Goulash: Orbán opens the door to Chinese surveillance tech & hundreds of Russians

SPICY SCOOPS

There is always a lot of information that we hear and find interesting and newsworthy but don’t publish as part of our investigative reporting — and share instead in this newsletter. 

BUDAPEST–BEIJING SECURITY PACT COVERTLY INCLUDES CHINESE SURVEILLANCE TECHNOLOGY

Fresh details regarding Xi Jinping’s May visit to Budapest have begun to surface. As it was widely reported, a new security pact between Hungary and the People’s Republic of China (PRC) allows for Chinese law enforcement officers to conduct patrols within Hungary—which is to say, within a European Union member state. Chinese dissidents living in the EU fear that the PRC may abuse this agreement: Chinese policemen “can even go to European countries to perform secret missions and arbitrarily arrest dissidents,” as I reported in a previous Goulash newsletter. However, there’s an additional as yet undisclosed aspect of this security arrangement. According to reliable sources familiar with recent Chinese-Hungarian negotiations, a provision permits the PRC to deploy surveillance cameras equipped with advanced AI capabilities, such as facial recognition software, on Hungarian territory. 

The Orbán government already maintains a significant surveillance infrastructure, including CCTV systems, and there are indications that, besides the Pegasus spyware, they may have acquired Israeli-developed facial recognition technology as well. Nevertheless, allowing the PRC to establish their own surveillance apparatus within Hungary raises distinct concerns. Even if purportedly intended to monitor Chinese investments, institutions, and personnel, the potential involvement of Chinese technology firms, some of which have ties to the People’s Liberation Army or Chinese intelligence and are subject to Western sanctions, could complicate Hungary’s relations with its NATO allies. The Hungarian government, when approached for comment, redirected inquiries to the Hungarian police, who claimed that Chinese policemen won’t be authorized to investigate or take any kind of action on their own. My questions on surveillance cameras and AI technology remained unanswered.

CHINA FURTHER SPLITS THE VISEGRÁD GROUP

One of the factors enabling Hungarian Prime Minister Viktor Orbán’s maneuvers is the deep-seated divisions among its official allies, particularly evident within the Visegrád Group, regarding China. While Slovakia largely aligns with Hungary’s amicable stance towards both China and Russia, Poland adopts a more nuanced position, vehemently opposing the Kremlin while maintaining a softer approach towards China, as previously discussed in this newsletter. Conversely, the Czech Republic takes a hawkish stance towards both China and Russia. During a recent off-the-record discussion with journalists in Prague, a senior Czech official specializing in foreign policy candidly expressed skepticism about the efficacy of the V4 platform. “At this moment, it’s not possible to have a V4 common stance on China. I thought we already learned our lesson with the pandemic and how our supply chains [too dependent on China] were disrupted,” the Czech official said, adding that “I don’t know what needs to happen” for countries to realize the dangers of relying too heavily on China. The Czech official said Xi Jinping’s recent diplomatic visits to Paris, Belgrade, and Budapest was proof China is using the “divide and conquer” tactic. The Czech official felt that it isn’t only Hungary and Slovakia that are neglecting national security risks associated with Beijing, noting that “France doesn’t want to discuss China in NATO,” underscoring a broader reluctance among European nations to confront the challenges posed by China’s growing influence.

CZECHS REMAIN STEADFAST IN SUPPORT OF TAIWAN, OTHERS MAY JOIN THEIR RANKS

In discussions with government officials and China experts both in Prague and Taipei, the Czech Republic and Lithuania emerged as the sole countries openly supportive of Taiwan. This is partly attributed to the currently limited presence of Chinese investments and trade in these nations, affording them the freedom to adopt a more assertive stance. Tomáš Kopečný, the Czech government’s envoy for the reconstruction of Ukraine, emphasized in a conversation with journalists in Prague that regardless of which parties are in power, the Czech Republic’s policy toward China and Taiwan is unlikely to waver. When queried about the stance of the Czech opposition, Kopečný replied, “You could not have heard much anti-Taiwanese stance. Courting [China] was done by the Social Democrats, but not by the [strongest opposition party] ANO party. I don’t see a major player in Czech politics having pro-Chinese policies. It’s not a major domestic political issue.” This suggests that even in the event of an Andrej Babis-led coalition, a shift in allegiance is improbable.

