Another Russian-Hungarian deal, good only for the Russians

In the past few years passengers have been evacuated from one metro car after the next on the M3 line in Budapest because the cars started to smoke. These Soviet-made cars have been in service since 1978 without any refurbishing. The most modern metro cars nowadays are guaranteed for 30-35 years. It was high time for these old cars to be retired. Line 2, which was completed in 1970, had the same vintage Soviet cars, but they were replaced by air-conditioned Alstom Metropolis trains in 2013. It was also Alstom that provided the cars for the M4 line that opened in March 2014. Thus, it would have made a lot of sense to seriously consider Alstom’s bid to provide 37 trains with 6 cars each for the M3 line.

Well, this is not what happened. After years of often acrimonious discussions between the central government and Mayor István Tarlós, a decision was reached a few months ago. The M3 line is not getting any new trains. The Soviet cars will be refurbished, allegedly because of cost. Commentators and experts are skeptical.

But let’s start at the beginning. In order to get rid of the by now dangerous old cars Budapest figured it would have to take out a 60 billion forint loan, for which it needed the central government’s guarantee. It was a few months ago that at last the Orbán government said it would guarantee the loan, but only if the money was used to refurbish the old cars, not to buy new ones. The city’s hands were tied. They would have to settle for fixing up the old trains.

Originally 22 companies were interested in getting the job, but BKV, Budapest’s transit authority, found only five that could meet the requirements. Alstom was not among them. In the end, the competition was between two companies: the Russian Metrovagonmash, whose predecessor, the Mytishchi Machine-building Factory, produced the original trains, and Skinest Rail, an Estonian company whose owner is Oleg Ossinovski, an Estonian-Irish citizen. Magyar Nemzet learned that Skinest Rail planned to have the job done in Ukrainian Krykov Railway Car Building Works operating in Kremenchug if it got the job, which it didn’t.

It was only about a week ago that the final decision was reached: Metrovagonmash was the winner. BKV’s arbitration committee ruled that Skinest’s bid couldn’t be considered because, according to Hungarian public procurement law, it had eight “formal” mistakes. It is amazing how often a company is excluded from the bidding process because of “formal mistakes.” Skinest claims that they not only underbid Metrovagonmash by 9 billion forints but offered a 30-year guarantee as opposed to the Russian 25-year guarantee. The Skinest motor design would also have ensured savings in energy use.

Budapest ended up with a project that will cost 69 billion forints, while it can borrow only 60 billion. The balance must be found in Budapest’s very tight budget., an economic internet news site, finds the deal “inexplicable.” Everybody suspects foul play here. And not without reason when one reads that László Deák, CEO of Alstom Hungária Zrt, told Magyar Nemzet that “months ago they approached city hall saying that for 75-81 billion forints (242-250 million euros) they would deliver 37 trains with six cars each.” The difference between the 69 billion Budapest will have to pay for old refurbished trains and the Alstom’s offer for new cars is relatively small. (As a point of comparison, “the fence” will cost close to 30 billion forints.) Moreover, after negotiations the city might have been able to lower the price even further. István Tarlós, however, claims that he has no information of any such offer.

By now, Hungarian internet sites have published pictures of the likely Metrovagonmash creations by finding old Soviet-made cars refurbished by the same company. Here is one from Moscow.

Moscow metro

Compare that with the Alstom cars running in Budapest:


The city council with its large Fidesz majority naturally voted to accept Metrovagonmash’s offer with the dutiful assistance of the MSZP members. There was only one person who voted against it: Erzsébet Gy. Németh of DK, who suspects a connection between the Russian loan to build the Paks II Nuclear Power Plant and the Russian firm’s winning tender. Antal Csárdi of LMP abstained. He was even more specific in his criticism. According to him, all signs point to the likelihood that Viktor Orbán during his trip to Moscow promised Putin that the Russian company would get the job to refurbish the metro trains. He told Magyar Nemzet that Alstom sold new metro trains to Paris for less money than Budapest is paying the Russians for refurbished ones.

As I said, BKV and the Budapest government claimed that the decision to settle for renovating the old cars was financial. In fact, Tibor Bolla, CEO of BKV, in an interview today alleged that the new trains would have cost at least 90-95 billion forints, an estimate based on prices obtained during earlier negotiations for the trains.

But that’s moot. Cost didn’t figure into the city’s current decision because the choice to refurbish the old cars instead of purchasing new ones was not in their hands. It was in Viktor Orbán’s. So, let’s assume that Orbán had an understanding with Putin about the Russian firm’s involvement with metro cars on the M3 line. Why didn’t he then simply specify new cars manufactured by Metrovagonmash? That would have meant an even a bigger chunk of money for the Russians. I suspect that he was afraid that Metrovagonmash, with its still fairly conservative design and technical know-how, might not have been able to compete successfully with, for example, Alstom. Declaring the Russian company the winner would have been too obvious. Having the same Russian company fix up the old cars that it manufactured forty years earlier looked like a much safer bet.

As it turned out, even that wasn’t entirely smooth sailing. The Russians won only on a technicality. Two days ago Skinest Rail submitted a formal complaint to the European Commission over the procurement procedure. The Estonian firm “contends that its bid was more favorable in every key aspect, as its proposal meets all modern technical requirements–asynchronous drive, disc brakes, pneumatic suspension, longer life cycle, etc.–and the eight points cited by BKV Zrt. as reasons to disqualify the Skinest bid are formal in character.” The press release further noted that “a Hungarian Parliament bill for the acceleration and simplification of certain development investment projects in Budapest was passed on the same day as the announcement of the tender winner, and was dubbed the M3 Act because of its focus on the M3 modernization project.”

