Wider Europe

Welcome to Wider Europe, RFE/RL's new newsletter focusing on the key issues concerning the European Union, NATO, and other institutions and their relationships with the Western Balkans and Europe's Eastern neighborhoods.

I'm RFE/RL Europe Editor Rikard Jozwiak, and this week I'm drilling down on two big issues: Getting more Russian money for Ukraine and Armenia’s long road to EU visa liberalization.

Briefing #1: How The West Will Use Frozen Russian Assets

What You Need To Know: The European Union and the Group of Seven (G7) leading industrialized nations are slowly gearing up new legislation that will allow a $50 billion loan to go to Ukraine by the end of the year.

The political decision for that loan was already agreed when the G7 met in Italy for its annual summit on June 13-15. In the communique from the meeting, it was stated that “we decided to make available approximately $50 billion leveraging the extraordinary revenues of the immobilized Russian sovereign assets, sending an unmistakable signal to President Putin.”

There are roughly $282 billion worth of Russian frozen assets in G7 countries after these resources were targeted by sanctions in early 2022, mostly in the EU. And while no one is keen yet to face the legal consequences of actually confiscating the money -- as fears persist it could dissuade other countries from investing in the eurozone and thus undermine the euro -- there is momentum now to get creative in using the funds to financially support Kyiv.

The G7 declaration stated as much by noting that “Russia must end its illegal war of aggression and pay for the damage it has caused to Ukraine. These damages now exceed $486 billion, according to the World Bank. It is not right for Russia to decide if or when it will pay for the damage it has caused in Ukraine. Russia’s obligations under international law to pay for the damage it is causing are clear, and so we are continuing to consider all possible lawful avenues by which Russia is made to meet those obligations.”

Deep Background: Most Russian money located in the EU, the onus is on Brussels. EU leaders, including more Ukraine-skeptic nations such as Hungary and Slovakia, endorsed the G7 outcome at a summit in Brussels just a week after. They unanimously agreed on conclusions that urged the European Commission to take the work forward on this and added, “Subject to EU law, Russia’s assets should remain immobilized until Russia ceases its war of aggression against Ukraine and compensates it for the damage caused by this war.”

It should be recalled that the bloc already has a mechanism in place to send the annual windfall profits from the frozen Russian assets to Ukraine. This is estimated to generate some 3 billion euros a year ($3.2 billion), with 90 percent of it going to military equipment and the rest for reconstruction.

The first tranche of this money was disbursed over the summer.

This new G7 initiative, however, goes a step further, bringing the interest proceeds from frozen assets via a loan that is guaranteed by the G7 countries.

The preliminary division is that the EU and the United States will back this up with $20 billion each, and Japan and the United Kingdom will guarantee the remaining $10 billion between them. But a lot of nitty-gritty legal groundwork is still needed.

Drilling Down

• The item was discussed for the first time by EU ambassadors at the end of July with the European Commission providing a one-page outline, seen by RFE/RL, of what the options are. The idea is that the commission will present a fully fleshed-out legal proposal at the end of August with EU ambassadors discussing the text on September 4. But from the one-pager it is already clear that there are essentially just two avenues available to take.
• The main issues to ensure are legal certainty and predictability. And that means that Russian assets remain frozen for a longer period. Brussels is looking to either agree on an open-ended immobilization of Russian assets or prolong this sanction by a longer period of up to 36 months. It’s worth noting that all types of economic sanctions against Russia that Brussels has imposed currently are rolled over via consensus by the 27 member states every six months, with the latest prolongation confirmed on July 22.
• According to diplomats familiar with the initial discussion, the overwhelming majority favor an open-ended immobilization. The option paper says this option will still be “reviewed by the Council at regular intervals (e.g. 12 months), on the basis of clear predefined criteria (i.e. the end of the war of aggression and assurances of nonrepetition, the payment of compensation by Russia, etc. as set out by the EUCO – European Council).”
• It also adds that “ending the immobilization of the CBR (Central Bank of Russia) assets would require a new Council act, based on a report by the High Representative (EU foreign policy chief)/Commission assessing that the criteria for lifting are fulfilled.”
• The question is, however, whether Hungary has the appetite to agree on this. So far, EU leaders have never threatened not to roll over the sanctions but at the same time they haven’t been militantly against moving away from an extension beyond the six months mark. Budapest might go against both options outlined in the paper, and that would mean there isn’t much of the legal certainty and predictability that the EU seeks.
• If the EU can ensure this, the question is whether the United States, in the middle of its election period, is ready to give a green light. The U.S. Congress needs to approve this loan, and if there are any fears that Hungary (or any other EU member states, for that matter) might threaten to block the renewal a couple of times a year, the whole scheme risks unraveling.
• That’s why the United States initially wanted the EU to guarantee most, if not all, of the $50 billion and why most member states would prefer an open-ended immobilization. The diplomatic wrangling on this is likely to continue throughout the autumn.

