The Russian-Hungarian deal on the Paks Nuclear Power PlanT is in trouble

Yesterday came the news from Bruxinfo, a Hungarian-language internet site specializing in news about the European Union, that the European Commission will require the Hungarian government to suspend all projects connected to the building of an extension to the existing nuclear power plant in Paks, just south of Budapest along the Danube river. The original plant was built by the Russians, and the two additional reactors, named Paks II, is to be built by Rosatom, the giant Russian nuclear power plant construction company. The very costly project can be undertaken only if Hungary receives a foreign loan, and it seems that it was only the Russian government that was ready to lend €10 billion to be spent on the project, which would be 80% of the cost. The rest is to be provided by the Hungarian government.

The reason for the suspension is that “Hungarian authorities failed to comply with EU procurement rules when they awarded an €12.5 billion project … to Russia’s Rosatom directly, without a tender.” A few minutes after the news broke journalists from Népszabadság were at János Lázár’s door, who confirmed that, although the official letter hadn’t arrived yet, the news didn’t come as a surprise to the Orbán government. However, Lázár added, “the Hungarian government has no reason to be worried [because] we have in our possession a piece of paper that was signed by José Manuel Barroso, former president of the European Commission, on January 14, 2014. Without this we couldn’t have signed the contract.” This letter, he indicated, will show that Hungary followed all the rules and regulations of the European Union. As we will see later, Lázár might be far too optimistic on this score.

The whole Paks II deal has been shrouded in secrecy, especially as far as the Hungarian side was concerned. It was on March 13 that sharp-eyed reporters from vs.hu discovered the Russian text of the loan agreement on www.pravo.gov.ru. This document showed that the Budapest team involved in the negotiations hadn’t told the whole truth about the details of the agreement.  For example, they repeated several times that the Hungarian government’s 20% contribution will be due only at the end of the twenty-one-year period, during which time the loan must be paid back. This turned out to be inaccurate. Every time Rosatom submits a bill Hungary will have to pay 20% of it from its own coffers. More details of the contract between Russia and Hungary are in my post on the subject, written on March 13, 2014.

A year later I wrote again about Paks II when Vladimir Putin had a bizarre conversation with Sergey Kiriyenko, head of Rosatom, on television. Here Putin talked about the Hungarian deal and stressed that “we offer good terms and advanced technology, so if the partner is forced to refuse [to cooperate], which they could have done, it would be damaging to Hungary’s national interests.” Kiriyenko assured Putin that “we have received confirmation from the government of Hungary that all the agreements are in force on a wide range of projects… Everything has been confirmed and coordinated and the contract is coming into effect.” At that time, practically the entire Hungarian media interpreted Putin’s words as a threat to Hungary. My own interpretation was that Putin either suspected or knew that the European Union had already put pressure on Hungary and that Hungary might have to abandon the project.

By that time, the Hungarian government had managed to overcome one hurdle regarding Paks II. Originally Rosatom was to supply fuel rods for the life of the reactors. Eventually, Lázár triumphantly announced that everything was solved. Hungary managed to convince Russia to accept a compromise on this particular issue. However, the nagging problem of the Hungarian government’s entrusting the project to Rosatom without an open bidding process was there from the very beginning. In fact, as soon as the contract was signed, the EU commissioner in charge of energy indicated that this particular aspect of the contract would be investigated in the future.

chess

“A lie has no legs,” says the English proverb. Of course, we know that an awful lot of lies go unnoticed, but perhaps the Hungarian government’s lies about Paks II may catch up with it. Péter Magyari of 444.hu has been trying to find out whether part of the Russian loan has already been received in Budapest. After he and other journalists had a conversation with Attila Aszódi, government commissioner in charge of Paks II, Magyari came to the conclusion that some Russian money has most likely already arrived and been spent on preliminary expenses. According to the commissioner, about 6-10% of all expenses will be spent between 2015 and 2018 on the project, before the cornerstone is laid. The problem is that, at least until September, Lázár had several times stated that not a euro cent had come from Moscow. The fear is that the Orbán government, knowing the concerns of Brussels, began speeding up the process of awarding contracts for the project in order to present a fait accompli, a situation that cannot be reversed. If, however, the project is either scrapped or has to start from scratch, Hungary will be stranded with a considerable debt that must be paid back to the Russian government immediately.

