Hungarian bank to support Putin-friendly Bosnian Serb entity with 45-billion forint loan

Through state-owned Eximbank, and in the form of an extremely cheap loan, the Hungarian government has given 45 billion forints (110 million euros) to Republika Srpska in Bosnia and Herzegovina so that the government of Milorad Dodik can repay its loans due to expire in 2023, Radio Free Europe reports. Without the Hungarian public funds, the Serb-majority republic, which has been fighting for independence and secession from the federation, and is thus undermining the stability of the region would have most likely gone bankrupt.

The €110 million of emergency aid will have to be repaid over ten years, with a one-year grace period and an annual interest rate of 5% (!). The leadership of the increasingly indebted Bosnian Serb entity has made no secret of the fact that it needs the money to cover the repayments of their previous loans. Finance Minister Zora Vidović has said that thanks to the Hungarian loan, "there will be no problems with making the payments".

Bosnia and Herzegovina, created after the Dayton Agreement that ended the 1992-1995 Bosnian war, consists of two regions: the Federation of Bosnia and Herzegovina, which is predominantly Bosniak and Croat, and the Republika Srpska, the population of which is predominantly Serb. The two entities have separate institutions, but their representatives have both participated in the work of the federal institutions.

Milorad Dodik, the president of the Serb-majority Republika Srpska has been campaigning for years for the secession of the Serb-majority entity. The conflict escalated when in October 2021 Dodik, who is considered an ally of Putin, announced that the Serbs would withdraw from Bosnia and Herzegovina's federal institutions, the Western Balkan country's joint army, supreme judiciary and tax authority. The Bosnian Serb leadership is intending to build an independent army.

Elections were last held in the Republika Srpska in early October and Dodik, who has been in power for decades, won by a narrow majority. The Dodik government then introduced a substantial increase in pensions and public sector wages, all financed by loans. On top of that, they also have to repay some HUF 240 billion in maturing loans.

The Hungarian government's policy towards the Bosnian Serbs has recently been particularly attentive. Following Viktor Orbán's visit to Bosnia last November, the Hungarian government launched a €35 million economic development programme, the start of which coincided in part with the elections there. In mid-August, a Hungarian company, Lugos Renewables admitted that Elektroprivreda RS (ERS), a major electricity company in the Bosnian Serb entity, had secretly, without an open tender sold them a 70 percent stake in the region's largest solar power project in Trebinje. The sale also took place after Viktor Orbán's November 2021 visit to Bosnia.

The question of NATO membership is also one of the biggest conflicts dividing Bosnia: the leadership of Dodik's Republika Srpska vehemently opposes it and is trying to prevent it by all means. Igor Kalabukov, Russia's ambassador in Sarajevo, has previously threatened that if Bosnia wants to join NATO, it could face the same fate as Ukraine. The EU has repeatedly accused Viktor Orbán of acting against EU interests by backing the breaking up of Bosnia and Herzegovina, which has just recently been officially granted EU candidate status.