Briefing #2: Armenia's Long Road To Visa Liberalization

What You Need To Know: EU foreign ministers officially gave the green light to the European Commission to commence visa liberalization dialogue with Armenia on July 22. The move came the same day as the bloc also rubber-stamped a 10-million-euro ($11 million) package of nonlethal military aid for Yerevan under the European Peace Facility (EFP) -- the first time ever that the South Caucasus republic got such support from Brussels.

EU diplomats I have spoken to have noted that the two decisions signal closer cooperation with Armenia as the country appears to loosen its political and economic dependence on Russia.

Of the two deals, the start of the visa liberalization dialogue is the bigger prize -- at least down the road. It would, if concluded positively in the future, allow Armenians with biometric passports to travel to all EU countries except Ireland plus non-EU Iceland, Liechtenstein, Norway, and Switzerland for 90 days in any 180-day period without any need for a visa.

Ask any official from Georgia, Moldova, or Ukraine and you will get the answer that they have all benefited greatly from visa-free travel to the bloc. It is, however, worth noting that the recent green light given by EU member states only represents the first baby steps of a process that will take years.

Deep Background: How long will it take? That's ultimately a political decision, of course. But I understand that the European Commission, which now is the EU body in charge of the matter, wants to launch the visa dialogue as early as this autumn.

This is significant as the European Commission is on its last leg of its current five-year mandate. In December, a new commission should be sworn in if all goes well with hearings of the new commissioners (26 of them; President Ursula Von der Leyen already passed a vote in July) scheduled in relevant European Parliament committees in September and October.

That means no time should be lost by waiting for a new team to take over in Brussels. After the dialogue is launched, the commission will work on a Visa Liberalization Action Plan (VLAP), which is a sort of guiding document for what Armenia needs to do to get a visa-free regime.

It’s worth comparing the timelines for Georgia, Moldova, and Ukraine. Kyiv went from launching the visa dialogue to getting a VLAP within a month -- largely because it had a big civil service that could expedite these things quickly. For Georgia and Moldova, it took around six months to go from one to the other, and it is likely to be something similar for Armenia.

What will the VLAP contain? Essentially, it will follow the same format as with the three other Eastern partners that secured visa-free travel to the EU, even though it is expected from diplomats I have spoken to that there could be issues that are tailor-made for Yerevan though these are yet to be determined.

Armenia will essentially have to undergo reforms in four areas: firstly, document security, including a fully functional system of providing biometric passports and a unified and secure electronic population registry.

The second bloc of reforms is perhaps the trickiest to complete as it concerns migration management and asylum. Armenia will have to ensure strict rules when it comes to readmitting Armenian citizens that sought asylum in the bloc but failed to get it, preventing migration from happening in the first place, and increasing capacity for receiving and accommodating asylum seekers.

The third area is called “public order and security” but essentially contains measures to fight corruption, terrorism and organized crime.

The fourth and final issue is about fundamental rights -- essentially ensuring that everyone has the right to have access to official Armenian travel documents.

Drilling Down

• After the VLAP is presented, the European Commission will issue progress reports on how Armenia is faring in the various fields every six to eight month or so. For Ukraine, for example, the VLAP was presented in November 2010 and the first report came in September the following year.
• The sixth and final report from the Commission on Ukraine was published in December 2015 and in the spring of 2016 it recommended visa liberalization for Ukrainian citizens. So, all in all a process lasting nearly six years.
• For Georgia, on the other hand, it went faster. The VLAP was presented in February 2013 and only four reports were needed, from the period November 2013 to December 2015. The commission then recommended a visa-free regime in March 2016. So pretty much three years.
• But there is a catch. As mentioned above, this is politics, after all. Even if the European Commission, sometime in the future, assesses that Armenia has fulfilled all conditions, it doesn’t mean Yerevan will get a visa regime right away.
• The move has to be agreed by both the European Parliament and all EU member states. And while the former rarely causes any problems when it comes to granting visa-free status, it can be hard to find consensus among EU member states.
• It took a year from the European Commission’s recommendations to member states finally agreeing on granting Georgia and Ukraine visa liberalization -- both eventually got it in 2017.
• It’s likely some member states will have reservations about Armenia going forward. In the discussion about starting visa liberalization dialogue with Yerevan, some fears were aired.
• France, which has a sizable Armenian diaspora, noted that it could not rule out that visa liberalization could lead to increased asylum claims. The Czech Republic worried that Russians could use it as an avenue into the EU as some have dual Armenian-Russian citizenship.
• Germany and Sweden aired concerns that visa liberalization for Georgia meant an increase in Georgian criminal gangs operating in their countries and the Netherlands and Austria, both with governments pushing for stricter European immigration policies in general, are cautious about potential visa liberalization being misused for that purpose.

