Hungary's government announced Thursday it is withdrawing its membership from a Russia-controlled investment bank a day after the United States issued sanctions against the Budapest-based financial institution.
The decision, announced on Thursday by Hungary's Ministry of Economic Development, came in response to the U.S. Treasury Department on Wednesday placing sanctions on the International Investment Bank (IIB), which relocated its headquarters to Hungary's capital from Moscow in 2019.
In a statement, the ministry said that "although the International Investment Bank has played an important development role in Central and Eastern Europe, the U.S. sanctions have rendered the bank’s operations meaningless."
"Therefore, the government recalls the Hungarian government’s delegates to the International Investment Bank and withdraws from the international financial institution," the statement said.
Hungary's stake in the bank, and the government's willingness to host its headquarters in Budapest, led to frustration from U.S. officials in both the Biden and Trump administrations, who argued it could serve as a conduit for Russian espionage within the European Union and NATO.
In announcing the U.S. sanctions on Wednesday, a Treasury Department statement said the bank enables Russia "to increase its intelligence presence in Europe, opens the door for the Kremlin’s malign influence activities in Central Europe and the Western Balkans, and could serve as a mechanism for corruption and illicit finance, including sanctions violations."
At a news briefing in Budapest following the sanctions announcement, the U.S. ambassador to Hungary, David Pressman, said Hungary’s government had ignored pleas from multiple U.S. administrations to withdraw its stake in the bank.
"The presence of this opaque Kremlin platform in the heart of Hungary threatens the security and sovereignty of the Hungarian people, their European neighbors and their NATO allies," Pressman said.
Three current or former bank executives – Russian citizens Nikolay Nikolayevich Kosov, Georgy Nugzarovich Potapov and Hungarian national Imre Laszloczki – have also been designated for sanctions, Pressman said.
The officials were among dozens newly added to a U.S. sanction list of entities and individuals, as part of a broader package targeting the financial networks of two of Moscow’s wealthiest businessmen who are close allies of Russian President Vladimir Putin.
Founded in the Soviet Union in 1979, the IIB moved its headquarters to Budapest under Prime Minister Viktor Orban, who cultivated close ties with Putin before the Ukraine war.
Billed as a version of the London-based European Bank of Reconstruction and Development (EBRD) – albeit smaller – the bank distributes loans to firms and projects in member countries.
EU members Bulgaria, the Czech Republic, Slovakia and Romania were formerly members of the bank.
But all four countries said they would withdraw their membership after Russia launched its invasion of Ukraine, leaving Hungary as the only remaining EU member.
The other members, besides Russia itself, are Cuba, Mongolia and Vietnam.
Orban has drawn fierce criticism from both EU and NATO allies for his neutral stance on Russia's war in Ukraine.
"We have concerns about the continued eagerness of Hungarian leaders to expand and deepen ties with the Russian Federation despite Russia's ongoing brutal aggression to Ukraine and threat to transatlantic security," Pressman said Wednesday.
With the sanctions, "the U.S. is demonstrating that we will take action in response to Hungary's choices," he said.