Now let’s return to János Lázár’s claim as of yesterday that all’s well with the project because “we have in our possession a piece of paper that was signed by José Manuel Barroso, former president of the European Commission, on January 14, 2014. Without this we couldn’t have signed the contract.” János Lázár’s memory is not the best. The “piece of paper” he is talking about was dated February 7, 2014 and was an answer to Viktor Orbán’s letter to Barroso written at the end of January. Orbán informed the president of the European Commission about “the recent developments with regards to nuclear energy cooperation between Hungary and the Russian Federation.” Orbán in this letter tried to downplay the fact that the job of building the nuclear power plant was given to Rosatom without any competitive bidding process.

It was to this letter that Barroso reiterated the Commission’s “respect for Member States’ basic choices concerning their energy mix.” Barroso added, however: “Member States’ commitment to comply fully with the rules of the Treaties and secondary legislation, in particular those governing the internal energy market, and to act in a spirit of coordination and full transparency, remains vital.” After the Commission examined the draft agreement, it “raised no objections of principle to the agreement from the perspective of article 103.” However, this was not a blanket endorsement of the Russian-Hungarian agreement because “there are … other aspects of EU law to be observed, such as the rules on public procurement and state aid.” (emphasis mine) All this can be read in my post of February 26, 2014.

I’m afraid you will have to trust me when it comes to the veracity of these quotes because today when I tried to get back to the links I provided to kormany.hu, the Hungarian government’s official website, I couldn’t find either Orbán’s letter to Barroso or Barroso’s to Orbán. They are both gone. I wonder why.

I was lucky to have recorded the most important sentences from Barroso’s letter. This way we have in front of us the message of this “piece of paper,” which doesn’t support János Lázár’s contentions. But what else is new?

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Member

Thank you Eva, again and again for the excellent articles, with properly and well connected web addresses for the proofs and supporting data of your conclusions and opinions. I learned a lot from you during the years, not just the content, but the style ant methods, how to present them convincingly to others.
I sincerely hope, the the EU politicians begins to do the jobs they are being paid for (and well enough) and not just playing with each other and enjoying themselves on high salaries as in the tenure of Barroso.
Hungary could be a World power in wind energy, even if they would only harness what comes from their politician’s mouth – and that is a (foul) wind that never stops 24/7!

BritinBudapest
Guest

Eva – there are ways to find internet pages which have been deleted – the internet never forgets even if Janos Lazar does. I am not an expert at all in this, but have used something called the ‘waybackmachine’ in the past. Maybe some other readers can help find the original letters – it could be a good moment to publish them.

Bowen
Guest
Gergő
Guest

Thanks Bowen, the Barroso letter is just ridiculous in the sense that it’s literally nothing for legal purposes.

Barroso didn’t promise anything nor stated anything binding.

It’s at most a polite answer – though I guess for Orban that’s enough. Orban wanted enough plausible cover to start awarding business.

Gergő
Guest
The entire Paks II project is insane. There’s no need for the extra electricity, Paks 1 (the existing four reactors) can still operate for 30 more years, the costs of the dismantling and constructing the spent fuel depository have not even been estimated (there may not even be a proper geological location in Hungary for the depository), extra dams on the Danube and energy storage facilities (such as a pumped-storage hydroelectric dam similar to the one that was planned into the Zemplén-mountains, but which was abandoned due to lack of EU funding) would be necessary, Hungary would chain itself to Russia for decades (e.g. the loan and the fuel purchase and know-how) and so on. In fact there are no pro arguments. Why is this project is being pushed so relentlessly by Orban? Why don’t insulation, energy savings, green energy projects get any meaningful funding or support? Even assuming a corrupt to the bone dictator, there is no satisfactory answer. The only answer I can think of is that Orban is a Russian agent for all practical purposes, who would do anything to steer Hungary toward Russia, back into the orbit of the Russia bear. Orban and his minions like… Read more »
Bowen
Guest

Denmark, a not-particularly sunny or large country, is committed to being 100% reliant on renewable energy (including solar) by 2050. Morocco wants to be 40% reliant on solar by 2020.

You’d have thought Hungary, with its exceptionally sunny location, large flat empty spaces, and supposedly inventive people, would be leading the EU in this.

tappanch
Guest

“Denmark, a not-particularly sunny or large country” – but particularly windy !

July 10, 2015:

“On an unusually windy day, Denmark found itself producing 116% of its national electricity needs from wind turbines yesterday evening. By 3am on Friday, when electricity demand dropped, that figure had risen to 140%.”

http://www.theguardian.com/environment/2015/jul/10/denmark-wind-windfarm-power-exceed-electricity-demand

http://denmark.dk/en/green-living/wind-energy/

We can all agree, the second Paks is not needed for the energy needs of Hungary.

