Goulash: Tales of spying, smuggling, and Chinese influence

Szabolcs Panyi 2023-12-21

Goulash Newsletter

Greetings to our subscribers. Believe it or not, you’re reading the tenth edition of Goulash! To celebrate this anniversary, our latest newsletter is packed with an extra amount of fresh and juicy scoops on Hungary, investigations into Ukrainian draft dodging (with Czech ties), as well as an analysis of Robert Fico’s attack on Slovakia’s anti-corruption institutions. And, since Christmas is coming, I’ll take this opportunity to recommend some of my colleague’s books, which would make great presents. If you haven’t yet, please tell your friends that it’s worth subscribing to Goulash with this link! – Szabolcs Panyi, VSquare’s lead Central Europe investigator

Back in 2016, when the soon-to-be founders of VSquare gathered in Warsaw to discuss our cross-border initiative, we worked to come up with a name. Although we eventually settled for VSquare (standing for V4, the Visegrád Four countries), the runner-up name for our site—proposed by Investigace’s Pavla Holcová—was goulash. But no brainstorming session is ever really wasted, and the name will be served as our new newsletter.

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. In this edition, we’re focusing on Hungary and Budapest, and also following up on some of our earlier scoops. But first—we start with Poland.

POLISH INTELLIGENCE COMMUNITY BRACING FOR GENERATIONAL CHANGE AFTER AN ERA OF POLITICIZATION

While the new democratic government in Poland is expected to be formed next week, the controversial parliamentary commission to investigate Russian influence, established by the outgoing Law and Justice party, completed its work with a “partial report.” The commission’s political aim was to smear leaders of the Polish opposition–who have since won the parliamentary election–as Russian agents. The authors of the report concluded that neither Donald Tusk—the incoming prime minister—nor a few other top officials from his former government should run for any public office related to national security. This also includes Tomasz Siemoniak, who is soon taking over the role of Minister-Coordinator of Intelligence and Security Services. As funny as it might sound—even members of Andrzej Duda’s Presidential Office admit that they don’t treat the report seriously—according to intelligence experts, the report might seriously damage the reputation of Polish national security institutions, especially after the report accused some Ukrainian and NATO diplomats of being linked to the FSB, an accusation that was made “by mistake” (as revealed by Newsweek and Oko.Press). 

Piotr Pytel, former head of Polish counterintelligence, accused by the authors of the report of “secret meetings with Russian diplomats” and “disinformation campaigns on Law and Justice’s inclinations towards Russia,” told VSquare that he is planning a lawsuit against the commission. But there are other serious issues with the report. According to Siemoniak, interviewed by our editor-in-chief Anna Gielewska for RMF, materials included as attachments to the report some classified files from previous investigations, which should have never been published on the prime minister’s office website. Siemoniak also hinted at his future plans for Polish national security. When our editor-in-chief asked him whether the same former top intelligence officers running the national security services in the former Tusk government would soon be back in office, he suggested that he expects a generational change in Polish intelligence.

OTHERS SPY ON RUSSIA, HUNGARY SPIES ON UKRAINE

Speaking of Ukraine: Relations between Budapest and Kyiv are at an all-time low. With Hungarian Prime Minister Viktor Orbán flat-out opposing Ukraine’s EU accession in recent weeks, Ukraine’s SBU is now accusing former president Petro Poroshenko of plotting to meet in secret with Orbán, a move that would have played into the Kremlin’s hands (while there are still lots of questions, Hungary actually confirmed the planned meeting). Below the surface, however, it’s even more tense. When it comes to intelligence sharing between allies, most EU/NATO countries share what they obtain from spying on Russia. However, it seems that Hungarian civilian and military intelligence have a somewhat different focus—Hungary is sharing relatively a lot of intelligence collected on Ukraine, with its allies, according to two intelligence officers working for EU/NATO countries. One of the officers, speaking of the credibility of these reports, told us, “These are interesting materials; however, their reliability is a different story.” (Here you can find more VSquare stories about the war in Ukraine.)

SCOOP CONFIRMED: DUBAI NEIGHBORHOOD FOR BUDAPEST TRIGGERS OPPOSITION

“We will never build a mini-Dubai. It will be a maxi-Dubai once it’s built,” Viktor Orbán’s Minister of Construction and Transport János Lázár said of our widely quoted scoop earlier this week. He not only confirmed plans of building a huge, Dubai-style neighborhood in Budapest, he actually doubled down on them. Minister Lázár even compared the Emirati real estate project to Budapest’s spectacular late-19th century development—raising lots of eyebrows as Dubai-style ultramodern architecture may seriously damage the city’s majestic neoclassical image, not to mention the skyline. However, he sounded ambiguous when asked if he actually supports the idea of erecting a 220-240 meters tall skyscraper, which we also reported as being part of the plan, and said he can “neither confirm nor deny” that Emirati billionaire Mohamed Alabbar’s Emaar Properties is behind the project. In reality, Lázár and Alabbar were actually negotiating the project in person in Budapest as our scoop was published two weeks ago, a source close to the government told me. 

Lázár is in a delicate position here as he had publicly and vehemently opposed building highrises, while Budapest’s mayor, who is in the opposition, is also heavily against erecting skyscrapers, and pledges to do whatever it takes to prevent it—while also signaling openness to supporting some other parts of the plan. According to a source close to the government, at a recent closed-door meeting, Lázár put the project’s overall value closer to $10B—instead of the official $5B—and said that, while he’s supporting every other part of the project, he won’t let a skyscraper be built. Lázár also believes that if he can somehow cap the height of this tallest building, he can also sell this as a compromise to Budapest mayor Gergely Karácsony. However, there’s much more at issue with the planned Dubai neighborhood than a single highrise. For example, it’s a high-end luxury development which absolutely lacks plans for building public or even affordable housing for local residents—an issue that grassroots leftwing group Szikra (Spark) is trying to turn into a protest movement at a time of housing shortage.