In Taipei, both a Western security expert and a senior legislator from the ruling Democratic Progressive Party (DPP) asserted that numerous Western countries covertly provide support to Taiwan to avoid antagonizing China. The DPP legislator hinted that the training of a Taiwanese air force officer at the NATO Defence College in Rome is “just the tip of the iceberg.” The legislator quickly added with a smile, “the media reported it already, so I can say that.” Delving deeper, the Western expert disclosed that since Russia’s aggression in Ukraine, there has been increased communication between Taiwan and EU countries, particularly those closely monitoring Russia, including on military matters. “There is a lot going on behind the scenes,” the expert noted, with the caveat that certain specifics remain confidential. When asked which Western countries might follow the lead of the Czechs and Lithuanians in openly supporting Taiwan, the expert suggested that most Central and Eastern European nations might be open to such alliances.

MCCONNELL’S CRITICISM OF ORBÁN PRECEDED BY KEY AIDE’S VISIT

In a significant setback to the Orbán government’s lobbying efforts aimed at US Republicans, Senate Minority Leader Mitch McConnell condemned Orbán’s government for its close ties with China, Russia, and Iran during a recent Senate floor speech (watch it here or read it here). “Orban’s government has cultivated the PRC as its top trading partner outside the EU. It’s given Beijing sweeping law enforcement authorities to hunt dissidents on Hungarian soil. It was the first European country to join Beijing’s Belt-and-Road Initiative, which other European governments – like Prime Minister Meloni’s in Italy – have wisely decided to leave,” McConnell stated. This speech appeared to come out of the blue, as there had been no prior indications of McConnell’s interest in Hungary. However, in reality, McConnell’s key aide on national security, Robert Karem, made an official trip to Budapest last October and held multiple meetings, according to a source familiar with the visit. Before working for McConnell, Karem served as an advisor to former Vice President Dick Cheney and as Assistant Secretary of Defense for International Security Affairs under the Trump administration. Multiple sources closely following US-Hungarian relations suggest that McConnell’s outspoken criticism of Orbán, despite the Hungarian Prime Minister’s recent visit to Donald Trump in Florida, is the clearest indication yet that Orbán may have crossed a red line by courting nearly all of the main adversaries of the US.

RUSSIAN PRESENCE FOR PAKS TO EXCEED 1,000 IN HUNGARY BY 2025

Russia’s nuclear industry is not yet under EU sanctions, and as a result, Rosatom’s Hungarian nuclear power plant project, Paks II, is still moving forward. While construction of the plant faces numerous regulatory hurdles, significant Russian involvement is anticipated in the city of Paks. A source directly engaged in the project revealed that the current contingent of Rosatom personnel and other Russian “experts” working on Paks II is projected to double or even triple in the coming year. “Presently, approximately 400 Russians are engaged in the Paks project, with expectations for this figure to surpass 1,000 by 2025,” the source disclosed. This disclosure is particularly noteworthy given the lack of precise public data on the exact number of Russians in Paks. Previous estimates, reportedly from the security apparatus of a certain Central European country, suggested a figure around 700 – a number that appears somewhat inflated to me. However, it is anticipated to escalate rapidly. Notably, the staunchly anti-immigration Orbán government recently granted exemptions for “migrant workers” involved in both the Russian Paks II and the Chinese Belt and Road projects, such as the Budapest-Belgrade railway reconstruction, allowing them to obtain 5-year residency permits more easily.

Central European security experts I’ve asked view the anticipated influx of Russian – and Chinese – workers into Hungary as a security concern for the entire region. Specifically, there are fears that Russia might deploy numerous new undercover intelligence operatives to the Paks II project, who could subsequently traverse other Schengen zone countries with ease. These concerns are not unfounded, as Russia has a history of leveraging state-owned enterprises like Rosatom to cloak its intelligence activities, according to Péter Buda, a former senior Hungarian counterintelligence officer. We reached out for comment, but the Hungarian government has yet to respond to inquiries regarding this matter. (For further insights into the Orbán government’s involvement in the Rosatom project, read “How Orbán saved Russia’s Hungarian nuclear power plant project” by my esteemed Direkt36 colleagues.)

