Viktor Orban, Hungary's Prime Minister, has made waves within the European Union (EU) by postponing his decision on extending sanctions against Russia, influencing the EU's political dynamics during this precarious moment. This unexpected development highlights the possible repercussions of U.S. President-elect Donald Trump's administration on Transatlantic relations.
Traditionally, EU sanctions targeting Russia’s economy and defense industry have been renewed every six months. These sanctions, introduced following Russia’s annexation of Crimea and its military involvement in Ukraine, are due for renewal by the end of January 2017. Nonetheless, during the EU summit in Brussels on December 19, Orban stood against the customary procedure, asserting he needed to wait for Trump’s policy direction.
The Hungarian Prime Minister's reluctance to act has sent ripples through European political circles. Orban wishes to align the EU’s response to Russia with the coming Trump administration, which he perceives may mark a shift away from Europe's current strategies, often seen as too aggressive against Moscow. Orban's move reflects his close rapport with Trump, who has previously shown little enthusiasm for maintaining existing foreign policies.
Orban's ties with Trump extend beyond mere camaraderie; the two leaders’ meeting at Trump's Florida residence earlier this month indicates the Hungarian leader’s strategy to avoid decisions potentially at odds with militant posturing from the U.S. After the election, Orban had voiced concerns over America's previous foreign policy concerning Russia, advocating for recommendations aimed at easing the tension.
This relationship has broader ramifications for the EU's stance on Russia, especially when one considers the geopolitical weight these sanctions carry. If Hungary, as part of the EU, proceeds to block these sanctions, it could catalyze other member states to follow suit, potentially fracturing the EU's unified front against Russia.
The looming deadline for renewing the sanctions adds urgency to the already complicated situation. European leaders are on high alert, weighing Orban's unique position as both EU member and Trump ally, which could have significant repercussions for the alliance's cohesiveness.
Beyond sanctions, Trump has employed aggressive tactics involving tariffs. Notably, he announced intentions to impose tariffs on the EU if it fails to purchase more oil and gas from the United States. “I told the European Union they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!” Trump stated on his Truth Social platform.
This confrontational approach toward trade, evidenced by past tariffs on Canada and Mexico, adds another layer of tension to the U.S.-EU relationship, hinting at the potential for trade disputes reminiscent of previous tariff wars. The EU Commission's spokesperson, Olof Gill, acknowledged the importance of addressing trade relations and expressed eagerness to discuss how to strengthen economic ties with the U.S. amid these threats.
Trump's threats could compel the EU to engage deeply with the U.S. about energy supplies as it seeks to phase out imports from Russia. Following the imposition of tariffs on aluminum and steel, reciprocal tariffs from the EU targeted American goods—leading to increased trade tensions. This reciprocal approach could escalate the situation between the U.S. and its largest trading partner.
Adding to the complexity, economic strains plague European powers like France and Germany, both grappling with political clout and fiscal stability. Bill Campbell, Portfolio Manager at DoubleLine Global Bond, noted significant risks for European markets stemming from the anticipated changes under Trump’s administration. His analysis highlighted "elevated risk premia for French sovereign debt and downward pressure on the euro," indicating the Nymex effects of uncertainty on the EU's biggest economies.
Campbell's research outlines the intersection of Trump's prior policy stance and the internal challenges faced by key EU states, emphasizing the possibility of even greater economic instability as Transatlantic relations take center stage. The potential turmoil affects investment strategies and requires close monitoring by European investors and policymakers.
These developing narratives around sanctions, tariffs, and political uncertainty will shape the future of EU-U.S. relations. While Trump’s presidency promises to alter established December dynamics, leaders of the EU, including Orban, now face the challenge of balancing domestic desires with international expectations.
How this balance plays out could determine the EU’s collective response to future U.S. foreign policy actions and highlight the fragility of Transatlantic cooperation as competing interests vie for influence and security.
