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EU MONEY FOR HUNGARY’S VOTE 
BUYING OFF ORBÁN: EU leaders and their aides are in frantic negotiations with Hungary’s Viktor Orbán on a deal to give him more EU money in exchange for him lifting his veto on aid for Ukraine, officials and diplomats tell Playbook.
Traitor warning: Meanwhile, European People’s Party leader Manfred Weber told Playbook EU leaders should approve aid for Ukraine “if needed without Hungary,” warning that Orbán is being “treacherous.” Socialists and Democrats leader Iratxe García told Playbook that “if we give in to Orbán now, he will continue to blackmail us.”
Reminder: EU leaders want to approve two key support measures for Kyiv: A €50 billion lifeline for Ukraine’s war-struck economy, and starting EU accession talks. Orbán is blocking both, in what MEPs described as “blackmail.”
Hungary on Tuesday decided to talk turkey: Budapest would stop vetoing new financial aid for Ukraine, if Brussels unblocks all the funds that were supposed to go to Hungary, but which the EU froze over corruption and rule of law concerns, according to Orbán’s political director.
**A message from EFPIA: Imagine a forward-thinking, strategic and ambitious Europe. Despite our rich legacy of medicines innovation, Europe is witnessing a gradual decline in its share of global R&D investment, while other, more ambitious regions are surging ahead. The revision of the pharma legislation should aim to close the gap between the EU and the US. Read more.**
€10B today: Brussels is expected to announce this afternoon that it will release some €10 billion in frozen EU funds for Hungary. (Officials said they were waiting for Tuesday’s judiciary reform to be published in Hungary’s official gazette today before pulling the trigger.)
Thanks for the appetizer, where’s the main course? But that’s not nearly enough for Hungary, Balázs Orbán, the political director (who is not related to Viktor) told Bloomberg. He said Budapest would lift its veto only if Brussels handed over all the cash it has frozen, amounting to about €30 billion.
Keeping the bargaining power for the next round: The EU wants to approve a €50 billion package for Ukraine, which would assure the country is financed for four years. But Hungary remains opposed to that, and instead wants shorter-term packages — which would allow it to extract more concessions by threatening to veto future rounds of aid.
‘On a knifes edge’: “A solution is possible,” one official told Playbook. “We will have to give [PM Orbán] something. That hurts, but that’s the way it goes,” they said, adding that “we’re on a knife’s edge” on a possible deal. A senior diplomat was more sanguine, saying that while this week’s EUCO summit would be “a long one,” he was “optimistic” about a deal with Budapest.
Behind the scenes, the PM and his aides are also signaling they’re open to a deal, another official told Playbook. Orbán “argues he must protect his population against the cost-of-living, high energy prices and that the far right is surging, which is even more radical than he is,” the first official said.
Message understood: So, the EU’s “billions could help on economic issues,” he said, adding that Berlin and Paris “have understood this message.”
More money: Balázs Orbán also said Hungary was in favor of extra EU funding for border protection and to make economies more competitive — both programs that could funnel extra cash to Budapest.
On Ukraine’s EU accession: Balázs Orbán said opening EU accession talks with Ukraine remained a “red line” for Hungary. But officials in the Commission and EU capitals are more optimistic that a deal could be found on that as well, by reassuring Hungary that actual accession negotiations with Ukraine would only begin once the country “fulfills a strict set of conditions,” according to a third senior official.
Soothing Budapest: EU countries could add assurances on the reversibility of any accession promise, and that before admitting Kyiv into the club, Brussels would assess the impact on areas such as farming policy — a sensitive issue for many member nations.
Preaching to the choir: With his warnings about the cost of Ukraine’s accession, and his insistence that Kyiv remains lightyears away from having stable democratic institutions, Orbán has been saying out loud what many EU leaders were whispering behind closed doors. “But,” the official said, “Orbán knows well that Ukraine will one day be a member of the EU,” and his team is “aware that we need to find a solution.”
PARLIAMENT GEARS UP FOR A FIGHT: The leaders of Parliament’s biggest political groups are unanimously opposed to the EU’s deal with Orbán, issuing very strongly worded warnings about Orbán’s ties to Russian President Vladimir Putin.