Looking Ahead

The EU and NATO are still on the beach this week, but look out for two interesting visits on August 21. First German Chancellor Olaf Scholz is due in Chisinau in what is a symbolic show of solidarity from the EU’s most powerful member state to Moldova, which will hold a crucial presidential vote later this autumn and a referendum on whether the country should aim to join the EU.

That same day Indian Prime Minister Narendra Modi is due in Warsaw and will travel to Kyiv from there. The West has attempted to woo India for a long time and is hoping the country will be more vocal and practical in its support for Ukraine and opposition to Russia’s invasion.

That's all for this week! Feel free to reach out to me on any of these issues on Twitter @RikardJozwiak, or on e-mail at jozwiakr@rferl.org.

Until next time,

Rikard Jozwiak

If you enjoyed this briefing and don't want to miss the next edition subscribe here.

Welcome to Wider Europe, RFE/RL's newsletter focusing on the key issues concerning the European Union, NATO, and other institutions and their relationships with the Western Balkans and Europe's Eastern neighborhoods.

I'm RFE/RL Europe Editor Rikard Jozwiak, and this week, both my briefings focus on Hungary and how the country's leaders have managed to irk Brussels all summer long.

Briefing #1: Brussels Is Not Happy With Hungary's Visa Plans

What You Need to Know: Many may have thought that Hungary, which currently holds the six-month rotating presidency of the Council of the European Union until the end of the year, would lay low in August. It's vacation season and, essentially, the Brussels machinery grinds to a halt.

But then, at the end of July, Budapest announced that it would expand its "national card" immigration program to include Belarusians and Russians, as well as citizens from Bosnia-Herzegovina, Moldova, Montenegro, and North Macedonia. (Serbians and Ukrainians were already on the list.)

The card allows holders to work in Hungary for two years and be joined by their immediate family. It is simpler to get hold of than a regular work permit or a business visa. After three years, it can even lead to permanent residency.

The inclusion of Russians and Belarusians has irked Brussels and several member states alike, as it appears to contradict the EU policy toward the two countries. The bloc has imposed visa bans and asset freezes on well over 2,000 citizens from both countries over the ongoing war in Ukraine. It has frozen visa-facilitation agreements and made it harder to travel from Belarus and Russia to the EU's borderless Schengen zone via flight bans and limits on other modes of transport. On top of that, hundreds of Russian diplomats have been expelled from EU member states, many over accusations of espionage.

Deep Background: The main criticism of Hungary's expansion of its "national card" program is that it could lead to undermining security in the Schengen zone and increasing the possibility of Russian spying, as cardholders -- in both theory and practice -- can move freely across most of the bloc.

That critique was the gist of EU Home Affairs Commissioner Ylva Johannsson's August 1 letter to the Hungarian authorities, in which she noted that "there are increasing reports of sabotage and attacks on our critical infrastructure and other hostile acts." In the letter, seen by RFE/RL, she also said that "while the EU member states have the competence of issuing long-stay visas and residence permits, such schemes need to be carefully balanced not to put at risk the integrity of our common area without internal border controls and to duly consider potential security implications."

She also asked Budapest to get back to her on 13 questions, included in an annex to the letter, by August 19. Perhaps the hardest of those questions will concern Hungary's justification for granting "national cards" to citizens of Belarus and Russia, as well as whether or not Budapest conducted a security analysis prior to making the decision.

Johannsson also pressed Budapest on whether it will systematically carry out a search in the Schengen Information System (SIS), a database used by member countries to share security and border data, on Belarusians and Russians applying for the "national card." And, more importantly, she asked what would happen in case someone applying for the card was red-flagged in the SIS.