HUNGARY’S LARGEST INVESTMENT TO CREATE LOTS OF JOBS–SOME FOR ROBOTS ONLY

The gigantic Emirati project is not the only development of this magnitude that may fail to deliver all promised benefits to Hungarian citizens. China’s Contemporary Amperex Technology Co Limited (CATL) is building a 100 GWh battery plant in the city of Debrecen in east Hungary, labeled as Hungary’s largest foreign investment to date, worth €7.34B ($8.5B). While the Orbán government tries to sell the environmentally concerning factory to locals by emphasizing that it would create 9,000 new jobs, reality is more complicated. According to a well-connected China researcher from Western Europe, Chinese investors are fully aware of Hungary’s chronic labor shortage as well as the political risks and image problems associated with employing migrant workers. Thus the plan, according to the researcher, is to automate CATL’s battery production as much as possible to cut down labor needs, with robots and equipment operated on an internal 5G network, very likely supplied by Huawei. So let’s take that promise of 9,000 new jobs with a grain of salt.

CHINESE FIRM INVOLVED IN DEADLY TRAIN CRASH GETS HUNGARIAN JOB

Now following up on some of my other previous scoops. There was a serious internal Chinese-Hungarian row over whether China’s last Belt and Road (BRI) project in the EU, the Budapest-Belgrade railway reconstruction, should use Chinese or Western technology. Xi Jinping eventually pressured Orbán to accept that the railway signaling equipment and the so-called automatic train control system must be Chinese. Now I can reveal, based on what a source close to the Hungarian government told me, that China Railway Signal & Communication (CRSC) will provide the equipment—instead of AŽD Praha, the Czech company for which the project consortium’s Hungarian partners were pushing. CRSC is the same company that’s already involved in the Serbian leg of the BRI railway project. 

Previously, for example, CRSC also provided equipment for the Moscow-Kazan high-speed rail. At present, it’s also busy developing the Jakarta-Bandung high-speed train line—along with Huawei. However, the company has a checkered past. In 2011, they were found responsible for a deadly train crash killing 40 people. “According to a final investigation report, the train crash was caused by major design flaws in train operating equipment, relaxed safety controls and poor emergency response to equipment failure,” the state-run Xinhua news agency said at the time. Dozens of CRSC managers were punished, and one of them even collapsed and died during a post-crash inspection.

ORBÁN’S THINK-TANK REACHING OUT TO BOTH US REPUBLICANS AND CHINA

Mathias Corvinus Collegium (MCC), the government-supported think-tank and college headed by Viktor Orbán’s political director, is establishing closer ties with China at a fast pace, sources with knowledge of the institution’s inner workings told me. (Like Corvinus University, MCC is also largely financed through MOL shares.) For example, representatives of the Shanghai-based Fudan University–which was on course to set up a huge campus in Budapest until I revealed these plans, after which the project was put on hold—are now in regular contact with MCC, one source told me. A few weeks ago, at a conference on emerging technologies, the line-up was filled with Chinese speakers—two of them from Fudan. From November, MCC has also employed a Chinese citizen, who had previously published on US-Chinese relations from a Chinese perspective, as researcher. I asked MCC if they screened their new hire—for example, if they know whether he’s a member of the Chinese Communist Party—but received no reply. The visible pro-Chinese shift at MCC is rather intriguing, especially because, at the same time, MCC is also busy networking with fiercely anti-Chinese US Republicans. (In case you missed it, here’s our latest by atlatszo.hu on Hungarian lobbying in Washington DC, and I’d also recommend this OSW analysis on Hungarian–US relations.)

Got a nice scoop to include in our Goulash newsletter? Contact me at [email protected]

NEW ON VSQUARE

THE SMUGGLER’S TALE: ‘SAVING LIVES IS MY MISSION, I CHARGE $4,500 PER LIFE’

The situation on the battlefield in Ukraine is getting complicated—and the one in Ukrainian society is, too. One of the most sensitive areas is where law-abiding patriotism clashes with the most basic survival instinct: draft dodging, or escaping military service. The number of adult men of conscription age within the Ukrainian refugee population is on the rise, and Kristina Vejnbender’s detailed and colorful story for investigace.cz tells exactly how they escape. By analyzing social media accounts, and even identifying and contacting an experienced smuggler who is eventually eager to go into details of his tradecraft, this article is one of the most candid accounts of Ukraine’s painful and complex reality.

CLIMATE CHALLENGE IN EUROPE: MORE WILDFIRES, FEWER FIREFIGHTERS

Remember all the news from the summer about wildfires sweeping across the globe? Pictures of flames from Sardinia, Portugal or Santorini? As we’re seeing the consequence of climate change accelerating, one would think that we’re also trying to get more prepared. You would be wrong. This joint story by FRONTSTORY.pl and Hungary’s EUrologus reveals that the number of firefighters is shrinking and the firefighters themselves are growing older, and points out other serious problems as well.

Szabolcs Panyi

VSquare’s Budapest-based lead investigative editor in charge of Central European investigations, Szabolcs Panyi is also a Hungarian investigative journalist at Direkt36. He covers national security, foreign policy, and Russian and Chinese influence. He was a European Press Prize finalist in 2018 and 2021.