Orbán’s meeting with Putin “shows he has left Team Europe and joined Team Russia. His attempts since then to mobilize opposition in Europe and the U.S. against more financial support [for Ukraine] is treacherous,” warned Weber, the EPP chief.
Putin’s Trojan horse: “Who can still count how many times Putin’s Trojan horse watered down EU sanctions against Russia and delayed financial support for Ukraine?” Iratxe García told Playbook, adding that it is “unacceptable that in an attempt to win Budapest’s approval, the European Commission is considering unlocking billions of euros for Hungary that were frozen over rule-of-law and corruption concerns.”
Gearing up against unanimity: The Hungarian’s blackmail “shows once again that we need to get rid of the unanimity rule in the EU decision-making in foreign affairs, as the S&D group has been saying for a long time,” she added.
Also unhappy: The Greens and the liberal Renew Europe group also issued strongly worded statements against the EU’s move to unblock funds for Orbán.
MEANWHILE, IN UKRAINE: Over 50 people were injured when Russia launched a barrage of missiles at Kyiv in the early hours of this morning. Though all 10 missiles were intercepted, several buildings were damaged, including apartments and a children’s hospital, the city’s mayor said. It is the second attack on the Ukrainian capital this week.
NOW READ THIS 1: “We will help defend Ukraine. We will not be threatened, and we will not compromise on the freedom, liberty and security of either the Ukrainian people or our own,” write Estonian PM Kaja Kallas and Finnish Prime Minister Petteri Orpo in this article for POLITICO.
NOW READ THIS 2 — RETURN OF AUSTRIA-HUNGARY? Whether on Ukraine, Russia, or even the Israel-Hamas conflict, the impression in EU circles is that Austria and Hungary are back together again. It’s not that simple, argues Matthew Karnitschnig in this essential analysis.
RUSSIA SANCTIONS
EU ENERGY SANCTIONS COME UP SHORT: This time last year, the EU unleashed an unprecedented wave of sanctions aimed at hammering Russia’s energy exports — a vital lifeline that feeds almost half the country’s war-hungry budget. But a year on, those efforts seem to have stuttered.
Refresher: Last December, Brussels slapped a bloc-wide ban on Russian oil imports, and teamed up with the U.S., U.K. and its other G7 allies to impose a limit on sales of Moscow’s crude at $60 per barrel internationally. Western insurers and shipping operators were prohibited from providing their services to any cargoes selling above this price.
Stark reality: But Russia’s oil export earnings have dropped just 14 percent since the restrictions were imposed, and in October, its fossil fuel revenues hit an 18-month high. That’s because enforcement across the EU is scattered and reliant on inconsistent data, a new black market has sprung up to insure, ship and hide Russia’s fuel as it travels the world, while gaping loopholes in sanctions remain unpatched.
EU buys oil above the G7 price limit: Bulgaria is a particularly stark case. The country got an exemption from the EU’s ban on seaborne Russian oil, arguing it needed this to protect its consumers from high fuel prices. But after getting the Commission’s green light in August, it then also bought up millions of barrels of Russian crude above the G7 $60 per barrel limit, according to private email exchanges and confidential customs data seen by POLITICO.
The bottom line: While it’s technically legal, that loophole boosted Russia’s budget “without any apparent benefits for Bulgarian consumers,” said CSD senior analyst Martin Vladimirov. Now, the country’s former PM Kiril Petkov has vowed to patch the hole. Read the full story by Victor Jack, Gabriel Gavin and Giovanna Coi.
TODAY’S MUST READ: “Everyone on Ukraine’s side — starting with the leadership in Kyiv and their allies in Europe and Washington — has in the last half year shrunk themselves,” writes POLITICO’s Editor-at-Large Matthew Kaminski in this excoriating analysis of the state of Ukraine’s Western coalition. “It shapes a dark and defeatist mood and for the Ukrainians represents the most perilous moment since Russia came within miles of Kyiv in the early days of the war.”
