It never occurred to anyone at the Austrian Chamber of Commerce that holding a pleasant business meeting on the outskirts of Moscow in January might arouse a certain suspicion. The goal was to attract hundreds of Austrian companies active in Russia and their business partners, and only after a journalist from an Austrian research platform asked questions about the event, the chamber canceled it.
The failed event in Moscow best illustrates the alpine nation's ambivalent approach to Russia after President Vladimir Putin launched a brutal attack on Ukraine last year. Vienna does not want to be seen as openly supporting Moscow, but it is also careful not to permanently damage a relationship that has been quite lucrative for Austria for decades.
Although Austria is not the only one that wholeheartedly embraced Russia before the invasion of Ukraine, no member of the European Union distanced itself so hard from Moscow. (Hungary doesn't even seem to be trying).
Although Austria provided Ukraine with significant humanitarian aid, received a large number of refugees, supported EU sanctions and publicly criticized Putin for violating international rules, behind the scenes the economic relations between the two countries remain practically untouched, especially in the fields of energy and finance.
When Austrian Chancellor Karl Nehamer decided in April last year to be the first European leader to go to Moscow (via Kiev) after the invasion and meet with Putin, he tried to sell it as a mission of peace and as his solemn "duty". However, Austria's critics in Europe sensed that there was something more. Although few details emerged from what Nehamer called a "difficult and honest conversation," skeptics noted that Russian gas continued to flow to Austria, unlike Germany, which was cut off.
Austria's Western partners had long tolerated its dealings with Russia, but the war in Ukraine raised the stakes and Vienna suddenly found itself under pressure from all sides. Critics on both sides of the Atlantic say Austria's embrace of "military neutrality" and what many see as its ambivalent approach to the crisis poses a significant threat to European unity over Ukraine.
"Austria is certainly the EU's weak point in the matter of Russia," said a high-ranking official of the European Commission, pointing to what he described as Moscow's successful infiltration of the Austrian establishment.
For the EU, already struggling to cope with Hungary's embattled Viktor Orbán and his relationship with Putin, Austria's refusal to aggressively distance itself from Russia further complicates efforts to present a common front. In Brussels, they fear that over time, the establishment of a Russia-tolerant zone in the geographical heart of Europe, which would include Hungary and Austria, could expand, giving Russia an advantage in efforts to tear the continent apart.
Alexander Schallenberg, Austria's energetic head of diplomacy and its fierce defender on the international stage, insists that such endeavors are a thing of the past and are not part of the present reality. In a recent interview, he said that Austria does not threaten European unity, but actually strengthens it.
"Since February 24 last year, both Chancellor Nehamer and I have made it clear what the position of our country and government is," said Schallenberg.
Non-alignment pays off
In order to understand the roots of the Austrian attitude towards Russia, it is necessary to look back to 1955. A decade after the end of World War II, the country was occupied by four Allied powers and divided into zones. In order to convince the Soviets to return full sovereignty to Austria, the state had to insert an article on neutrality into the constitution, which the population of the time considered a necessary evil. (The law does not prevent Austria from participating in an armed conflict, but stipulates that the country will not join a military alliance or allow other countries to station their army outside of its territory).
Given how deeply Russian interests are embedded in the politics and economy of Austria, the unraveling of Austro-Russian relations may no longer be possible
At first, the Austrians were not overly concerned about offending the Soviets. Many Austrians fought against the Soviets in the German army and were in Soviet camps, so there was not much love between the two countries. After the Soviets put down an uprising in Hungary, triggering a huge wave of refugees across the Austrian border, Vienna did not hesitate to join other Western countries at the United Nations in criticizing Moscow's actions.
However, it did not take long for Austria, positioned between NATO and the Soviet bloc, to discover the benefits of the new status. As a neutral non-aligned country, it could do business on both sides of the Iron Curtain.
On June 1, 1968, Austria became the first Western European country to sign a long-term contract with the USSR for the supply of natural gas. Only a few months later, disaster struck. In August, Soviet tanks again invaded Central Europe, this time into Czechoslovakia to quell the Prague Spring.
