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EU's Balancing Act: Elections, Sanctions, and Ukraine Aid

  • The European Parliament elections in June will trigger a race for top EU institutional roles, with member states considering candidates based on political balance, gender, and geography.
  • Hungary, under Viktor Orban, plays a contentious role, potentially impacting decisions on EU leadership and financial aid to Ukraine.
  • Key issues include securing financial aid for Ukraine, navigating sanctions on Russia, managing Hungary's influence, and supporting Ukraine militarily through bilateral means and NATO cooperation.

This year the EU will be focused on the European Parliament elections taking place across the 27-member bloc on June 6-9. The vote will open up a scramble for the selection of the top three institutional positions in Brussels: presidents of the European Council and the European Commission and EU foreign policy chief.

It is the prime ministers and presidents of the member states who select candidates for this role, often picking one from among their group. They do this by taking all sorts of parameters into consideration; there needs to be a gender balance and a balance of political allegiances, with the political party that finishes first in the European Parliament elections normally getting a first crack at naming the European Commission's president.

There also needs to be a good geographical spread, meaning ideally the positions will be dished out to people from northern, southern, western, and eastern parts of the union.

This "silly season" of jockeying for positions, both behind the scenes and in public, started early this year with Charles Michel, the president of the European Council -- which defines the political direction and priorities of the EU -- announcing on January 7 that he will run as a candidate for the European Parliament elections.

This surprise announcement will also focus the minds of EU leaders as it opens up the possibility that Hungarian Prime Minister Viktor Orban -- who is involved in various disputes with the bloc about the rule of law in his country and has often been noncooperative with Brussels, especially on Ukraine -- could become president of the council. Amid fears the divisive right-wing Hungarian leader could upset the EU's apple cart, Orban would not be a popular choice in Brussels or in most member states.

Orban could only become council president on a technicality. Under EU rules, if there isn't a permanent president of the European Council -- Michel's current job -- the country that holds the rotating six-month presidency will take over the president's functions. And Hungary is the member state that will hold that rotating presidency from July 1.

It's unlikely to happen, though. Michel, if elected to the European Parliament, would probably take up his seat in mid-July. But with two EU summits already scheduled in June to agree on the trio of top positions, chances are high that a successor will be found.

In European Council votes, there are no veto opportunities for Hungary or any other countries. Decisions are taken via qualified majority voting, thus support from 55 percent of EU member states, representing 65 percent of the EU's population.

Normally, the new council president would take up their position toward the end of the year; Michel's mandate, for example, runs until November 30. But this potential power vacuum between a possible selection of a successor in June and entering office in late fall is unlikely to create a backdoor for Orban, as a chosen successor could start their mandate as soon as the summer. An early start would only require a change to the rules of procedure, which can be pushed through with just a simple majority.

Deep Background: Internal politics aside, there will be several issues to look out for this year pertaining to Ukraine, arms deliveries, enlargement of the bloc, and sanctions on Russia. The most pressing of these issues is financial aid to Ukraine, especially after Hungary blocked a 50 billion-euro ($55 billion) package meant for Kyiv.

Ukrainian officials have said the country can survive without the money in the first quarter of 2024, so while the clock is ticking for Brussels to reach consensus on the financial package, there is still time. EU officials, speaking on background, have told me the package is likely to be green-lighted when EU leaders meet for another summit in Brussels on February 1.

It's likely to be pushed through for several reasons. For starters, many believe Hungary overplayed its hand in December 2023 when it blocked the aid package for Ukraine. Notably, Hungary was then the lone naysayer, with Slovakia -- under the rule of left-wing populist Robert Fico since October last year -- not aligning itself with Budapest as some had expected. It appears the country's dire economic situation and the fact that it is a eurozone country moderated Bratislava's response.

The 50 billion-euro package, which is meant to cover from 2024 to 2027, is also the largest chunk of a mid-term EU budget increase. Several billions have been earmarked to manage migration, help the bloc combat natural disasters, and provide more economic aid to the Western Balkans -- all initiatives Budapest supports. For this reason, officials in Brussels and some member states are keen to keep it all bundled together -- either all is approved or nothing.

Threats from the other 26 member states could also keep Hungary in line. The most credible one is to simply circumvent Hungary altogether. The 50 billion euros consists of 33 billion euros of loans guaranteed by the EU budget but also 17 billion euros from grants.

It's possible that amount could be covered by the other 26 members states, which would also pay for Hungary's share. The problem with this approach is that it would be time-consuming and risky as all 26 national parliaments would have to give their consent.

However, just the fact alone that other member states are looking at ways of bypassing Budapest could be enough of a scare tactic to secure a deal. Another threat aimed at Budapest could be invoking Article 7 of the Treaty On European Union, which would essentially strip Hungary of voting rights in the Council of the European Union, where government ministers from member states convene to amend and adopt laws and coordinate policies.

For such a drastic option, unanimity would be needed, and it's unlikely countries such as Austria and Slovakia, which are politically aligned with Hungary on many issues, would agree to freeze out Budapest. For EU officials, that would be a nuclear option if Hungary doesn't play ball -- and one Brussels will keep in its back pocket.

Another stick would be postponing Hungary's EU presidency, due to start in July. If four-fifths of the member states agree, Hungary's presidential stint could be postponed, with the country bumped down the list and not getting its chance till possibly as late as 2030. Again, as with the Article 7 route, as far as I understand from talking to EU officials, this is not actively being considered but it could be if there is no agreement at the EU leaders' summit in February.