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BUDGET UPDATE
BACK TO THE DRAWING BOARD: The latest compromise proposal on the EU’s midterm budget review wasn’t enough to sway a coalition of northern countries who want to keep fresh contributions to Brussels to a bare minimum.
Tick tock: The Commission’s proposed top-up includes €33 billion of loans and €17 billion of grants to support Ukraine’s budget until 2027. EU leaders are aiming to strike a deal at the European Council on Thursday and Friday — if they can get Hungary to agree.
Tightrope walk: Council President Charles Michel’s latest plan is a fine balancing act to keep various EU countries on board. He reversed mooted cuts to migration funding — a red line for frontline states including Italy and Greece — and resurrected a pot of cash for the Western Balkan which is dear to Hungary, among others, Gregorio Sorgi reports.
Two gifts to Ukraine: The Council chief also took out an unpopular proposal to use profits from frozen Russian assets to finance the new pot of cash to Ukraine, and slashed plans to move pre-existing money to Kyiv to finance the Commission’s new spending.
The problem: Adding extra cash here and there raises the amount of fresh money that is required from EU capitals — much to the disappointment of frugal countries, who want the Council to push down the amount of fresh funding and increase reallocations from the 2021-2027 budget. Michel has 24 hours to square the circle before EU leaders descend on Brussels.
WHILE YOU WERE SLEEPING
NEW COP28 TEXT: A few hours ago, following marathon overnight talks, the Emirati COP28 presidency published a new draft proposal, my colleague Zia Weise writes in from Dubai, where the U.N. climate talks have gone into overtime. The compromise text doesn’t mention a fossil fuel phaseout but does call on countries to join in “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050.”
What happens next: The text will require consensus approval from nearly 200 nations at the summit. Full details from our team on the ground here.
ANTI-MONEY LAUNDERING DEAL: The European Parliament and the Council reached a deal overnight on a European Anti-Money Laundering Authority, as previewed in Tuesday’s Playbook. The agreement doesn’t include a decision on where the new authority will be based, with discussion on that key question to continue in 2024. Here’s the Parliament’s press release.
**Vom Bundestag bis zu den Bundesländern – Berlin Playbook hat Ihre Politikberichterstattung im Griff. We’re coming to Germany – and bringing our award-winning journalism with us. Keen to get your daily dose of deutsche Politik before your morning coffee? Sign up here.**
IN OTHER NEWS
BILIOUS OVER BILLBOARDS: “Outrageous and scandalous” is how Commission Vice President Věra Jourová characterized Viktor Orbán’s anti-EU billboard campaign featuring images of the Commission president and Open Society Foundations Chair Alexander Soros. “This campaign is offending my boss, Ursula von der Leyen; it’s offending me as well and I think most, if not all, the members of the college.”
Blocking or abetting? Jourová was taking questions from reporters in Strasbourg on Tuesday, where she unveiled the Commission’s plans for EU registries of third-country lobbyists in the Defense of Democracy package. She was asked about Hungary’s plans for a so-called national sovereignty office that could investigate those suspected of working for foreign interests, which critics see as a way to harass civil society NGOs.
Jourová said a new directive would force the likes of Orbán to stick to EU-wide rules and save NGOs from stigma, but opponents of the Commission’s plans say Brussels gave Budapest the “political green light” for the latest move. Sarah Wheaton has more here.
BATTLE FOR THE BALTICS: On the Baltic Sea island of Saaremaa, a strategic territory invaded over the past century by both Germans and Soviets, a French military unit has been deployed for the first time to take part in the Estonian Defense League’s (EDL) annual military exercises. The goal: To be ready in case Putin expands his military ambitions from Ukraine to the Baltics, my colleague Laura Kayali reports.
Ready for Volodya: The EDL gathers unpaid, military-trained civilians who want to defend their district in case of attack, with a total force of 18,000 under the control of the defense ministry. The volunteer soldiers keep rifles and machine guns at home and spend their weekends training in combat and survival skills.
JUPITER DESCENDING: French President Emmanuel Macron has been stopped dead in his tracks over the failure of a flagship immigration bill that shows how hard it will now be to run his country without an absolute majority in the National Assembly. Read more by Clea Caulcutt.