With the memories of the invasion of Hungary still fresh, the Austrians feared that the Soviets might invade their country as well. The government even made emergency plans to move from Vienna to the far west of the country. Vienna tried not to provoke the Soviets, keeping Austrian troops 30 kilometers from the border with Czechoslovakia. (They were rightly concerned. The Soviets had planned to send Warsaw Pact troops across the border, but for reasons that remain unclear, decided not to.)
It was a crucial moment for Austria in the Cold War - the Soviets did not attack, and the gas continued to flow.
Most Austrians have learned their lesson: neutrality is good for both business and security.
Neutrality also allowed Austria to become an important stage for international diplomacy which emphasized the benefits of non-alignment.
The gas deal proved extremely beneficial for then-state energy group OMV, establishing Austria as one of the primary conduits for Russian gas destined for Western Europe.
"The power of history should not be underestimated," said Wilhelm Molterer, former Austrian vice chancellor and finance minister. "The economic benefits of that arrangement for Austria have been significant for many years."
History also illustrates how Austria's relationship with Russia was built from the beginning on a combination of fear and economic benefit, while Germans often describe their affection for Russia in cultural and historical terms.
On the other hand, the Russian elite has long viewed Austria as the best of both worlds: a gateway to the West, which is not entirely Western. Vienna, with its faded imperial splendor, indulgent politicians and famous gemutlichkeit (pleasant cordiality) is a traditional favorite of oligarchs and apparatchiks. Above all, it is a place where Russians with money and influence are welcome, whether they want citizenship, as was the case with the daughter of former Russian President Boris Yeltsin, or choose real estate in the Alps, like oligarch Oleg Deripaska.
Almost every living former Austrian chancellor sought a job in the East after leaving office.
Wolfgang Schissel, former chancellor of the center-right People's Party, has joined the boards of Russian mobile operator MTS and oil giant Lukoil. His Social Democratic successor, Alfred Guzenbauer, went to work for the "Institute for Research on the Dialogue of Civilizations," a pro-Russian think tank founded by a friend of Putin. Christian Kern, another social democrat, joined the board of the Russian state railway RZD.
The same is true for former ministers who mostly settled in Russian energy companies, arguing that Austria should remain a bridge to Russia for the sake of the West. (Most left their positions after Russia invaded Ukraine last year).
Just business, nothing personal
The extent to which Austrian leaders have cornered the country with Russia became clear during Putin's 2014 state visit, just weeks after he annexed Crimea and sparked a war in eastern Ukraine. Then the president of the Austrian Chamber of Commerce, Christof Leitl, jokingly reminded Putin that 100 years ago, Ukraine belonged to Austria. Putin then asked with a general laugh "so what do you propose", adding with a smile that he was afraid of the answer. As they joked, then-Austrian President Heinz Fischer patted Putin on the back, and earlier that day he received him with full military honors in the former imperial palace.
The jokes may have stopped after Putin's general invasion of Ukraine, but the economic relationship has remained virtually intact.
Russia is still the second largest investor in Austria after Germany, with foreign direct investments in the amount of 25 billion euros at the end of last year, or 13 percent of the total amount.
Meanwhile, a large number of Austrian companies that have invested in Russia remain active. Almost two-thirds of the 65 Austrian companies in Russia plan to stay there, according to a survey by the Kyiv School of Economics.
Oil and gas conglomerate OMV, Austria's largest company, remains a major player in the Russian energy sector. Raiffeisen Bank is the largest foreign lender active in Russia and a pillar of the country's financial system. Even Salzburg-based Red Bull continues to sell its energy drinks in Russia.
OMV claims it is obligated to continue buying at least 6 billion cubic meters of Russian gas annually until 2040 - the result of a 2018 agreement signed in Vienna by Putin and then-Chancellor Sebastian Kurz. The Austrian government, which owns just over 30 percent of OMV, a former state monopoly, claims it is not privy to the details of the contract. It remains a mystery how Vienna plans to fulfill its promise to reduce Austria's dependence on Russian gas to zero by 2027.
East winds
Until recently, Austrian officials have largely managed to counter international scrutiny of their ties to Russia with the tried and tested formula of diversion, obfuscation and relativization, all with a smile and sugary Viennese charm. "We are a small, neutral country and we have always tried to be a place for dialogue and to find a common language with all the countries of the world," said former Chancellor Kurz, whose frequent visits to Putin while he was in power aroused suspicion even in Austria.
