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12 April 2022

Austria is Russia’s tunnel into the heart of Europe

The country’s attachment to neutrality has led it to cultivate obsequious relations with Russian energy and espionage.

By Liam Hoare

VIENNA – Three months after Vladimir Putin’s illegal annexation of Crimea in 2014, a military guard of honour welcomed the Russian president to Vienna. Greeted by the Austrian president at the time, Heinz Fischer, in the imperial Hofburg, Putin said: “I’m very glad to be in Vienna, a place that has become very close to my heart.” Later he addressed the Austrian Chamber of Commerce, promoting Russian gas exports as the “basis for stability” in Europe. Even though his regime would become more isolated, Putin visited the Austrian capital again in 2018.

Moscow has its ideological allies in Europe: Serbia’s Aleksandar Vučić and Hungary’s Viktor Orbán, a Trojan horse for Russian interests in the European Union. It also has its useful idiots such as the former German chancellor Gerhard Schröder, last seen chairing the boards of Nord Stream AG, the consortium building a gas pipeline from Russia to Germany, and the Russian oil company Rosneft. Yet Russia has few more pliable partners in Europe than Austria. By virtue of its constitutional permanent neutrality Austria sees itself as a bridge between East and West. But when it comes to Russia, Austria is a compromised state. Rather than build bridges, Austria has dug a tunnel for Russia into the heart of Europe.

In 1968 Austria became the first western European country to import Soviet gas. The country became a hub for Soviet and Russian natural gas, which was stored at a facility in Baumgarten and then pumped on to Italy, Germany and France. Today Austria depends on Russia for 80 per cent of its gas and still has no plan for weaning itself or Europe off Russian energy. Austria was among the EU member states reluctant to sanction the Nord Stream 2 pipeline project upon the invasion of Ukraine in February — small wonder, given the Austrian state energy concern OMV had a stake in the scheme. Even now, after the massacre by Russian forces in Bucha, Austria opposes an EU embargo on Russian gas.

Austria brings not only Russian gas into Europe but Russian money. Initially, Austria was also opposed to booting Russia out of the Swift international financial transaction system. The European subsidiary of Sberbank, which is majority owned by the Russian state, is based in Vienna, while Austria’s Raiffeisen Bank International (RBI) is a major player in Russia. In 2021 RBI’s Russian operation made a reported profit of €474 million — closer to €600 million when Belarus and Ukraine are taken into account. Western sanctions against Russia limit RBI’s ability to operate there. According to an estimate from the Bank for International Settlements, Austrian banks are exposed to $17.5 billion in Russian debt.

Before the war in Ukraine, Vienna was a conduit for Russian business and a safety deposit box for Russian wealth. Offshoots of the Russian energy majors Lukoil, Gazprom and Sibur all based themselves in the Austrian capital. Oligarchs parked their funds in Austria’s ski resorts, with Yelena Baturina and Oleg Deripaska investing in luxury hotels in Kitzbühel and Lech am Arlberg respectively. In 2007 Roman Abramovich purchased a property on Kohlmarkt in the heart of Vienna for €27 million. EU sanctions recently forced Igor Shuvalov, the former first deputy prime minister, to vacate his six-acre property by Lake Atter in western Austria.  

Russian intelligence also finds Vienna very agreeable. When one European intelligence official told the Financial Times that Austria was a “veritable aircraft carrier” of covert Russian activity they were overdoing it — but not by much. Austrian authorities turn a blind eye to any espionage that does not impact them directly. The Russian diplomatic presence in Vienna is abnormally large and its enormous permanent mission to the United Nations is, experts believe, a hub of intelligence activity. On 7 April Austria’s foreign ministry took the highly unusual step of expelling four Russian diplomats. European partners consider Austria’s intelligence services and defence ministry to be jeopardised and unreliable.

Compromised, too, is Austria’s political elite. Austria has not one Gerhard Schröder but many. Wolfgang Schüssel (centre-right ÖVP), chancellor from 2000 to 2007, sat on the board of Russia’s largest mobile network operator, MTS, before shifting to Lukoil in 2019. Christian Kern (centre-left SPÖ), chancellor from 2016 to 2017, became a member of Russian Railways’ board after leaving office. Karin Kneissl (far-right FPÖ), foreign minister from 2017 to 2019, joined Schröder at Rosneft and also became a columnist for RT’s German-language website. Pictures of Putin dancing with Kneissl at her 2019 wedding in the vineyards of southern Styria were reported around the world as a symbol for contemporary Austro-Russian relations.

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Moscow’s political ties with the far-right FPÖ (the Freedom Party) have been particularly close. In December 2016 the FPÖ’s leader at the time, Heinz-Christian Strache, signed a five-year co-operation agreement with Putin’s United Russia party; that same year Moscow tried to use an FPÖ parliamentarian to undermine Austrian sanctions against Russia, according to a New Lines investigation. That agreement is old hat, the party claims, yet the FPÖ’s present leader, Herbert Kickl, has opposed taking in Ukrainian refugees, while the party’s leader in Vienna, Dominik Nepp, has condemned Ukraine as a “corrupt state”. The FPÖ also opposes the Ukrainian president Volodymyr Zelensky addressing the Austrian parliament — as did the SPÖ, before the party’s membership forced them into a U-turn.

During the Cold War, Austrian national security was contingent on the great powers respecting the permanent neutrality they themselves had invented. The Cold War would end, Nato expand, and Austria join the EU, yet the country did not shed itself of the notion that close, even obsequious relations with Russia were both necessary and desirable. From energy to espionage, Austria continues to act as Russia’s tunnel into Europe not by accident but by choice.

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