SERBIA VOTES: Serbs go to the polls this weekend for a snap general election called by President Aleksandar Vučić. But the outcome is essentially a done deal: Despite a united opposition — and a particular threat to Vučić’s Serbian Progressive Party (SNS) in the capital’s mayoral race — there is little prospect the SNS will lose on December 17, thanks in great part to the president’s expertly cultivated media persona, reports POLITICO’s Una Hajdari in this curtain-raiser.
AGENDA
— EU member countries’ permanent representatives meet in Coreper II from 9 a.m.
— Western Balkans leaders’ meeting. Arrivals from 3 p.m.; working session 5 p.m.; working dinner at 6:30 p.m.; press conference around 8:45 p.m. Watch.
— European Parliament plenary continues. Highlights: Council and Commission statements on preparation for this week’s EUCO, with European Commission President Ursula von der Leyen, at 9 a.m. … von der Leyen and Spanish PM Pedro Sánchez deliver statements reviewing Spain’s Council presidency 10:30 a.m. … voting from noon … Debate on Morocco and Qatargate from 1:30 p.m. … Justice Commissioner Didier Reynders takes part in debate on rule of law in Slovakia from 4 p.m. … Industry Commissioner Thierry Breton takes part in debate on European Defense Investment Program from 5 pm. … European Commissioner for Crisis Management Janez Lenarčič participates in debate on Frontex 7 p.m. Full agenda. Watch.
— NATO chief Jens Stoltenberg concludes visit to Saudi Arabia.
— European Economic and Social Committee plenary session. Spain’s First Deputy PM (and incoming EIB chief) Nadia Calviño to discuss Spanish presidency of the Council of the EU from 4:30 p.m. Agenda. Watch.
BRUSSELS CORNER
WEATHER: Light rain, highs of 8C.
US TAX SPAT: The United States famously requires its citizens to report their earnings to U.S. tax authorities regardless of where they live in the world. But is it legal for European banks to share data about their American clients with U.S. tax authorities? Not according to the Belgian data protection authority.
Privacy please! The Spanish Council presidency is asking all EU countries to say whether transfers of tax data to third nations are legal under the Union’s privacy rulebook known as the GDPR, according to a document obtained by Playbook’s own Nick Vinocur.
Watch this space: If the countries say the transfers aren’t covered by the GDPR, it opens up a can of worms. Other data protection authorities could follow the Belgians and say the transfers should be stopped. And that would amount to a challenge to the United States and the Foreign Account Tax Compliance Act. Whether EU countries are interested in that fight remains to be seen, though.
BIRTHDAYS: MEPs Marie-Pierre Vedrenne and Andrey Kovatchev; former Minister of Justice of Northern Ireland Naomi Long, a former MEP; Former MEPs Christofer Fjellner and Massimo Paolucci; Latvia’s Foreign Affairs Minister Krišjānis Kariņš; POLITICO’s Zia Weise; Spanish politician María Dolores de Cospedal García; Former U.S. Federal Reserve Chairman Ben Bernanke; Nicolas Robin of Plastics Europe. Malta’s Republic Day.
THANKS to Victor Jack, Nick Vinocur, Gregorio Sorgi, Laura Kayali, Jacopo Barigazzi, and Playbook producer Seb Starcevic.
**A message from EFPIA: Europe needs a comprehensive EU life-science strategy which includes multistakeholder collaborations to expedite translation of ideas into tangible health solutions. It needs to be combined with an EU industrial strategy for health security and a capital market union to bolster venture capital and mitigate funding risks for biotech endeavors in Europe, preventing their continued exodus to the US. It is vital that Europe has a competitive intellectual property framework to enable investments in the lengthy and risky development of novel treatments and an ambitious reform of the EU regulatory framework. Together these elements can safeguard continued investment in European R&D, support hundreds of thousands of highly skilled jobs as well as the largest sectoral contribution to the EU trade balance. The pharmaceutical legislation, in its current form, will further ability to attract R&D and manufacturing investment. MEPs and the European Council have the opportunity to help restore Europe’s competitiveness. Read more.**
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