Other questions relate to how Hungary is ensuring that sanctioned people aren't entering Schengen, and if border checks on Russian and Belarusian travelers are more stringent when compared to other third-country nationals. In the letter, Brussels also asked the Hungarian authorities how many applicants were expected from the two countries and the status (approved, refused, or pending) of those who have already applied.

Drilling Down

• Despite Brussels' indignation on this issue, there is precious little the EU can do. EU officials I have spoken to on background say that Hungary has once again found a loophole in the EU's legal framework. "I am afraid they have the legal arguments on their side," one diplomat with knowledge of the situation told me, adding that on national visas they don't really need to consult with anyone else in the bloc.
• In an internal note, seen by RFE/RL, Hungary tried to reassure the EU member states by noting that "Russian and Belarusian citizens may enter Hungary, and thus the Schengen area, only in possession of a valid visa and may obtain a residence permit only after the procedure laid down by law."
• But if the other member states and the European Commission are still concerned, is there really nothing they can do? First of all, nothing will happen in August; Brussels is simply not up to speed yet on the issue and will want to assess the situation properly when its diplomats and bureaucrats are back from their vacations. Second, while some are calling for Hungary to be kicked out or suspended from the Schengen zone, that is very unlikely to happen. First of all, ejecting Hungary would have to be a unanimous decision, which would be almost impossible to get. After all, Hungary's neighbors in the EU are benefiting from the free movement of people, services, and goods, thus any proposed restrictions would have a negative economic impact if they were implemented. It is also worth noting that it would be unprecedented, as no country has been kicked out of Schengen since it was introduced back in 1985.
• Alternatively, heightened security measures may be implemented at the borders of Hungary's neighboring countries and at airports for flights arriving from Hungary. Given that home-affairs issues, such as this one, are a national competence, it is up to each and every member state to introduce more stringent measures. But they do need to notify Brussels of their moves. Such temporary restrictions were, for example, dusted off during the COVID-19 pandemic, the migration crisis of 2015-16, or with increased terror alerts.
• While Hungary may very well get away with it, there is increased frustration in the bloc about Budapest's behavior. "Momentum for some kind of pushback is growing," one EU official, who preferred to remain anonymous because they do not have the authority to speak on the record, told me, adding that Hungarian Prime Minister Viktor Orban's trips to Moscow and Beijing earlier in the summer, ostensibly to pursue peace in Ukraine, still rankle.
• The nuclear option -- suspending Hungarian voting rights in the Council of the European Union -- is not off the table. The threat is there and has been for years, but is it realistic? So far, there is no appetite, but if France and Germany, the drivers of EU policy, get fed up with Hungary, things could start moving. Unanimity is needed here as well, but Berlin and Paris could cajole others into going ahead. "Until now, they were thinking that they had leverage over Budapest, and that they would act constructively during its presidency," one ambassador told me. It will be interesting to see how much patience diplomats will have with Hungary once they return from the beach.

Briefing #2: Budapest Wants To Import More Russian Oil

What You Need to Know: Although Hungary (and to a lesser extent Slovakia) have been a thorn in Brussels' side on a number of issues and have been frequently criticized, particularly by Ursula von der Leyen's European Commission, this hasn't stopped Budapest and Bratislava from recently asking for the EU executive's assistance in getting Russian oil flowing in larger volumes to the two landlocked Central European countries.

Both countries have since mid-July complained that the recently imposed Ukrainian sanctions on the Russian oil firm LUKoil have resulted in stopping the flow of pipeline crude sold by the Moscow company. They sent a joint letter to the commission, asking for emergency consultations with Kyiv, saying that Ukraine had breached both the spirit and the letter of the Association Agreement it had signed with the EU in 2014.

Yet, it appears that Hungary and Slovakia haven't managed to get their way. In a letter to their foreign ministers, sent by Valdis Dombrovskis, vice president of the European Commission and Brussels' trade supremo, it was noted that "the commission services have preliminary concluded that urgent consultation does not appear to be warranted as there is no current indication of an immediate risk to the security of supply."

The August 1 letter, seen by RFE/RL, also states that "according to the information at our disposal and in line with commission analysis, it appears that the sanctions imposed by Ukraine on LUKoil do not affect the ongoing oil transit operations via [the] Druzhba [pipeline from Russia to Central and Eastern Europe] carried out by trading companies as long as LUKoil is not the formal trader of the oil."