The Russian elite has long viewed Austria as the best of both worlds: the gateway to the West, which is not entirely Western, and Vienna, with its faded imperial splendor and compliant politicians, is the traditional favorite of oligarchs and apparatchiks.
It was during Kurz's mandate that the most grotesque example of the willingness of the Austrian political establishment to accommodate Russian interests came to light. In 2019, a video was released of Vice Chancellor Heinz-Kristian Strache of the far-right Freedom Party offering to trade political influence for an investment with a woman he believed to be the niece of a Russian oligarch. The scandal that followed brought down Kurz's government.
The discrepancy between Austrian rhetoric and reality is one of the reasons why its international partners stopped believing in Vienna's neutral arbitral status. For years after the annexation of Crimea, Western officials warned Vienna that the Russians had infiltrated their security services, but no one listened.
Only after exposing a mole in the high ranks of the security service in 2021 and after suspending Austria from the Western intelligence sharing network did Vienna decide to act. However, by then the problems had become so serious that the government decided to disband the intelligence service completely and start all over again.
The war in Ukraine further increased tensions and brought them to light. In January, after Schallenberg warned that Moscow should not be excluded from the OSCE, the Polish foreign ministry accused Austria of being "pro-Russian". Around the same time, the U.S. Treasury Department's sanctions enforcement division sent Raiffeisen Bank a list of questions about its Russian operations, which some observers saw as a sharp message from Washington to Vienna. Last week, the European Commission called out Austria for not doing enough to reduce its dependence on Russian gas, warning that it faces "major challenges" in terms of security of energy supply. In recent months, Austria has relied on Russia for as much as 70 percent of its gas, although overall volumes have fallen amid a mild winter and economic slowdown.
Considering how deeply Russian interests are involved in the politics and economy of Austria, the unraveling of Austro-Russian relations may no longer be possible. Last year alone, Austria paid seven billion euros for Russian gas.
Raiffeisen Bank has similar problems breaking its dependence on Russia. Last year, the bank earned more than 2 billion euros in Russia, which is more than half of the total profit. However, due to international sanctions against Russia, the bank, whose stock market value is around 5 billion euros, cannot get that profit. The bank says it wants to leave Russia, but has yet to find a way out. "They waited too long and missed the opportunity to reposition themselves," said an executive at a rival bank. "Their only option now is to somehow slip through."
Austrian officials privately complain that criticism of Raiffeisen Bank in Western capitals is hypocritical because many European and American companies that are still active in Russia benefit from its services and that the collapse of the Russian financial system would not be in anyone's interest.
However, increased surveillance of relations between Austria and Russia forced Vienna to change the board. When asked if he still sees Austria as a "bridge" to Moscow, which has been repeated by generations of Austrian politicians, Schallenberg was decisive.
"If you want to be a bridge, you need two shores, and currently they don't exist," he said. "When one country is driven by neo-imperialist desires and believes that it can change borders with rockets and tanks and simply denies the existence of a neighboring country, then there is no other shore".
So far, however, the change in rhetoric has not resulted in major shifts in policy—and given the prevailing political winds, that change may never come.
The right-wing pro-Russian Freedom Party, which wants to lift all sanctions against Russia, has been leading in all polls since November with around 28 percent of support and a few percentage points ahead of its closest rival, the center-left Social Democrats.
Given that the majority of Austrians still support sanctions, the party's popularity is probably rooted more in dissatisfaction with the current government than in enthusiasm for its policy towards Russia. In any variant, as things stand now, that party will do well in the elections in the fall of 2024.
A real confrontation with Russia requires, at the very least, a discussion of neutrality - which has a sacred status, as demonstrated by the recent debate over sending demining units to Ukraine.
"No one wants a debate about neutrality, but we must at least consider the reality of our obligations in the EU," said former chancellor Molterer.
Unfortunately for those hoping for a tougher attitude towards Russia, gemütlichkeit (pleasant cordiality) is a much easier option.
Prepared by: N. Bogetić
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