NEW ON VSQUARE

DANGEROUS LIAISONS: NEW DETAILS OF LATVIAN MEP TATIANA ŽDANOKA’S ESPIONAGE FOR RUSSIA

This thrilling investigation by Re:Baltica’s Inga Spriņģe, in cooperation with The Insider’s Michael Weiss and Christo Grozev, unveils stunning new details about Tatiana Ždanoka, a Latvian member of the European Parliament, and her long-term collaboration with the FSB. Initially revealed through a small batch of leaked emails, we now have a deeper understanding of her extensive espionage activities for Russia — claims she continues to deny, asserting that her leaked correspondence with an FSB handler is fake. One of the leaked emails states: “I am sending the draft resolution prepared by the Greens. I can’t access the other groups’ drafts, but you can get an idea from this one. Tomorrow, a compromise will be discussed and agreed upon with several groups. The debate will take place on Wednesday, and the vote on Thursday. T.Ž.” Read the whole story here – and some more revealing correspondences here.

DUBAI UNLOCKED: MEET THE LUXURY APARTMENT OWNER CEE OLIGARCHS AND CRIMINALS

This recent “Dubai Unlocked” investigation reveals how Dubai has become a luxurious playground for oligarchs and criminals from all parts of the world – including from Central and Eastern Europe. These high-flyers are using Dubai’s lax financial laws to stash their fortunes and evade justice back home. VSquare’s round-up focusing on the Visegrád region highlights prominent figures like Slovak oligarchs Miroslav Výboh and Norbert Bödör, charged with corruption multiple times, and Piotr Obarzanek, a Polish fugitive living it up with luxury cars and celebrity selfies. Then there’s the entourage of Ádám Matolcsy, the son of the Hungarian National Bank’s governor, and his lavish apartments in Palm Jumeirah. This tree-shaped artificial island is also popular among shady Czech businessmen such as Jan Kočka and Ivo Rittig. Read more about the findings here.

SLOVAK EDITORS-IN-CHIEF CONDEMN THE ATTACK ON PRIME MINISTER ROBERT FICO

In a joint statement, leaders of influential Slovak newsrooms who previously voiced concern over Robert Fico and his government’s attacks on independent media now condemn the assassination attempt against the Slovak Prime Minister. “The attack on Robert Fico is an attack on all of us. It is a path of hatred that cannot control Slovakia, because it will move us to the darkest places on the map,” the statement reads. 

MORE FROM OUR PARTNERS

BIOFUEL BARRONS. Rapeseed biofuels were supposed to be a cure for the climate crisis, but they have become a huge business. ICJK.sk reveals how Ján Sabol in Slovakia or ex-Prime Minister Andrej Babiš in the Czech Republic are also making money from it. (Text in Slovak.)

MILLIONS, MASSAGES AND MAYBACHS: THE TRAVEL LUXURIES OF MEDIA MAN PHILIP RÁKAY. Atlatszo.hu goes into detail about how a pro-Orbán pundit benefiting from public money is showing off a luxury car worth more than 200 thousand euros. (Text in English and Hungarian.)

DUBAI LUXURY APARTMENTS BOUGHT BY A COMPANY LINKED TO THE INNER CIRCLE OF THE SON OF HUNGARY’S CENTRAL BANK GOVERNOR. Direkt36, the Hungarian partner of the “Dubai Unlocked” investigation, wrote its story not only based on leaked real estate and land registries but also on photos uploaded to Pinterest by the Hungarian National Bank governor’s son. When contacted by journalists, he immediately took down the pictures taken inside a Dubai luxury apartment. (Text in English and Hungarian.)

CZECH DEFENDANT IN AN EMBEZZLEMENT CASE OWNS AN APARTMENT IN DUBAI. Investigate.cz published multiple articles as part of the “Dubai Unlocked” investigation – this one is about businessmen convicted in a Czech fraud case, and their luxury apartments. (Text in Czech.)

WANTED IN POLAND, FOUND IN DUBAI. Frontstory.pl’s investigation based on the leaked Dubai registries tells the story of a Polish fugitive who is wanted for leading a criminal organization at home — and is quietly running a business in the UAE’s capital. (Text in Polish.)

This was VSquare’s 21st Goulash newsletter. I hope you gobbled it up. Come back soon for another serving.

Still hungry? Check the previous newsletter issues here! 

SZABOLCS PANYI & THE VSQUARE TEAM