Deep Background: Some 5.5 million metric tons of oil were shipped via the Druzhba pipeline in the first half of 2024, of which half was sold by LUKoil. The remaining oil was transited by smaller Russian producers that aren't yet sanctioned by Ukraine.

It is worth pointing out that Hungary and Slovakia are still allowed to import crude oil from Russia. They, along with Bulgaria, the Czech Republic, and Poland, got exemptions from EU-imposed sanctions on pipelined Russian oil imports into the bloc that were agreed in 2022 and entered into force a year later.

There is a difference with Hungary and Slovakia, though. Both Bulgaria and Poland have now completely cut Russian pipeline imports, and the Czech Republic is working hard to do the same in the near future. When these exemptions were granted, there was an understanding that the member states should actively work to find alternative supplies in order to minimize dependence on Russian energy imports.

Drilling Down

• Hungary has actually increased its reliance on Russia, with the country importing 56 percent more Russian crude in 2024 than it did before the Kremlin's full-scale invasion of Ukraine in early 2022. Slovakia's oil imports from Russia have decreased somewhat since 2022 but still amount to over 50 percent of its total imports.
• The need for Hungary and Slovakia to diversify was also hammered home by Dombrovskis in his letter: "A significant number of member state representatives asked about the availability of alternative supply routes in addition to the Druzhba pipeline for the import of crude oil and questioned why Hungary and Slovakia had apparently not yet explored alternatives so far."
• One of those member-state representatives was Croatian Prime Minister Andrej Plenkovic, who wrote a letter to European Commission President von der Leyen on July 31, a day before Dombrovskis' missive to Bratislava and Budapest. The letter, seen by RFE/RL, notes that "the alternative options that Croatia can offer...have so far been underutilized."
• Plenkovic is a close ally of von der Leyen and a stalwart of the center-right European People's Party (EPP), the largest group in the European Parliament, which the Hungarian ruling party Fidesz belonged to before quitting under pressure in 2021. The EPP also recently admitted Hungary's main opposition challenger, Peter Magyar and his newly formed Tisza party, to its ranks.
• Needless to say, the Croatian premier is also sensing a potential business opportunity. His letter points out that "Croatia, with its robust oil infrastructure -- including the Omisalj terminal, the Sisak storage tanks, the Urinj refinery near the port of Rijeka, and the JANAF Adriatic pipeline --possesses capacities that far exceed national needs."
• According to Plenkovic, the JANAF pipeline could be the solution for both Hungary and Slovakia, as it can "guarantee the transport of 14.3 mtpa (million tons of crude oil per annum) from the Omisalj terminal, on the island of Krk, to Hungary and Slovakia, and beyond."
• He noted that JANAF had already struck a deal earlier this year with the Hungarian oil company MOL for 2.2 mtpa for the rest of 2024, but this only represents some 15 percent of the transport capacity available. The letter concludes by stating that "in light of the recent circumstances and in the spirit of European solidarity, JANAF is willing to negotiate long-term contracts involving larger volumes to ensure energy supply security and reduce dependence."
• The question is whether Hungary is interested. Its foreign minister, Peter Szijjarto, brushed away Zagreb's offer by noting that "Croatia is simply not a reliable country for transit" and adding that Croatia had increased oil transit prices fivefold since the outbreak of the Ukraine war.
• This prompted JANAF to respond, noting that "the statement regarding JANAF raising fees over the last three years is completely untrue. The methodology applied to calculate the fees takes into consideration the distance and the level of capacity utilization for a specific pipeline section, as well as the negotiation process, and is not related to the legal entity [of JANAF] ."
• This issue is likely to come up when EU foreign ministers gather for the first time after the summer break on August 29 -- a meeting that was originally supposed to be hosted by Budapest but was moved after several EU member states complained about Orban's trips to Moscow and Beijing.

Looking Ahead

While the EU and NATO are still mostly hibernating for the holidays, Eurostat, the bloc's official statistical office, is up and running. On August 14, it will publish its estimate of gross domestic product (GDP) growth and unemployment rates across the eurozone -- the countries that have adopted the euro -- and the EU. The statistics release is expected to show that an estimated 6 percent of the bloc's workforce is unemployed and there has only been 1 percent of GDP growth.

That's all for this week! Feel free to reach out to me on any of these issues on Twitter, @RikardJozwiak, or by e-mail at jozwiakr@rferl.org.

Until next time,

Rikard Jozwiak

If you enjoyed this briefing and don't want to miss the next edition, subscribe here.