws from ‘Russian spy bank’ after US sanctions

When the bank moved its headquarters from Moscow to Budapest in 2019, all alarm bells rang among Western intelligence services. Hungarian Prime Minister Viktor Orbán’s government, which at the time was strongly opposed to Russia, promised the organization full immunity from criminal prosecution. There was also no need to monitor the bank. The bank building has been declared a diplomatic site.

It was feared that a center would emerge in Budapest from which Russian intelligence agents could operate. One Hungarian opposition politician even called the IIB “Putin’s Trojan Horse”.

It has never been conclusively shown whether the bank was indeed used for espionage activities. But circumstances point in that direction. In any case, it is clear that when the bank relocates in 2019, Russia could use a new cover for spies in Europe.

In 2018, Western countries expelled dozens of Russian embassy workers after a former Russian spy and his daughter were poisoned in England. This was done by agents of the GRU, the Russian intelligence service. The label of embassy employee has regularly been used to provide diplomatic cover for spies.

Moreover, the boss of the bank comes from an important family of spies. Nikolai Kosov’s father was the top KGB official in Budapest in the 1970s, his mother has been described by Russian media as “one of the most extraordinary spies of the 20th century”. Kosov himself is also said to have a background in the intelligence services, but he denies this. The IIB also denies the spying allegations.

Hungary remained the only EU member

The bank also rejects the “Russian” label. In fact, it is not a Russian bank, because several states are shareholders in the development bank. Russia owns around 47% of the shares, making it by far the largest shareholder. Hungary owns about a quarter of the shares.

The IIB was founded in 1970 as a development bank for communist countries. Besides members of the Soviet Union, Hungary, Bulgaria, Mongolia and Cuba, among others, also became shareholders of the bank. When the Soviet Union collapsed, the need for banking largely disappeared. Hungary has already left the IIB once – quite remarkably under a previous reign of Viktor Orbán in the 1990s. later.

The IIB once again leads a moribund existence. The bank would collapse. After Russia invaded Ukraine, the bank was hit with sanctions, among others, from the EU. In addition, several countries have withdrawn. Hungary remained the only EU member after the Czech Republic, Slovakia, Bulgaria and Romania announced their exit from the bank.

Sleeper in line-up against Russia

Hungary didn’t want it at the time, but under American pressure they continue to veer off course, despite saying on Wednesday they wouldn’t. The US says the bank is being used to circumvent sanctions and increase the “presence of Russian intelligence in Europe”. Read: It is a hotbed of espionage activity, according to the United States. The US ambassador also criticized Prime Minister Orbán on Wednesday for his ties to Russia.

According to Hungary, the bank has played an important role in the development of Central and Eastern Europe, but has “lost its meaning” due to US sanctions, the economy ministry said in a statement. It is not clear whether the bank’s headquarters will now also disappear from Hungary.

The Western allies are keen to bring Hungary to heel. The country is regularly one of the biggest troublemakers when it comes to stance on Russia. This has to do with Hungarian economic interests, but also with the good relations between Orbán and Putin.

Hungary considers many of the sanctions to be ineffective and too harsh. The country also said recently that it would not arrest Putin if he set foot on Hungarian soil. The country is officially obliged to do so as a member of the International Criminal Court. He issued an arrest warrant for Putin. This week, Hungarian Foreign Minister Péter Szijjártó also visited Moscow for talks on energy supply.