Along with the sticks, the EU could also offer a few carrots. Brussels is still withholding 20 billion euros of money meant for Hungary. If the money is eventually released, the earliest that would happen would be after the February summit as there wouldn't be enough time for the European Commission to disburse it, especially given Budapest's slow pace of reforms.

The carrot probably wouldn't come in the form of cash, though, as was the case in December when Hungary received 10 billion euros of previously frozen EU funds -- a move many EU watchers believe paved the way for the bloc to green-light the start of accession talks with Ukraine after initial Hungarian resistance.

Instead, to get Hungary to sign off on Ukraine aid, Budapest could be offered more veto opportunities in the future. Hungary has pushed for so-called annual reviews of the cash flow to Kyiv. This means that, in principle, Budapest could stop the dispersal of funds every year, as the 50 billion euros is spread out over a four-year period.

While Hungary could still make trouble under this scenario, officials in Brussels just want to get money flowing to Ukraine as soon as possible, even if it's just a chunk of it for now. It is worth noting here that there is still no agreement on the amount to be dished out to Ukraine annually, and it doesn't have to be an even split of 12.5 billion euros each year until 2027.

Drilling Down:

  • Instead of targeting Ukraine, Hungary could concentrate any new veto opportunities on the enlargement process. Amid much fanfare, EU leaders in December decided to open accession talks with Ukraine and Moldova. For Bosnia-Herzegovina, there was a partial green light to start talks but only after the European Commission reports back, by March at the latest, on the progress of various reforms.
  • The issue here is that de facto EU accession talks with Kyiv and Chisinau haven't started yet, and no one really knows when they will. There are, in a sense, two things that need to happen. The first is screening, which essentially means EU officials go to Ukraine and Moldova and comb through the entire EU rulebook, which is divided up into 35 policy areas, known as chapters, and which both countries have to adopt as national legislation. This forms the basis of the EU accession framework, which needs to be adopted at the end of the screening process.
  • As a recent example, for North Macedonia and Albania, the screening took 18 months. I understand from speaking to EU officials on background that Kyiv thinks it can be done in six months; others in Brussels say that is too optimistic. The issue here is the screening hasn't started yet for either Moldova or Ukraine, something the European Commission must initiate.
  • According to several diplomats from EU countries who spoke on the condition of anonymity because they weren't authorized to speak on the matter, EU enlargement commissioner Oliver Varhelyi, a Hungarian close to the government in Budapest, isn't too keen to rush Ukraine's EU membership bid. What's more, a number of EU member states are probably not keen to proceed quickly either, stressing the bloc needs to undergo institutional reforms before any further enlargement can take place.
  • There will also be another European Commission assessment. When it reports back on Bosnia, it will also mention some of the reforms still left for Moldova and Ukraine to complete. This assessment is slated for February 27, although that date could change. If the assessments are positive, there is hope in Kyiv and Chisinau for an intergovernmental conference to be convened in the first half of the year. This would be a symbolic opening of accession talks, but for that, all 27 member states must consent, something far from certain at this stage.
  • Regarding sanctions on Russia, the EU passed its 12th package just before Christmas, and there is a chance a 13th package could be agreed around the second anniversary of Russia's full-scale invasion of Ukraine in late February. But since the Russian nuclear and gas industries likely won't be targeted, there is not much more that can be sanctioned -- or rather, there is not much more the EU is prepared to sanction. One possibility is for the EU to consider a wider ban of products that aren't allowed to transit Russia, remove or decrease state aid for EU companies still doing business in Russia, and finally use the instrument, so far untouched, to sanction third-country companies doing business with Moscow.
  • The EU's economic sanctions on Russia need to be formally extended by six months by the end of January. At the EU leaders' summit in December, there was political agreement to prolong sanctions, although in return for their support some members states might get concessions in other policy fields. The same is true of the extension, due in March, of asset freezes and visa bans the bloc has slapped on the nearly 2,000 individuals and firms over the last two years. Hungary has previously used its veto threat to try to remove some names and, back in September, three Russian individuals were delisted.
  • There is also an estimated 300 billion euros of frozen Russian assets in the bloc. In December 2023, the European Commission presented a plan to seize the profits and use it for Ukraine's reconstruction. Despite concerns from members of the eurozone that such a move could undermine the euro's standing as an international currency, talks are under way among the Group of Seven leading industrial nations, with the United States, United Kingdom, and possibly Japan, indicating they would be on board with the European Commission's plan.
  • Finally, the EU will try to maintain arms deliveries to Ukraine. It is, however, unlikely this will be done via the common European Peace Facility as Hungary continues to block a 500 million euros tranche, and Germany has questioned the legality of topping up the fund with more cash. Instead, increased bilateral aid seems to be the way forward for now. The big test will be if the EU manages to deliver 1 million rounds of 155-millimeter ammunition to Ukraine by the end March, as promised last year. There have been a few reports that the EU won't make the deadline, and it will largely depend on the EU's capacity and how much pressure Brussels can put on the defense industry in the coming months.

Looking Ahead

How to support Ukraine militarily will also be top of the agenda when NATO's defense chiefs meet in Brussels on January 17-18. Ukrainian officials have briefed the military alliance about the recent Russian missile attacks on the country, and several NATO members have promised to increase the supply of defense and anti-drone systems. There should be more concrete announcements in the weeks leading up to the NATO defense ministers' meeting in mid-February.

Last but not least, the first European Parliament plenary of the year kicks off on January 15. For four days, members of the chambers will debate numerous issues, including Ukraine and rule-of-law concerns in Hungary. On the latter issue, lawmakers look set to pass a nonbinding motion pushing for EU funds earmarked for Hungary to remain frozen.


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