Although Skinest claimed in its formal complaint to the European Commission that the bill passed by parliament “limits legal remedies available to contending bids,” according to Bolla, CEO of BKV, Skinest is mistaken, and since then they have asked for remedies in Hungary. Skinest will not, however, be able to compare the two competing tenders because of Metrovagonmash’s insistence on secrecy. I wouldn’t be too optimistic if I were Oleg Ossinovski. Estonia/Ukraine can’t beat Russia in Budapest.

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July 17, 2015 9:49 pm

The Hungarian bidding process is the simplest in the entire World. Anybody can bid, because the winner is already decided by the viktor before the bidding started.

July 18, 2015 12:18 am

Hungary: a conglomerate of thieves.


July 18, 2015 2:02 am

And if a Russian company, corrupt in all the ways in which every organisation is in Russia, does “fix up” the old metro trains, what guarantee is there that the job will not be done shoddily, and that trains will be safe to travel on?

Perhaps this excellent article should be publicised widely on Facebook.

July 18, 2015 12:14 pm

From appearances it looks like Hungary warms to the idea of Soviet designed objects in Budapest. The buy represents some nice moolah for the Russians as well as a bit of nostalgia too.

So with this business effort let’s look later on for some new designs on all the ‘hids’ across the Danube. They’ll be taking pictures of Viktor looking at potential re-worked designs of Vlad’s Trinity and Palace bridges for the Magyars hawked by their engineers. Gotta spread that ‘bizness’ around….;-)…

July 18, 2015 12:44 pm

Rather OT but funny:
For those who don’t understand German:
The report says that Putin, riding topless on a horse, was taken for a homosexual and attacked by some Russian right wingers …

July 18, 2015 4:01 pm

I am surprised that no one brings up the fact that many bids being won appear to be “cushioned” in order to cover the cost of padding someones pockets. The costs come in rather expensive and are claimed to be a more affordable purchase or build, then there must be a middle man who is getting paid to make sure the deal happens. In this case it is likely Orban. I have a feeling that once Orban is gone, it will be revealed just how much trouble he is leaving the Hungarian people in. Most of the stuff being done is taking place with loans, Hungarians will be paying it back.

July 18, 2015 4:18 pm

Yes, Liz, that’s a typical mafia phenomenon – seems that Hungarians now are used to it.
I just heard a few stories – no names of course:

A friend’s daughter worked at the tax office NAV in Budapoest – she told her mother she couldn’t stand the corruption any more, now she works in a village outside Budapest, less money but she feels better.

A Fidesz politician’s son (nominally still a student) is now the proud owner of several (!) tobacco shops and was just seen driving his new 100 000 € sports car …

The unbelievable success of the lighting company owned by Orbán’s son in law has also been mentioned here …

There is a long list of similar stories – some which I’ve heard are too dangerous to publish even.

July 19, 2015 2:54 pm
I suppose, that to someone living in Hungary all these “discrepancies” may even appear acceptable: After all, it just a little worse, just a little more corrupt, just a little more authoritarian than yesterday, oh, well. But if you happen to look at Hungary with keen eyes from the outside, you already see things from another perspective, and without the effect of the close proximity of the environment, and tend to see the greater picture with more stress on the overall effect, without being involved in minute details. A few day back I have accidentally met with a “little old lady” who usually travels at least once or twice in a year – since fifteen years – to Hungary to partake some balneology treatment in one of the hot spring baths. Beside of this she has nothing to do with Hungary, not related, no “blod” in the matter. And she loves the place, she really does! Learned even some basic sentences and a few dishes to make – it’s an achievement, it really is! However, she has the (dubious) “benefit” of the innocent, totally impartial, but not blind and rather sensitive to pick up vibes and bits of information –… Read more »
July 19, 2015 3:26 pm

I’ve been on the road all day so I’ll make it short:

I don’t have an answer, but I can corroborate your statements re single women:

Seems that around 50% of women in Hungary are divorced or just single mothers – which obviously puts a strain on them!

Many of my wife’s friends (actually she was too …) are in that unpleasant situation and I often wonder about Hungarian men – what’s wrong with them?

On the other hand I should be happy – wouldn’t have had that chance to find a wonderful woman if it weren’t so – and I’m not the only bloody foreigner around here with a lovely Hungarian wife …

July 19, 2015 4:00 pm

Thanks for the comment wolfi – and congratulations for your lucky strike!

However, the problem in the whole picture is that the single mom with two daughters and a full-time job – and some more, – MUST sell their house in order to educate her child, because she want a better future to her!

If it was the same system in service thirty-some years ago, Orbán would have ended his career as the janitor of the Felcsút soccer field – if things turned out lucky to him…
But since he is the one who makes up the rules today, nowadays only the precious few get the same privileged chance he did, as the son of a ‘Communist Party Secretary’…

No chance anymore to them who has just as much brain and talent as Orbán did have then, only to those who has the same “connection” he had, when he got admitted to the university. Orone must be immensely wealthy, or at least as much as our beloved leader does, working hard and living purely on his income, as we all know…