Isn’t it possible that Orban’s Bavarian friends pushed for it, anticipating an energy shortage in Germany because of the closure of the atomic power plants there?

Carp
Guest

tappanch:

I don’t think they pushed for it. More like the conservative Bavarian “friends” of Orban (who likely are Russlandsverstehers as most Germans are, and business is business after all for BMW, EON, Siemens etc.) told him that oh he should not worry, their own (German) government is so stupid, the CDU went all hippi green, terrible, these days noone can be trusted any more (ie. to be a real conservative).

They, the Bavarians knew that this is what Orban (who hired German advisors specifically for this project) wants to hear, so they told him.

But I’m sure there was no push or promise or anything like that. But obviously the Germans like big projects too – they felt that Orban would do Paks 2 anyway and like good sychophants supported the decision they figured was anyway already made.

Observer
Guest
“A lie has no legs” Right. That’s why the Orbán rolls them off the assembly line on wheels. In a nutshell, for those who wonder why: Q. 1 Why would the largest by far project of recent times be kept in secret, when it was to be know shortly? Q. 2 Why would anyone, gov or private co, rush a project 10 years ahead of time while crucial factors like deuterium technology, cold fusion or solar and wind energy can drastically rearrange the industry and the markets ? A. 1 I subscribe to the theory that Orbán wanted to negotiate in secret until he could secure favorable conditions, including some huge kickback. If these were not to be achieved, then perhaps the project would have been quietly dropped for now. A. 2 There was no credible reason presented by anyone to justify the rush. Moreover, all things normal, there would have been a 6-8 year period when the existing power grid around the plant would have been insufficient to carry the increased capacity produced by both old and new blocks running. So either the old block had to be shut prematurely or new grid capacities would have to be built… Read more »
exTor
Guest

http://www.theguardian.com/world/live/2015/sep/15/refugee-crisis-hungary-launches-border-crackdown-live-updates

This is old news to some, but I just happened onto this webpage. An AP photographer was forced to delete footage that covered two days. Hungary disputed the contention of forced deletion.

http://recode.net/2015/01/22/how-to-recover-deleted-photos-from-your-memory-card-or-smartphone

Many users of digital equipment are not savvy to the fact that a deletion is not actually real. The connection to files recorded on memory cards is severed, however the files still remain on the cards and are retrievable.

As long as no other photos have been taken, the ‘deleted’ files can be retrieved by special software. Had the AP photographer actually carried a spare card with him, he could have saved the so-called deleted files by removing the old card and storing it.

Carry spare cards !!!

MAGYARKOZÓ

szenes
Guest
I can well imagine that a new, proper public procurement process would be started – with the Russians winning the new one too of course. Let’s perform this theatre piece if the EU wants it so badly. The Orban government has held thousands of public procurement projects (almost all corrupt, rigged ones) and nobody could legally challenge those. For Orban and Lázár it’s only a question of “lepapírozás”, creating the necessary paperwork to make the project formally legal. Under the new public procurement rules not even the price is the determining factor but the best overall bid (as in sorry, we like the Russian bid best overall and we just don’t like the French – note that Areva is under restructuring anyway). Orban would quietly discourage other bidders and would set such conditions in the tender process which he knows the rest of the bidders simply would or could not not meet (except for the Chinese perhaps). Orban decided that he wanted to move to the Castle District and he’s been working on it. He never gave the idea up and by 2018 he will move in. If Orban decided to build Paks 2 and Jobbik is also wholeheartedly behind… Read more »
szabi
Guest

If the EU attacks Paks 2 we shall build Paks 3 and if the EU still attacks it we shall also build Paks 4.

Hungary will be the energy heart of Europe and will control energy all over Europe. The EU can’t do a thing. The dogs bark but the caravan goes on…

Observer
Guest

And pigs will fly …

petofi
Guest

@szabi

Ahhh, a real Hungarico in our midst. We’re honoured! (I think…)

Hungaricum.

Hajra Magyarok!! You have nothing to lose but your stupidities..(But actually, you must maintain them to remain a member of tribal Hungary!)

Guest

“Hungary will be the engine that will drive the EU out of recession” Orban 2013

Ha! Ha!.HAaaaaaaaa! HAAaaaaaaaaaaaaaaaaaaaa! Oh! Sto…… HAAAAaaaaaaaaaaaaaaaaa stop pleeeeeeeees ….HAAaaaaaaaaàa ……
Haaaaaaaa. STOPPPP!!!!!……. Haaaaaaaaaaaàaaàaaa…….

Guest

“Hungary will be the energy heart of Europe and will control energy all over Europe……”

Ha! Ha!.HAaaaaaaaa! HAAaaaaaaaaaaaaaaaaaaaa! Oh! Sto…… HAAAAaaaaaaaaaaaaaaaaa stop pleeeeeeeees ….HAAaaaaaaaaàa ……
Haaaaaaaa. STOPPPP!!!!!……. Haaaaaaaaaaaàaaàaaa…….

Member

“Hungary will be the country of iron and steel!” Matyas Rakosi

Guest

@szabi (November 19, 2015 at 7:54 am)

You comment is so absurd that it must be a joke. Your well thought out paraphrase on Orban’s statement on the final lenght of the Felcsut toy railway reveals it. Your prophecy of Hungary’s future energy leadership in Europe is overdoing even Orban. Please confirm that you meant it as a joke.

Pusztai Zoltán
Guest

The EU did not prohibit for Hungary to continue with the project.

Sorry but Hungary has every right to continue the preparations for Paks 2.

When the EU issues something binding Hungary will listen, until then the lawyers will do their job and the engineers will do theirs.

But until such time – probably after a litigation of 3-4 more years – Hungary will continue to build.

There is no compromise on Paks 2, it will be built. Such little hurdles were always expected. Orban doesn’t compromise, he is not giving in to Brussels. Szabi is right.

http://bruxinfo.hu/cikk/20151119-a-paksi-felfuggesztes-nem-kotelezo-de-melegen-ajanlott.html

Bowen
Guest

I’m awfully sorry, but …

“The Commission considers that the direct award of the Paks II nuclear power plant project does not comply with EU legislation on public procurement (Directives 2004/17/EC and 2004/18/EC).”

http://europa.eu/rapid/press-release_MEMO-15-6006_en.htm

petofi
Guest

@Bowen

Don’t you know? There is the ‘law of the land’ (EU) and then there’s the law of Mozes, er, I mean…the law of Orban.

Which do you think operates in the sacred ground of blessed Hungary?

petofi
Guest

@Zoltan

The Hungarian view of Law: “One cannot do what is prohibited; but all else is allowed!”

Law in the land of Tribalism.

Observer
Guest
“A lie has no legs” Right. That’s why the Orbán rolls them off the assembly line on wheels. In a nutshell, for those who wonder why: Q. 1 Why would the largest by far project of recent times be kept in secret, when it was to be know shortly? Q. 2 Why would anyone, gov or private co, rush a project 10 years ahead of time while crucial factors like deuterium technology, cold fusion or solar and wind energy can drastically rearrange the industry and the markets ? A. 1 I subscribe to the theory that Orbán wanted to negotiate in secret until he could secure favorable conditions, including some huge kickback. If these were not to be achieved, then perhaps the project would have been quietly dropped for now. A. 2 There was no credible reason presented by anyone to justify the rush. Moreover, all things normal, there would have been a 6-8 year period when the existing power grid around the plant would have been insufficient to carry the increased capacity produced by both old and new blocks running. So either the old block had to be shut prematurely or new grid capacities would have to be built… Read more »
petofi
Guest

27%

And, as usual in the Hungarian mindset, 27% is a Majority…because it depends on which 27%.

Law and life in the house of mirrors called Hungary.

Guest

Re: ‘Hungary will be the energy heart of Europe and will control energy all over Europe. The EU can’t do a thing. The dogs bark but the caravan goes on…’

Straight down to Dante’s infernal pool. ‘Energy’ heart? Perhaps more ‘lights out’.

Ostensibly this Paks business was to ideally ‘strengthen the energy security of the EU as a whole’ according to Putin. Cough cough , grabbing throat! The inanity of that statement astounds. If anyone believes that I have the Brooklyn Bridge for sale. Inquiries welcome.

And I don’t think Hungary gets any points for astuteness in their fiscal management of the country. Oh at the time the government ranted and raved a few years ago on how Western banks screwed the country with their loans. Yet we see Hungary now taking terms on Paks that could put it penury to the ‘Big Bear’. What to say? Hungary sure knows how to hang itself. Blind as bats as they saunter in the Putin cave. They’re in the country of ‘don’t care’. What a muddled bunch at the reins. You just can’t laugh with these Keystone Cops.

Observer
Guest

Rikard November 19, 2015 at 9:11
“Hungary sure knows how to hang itself. Blind as bats ..”

What about lemmings ? See :

H. has had one of the highest suicide rates in the world.
Hungary is at the bottom of the list re knowledge of foreign languages in Europe.
Having traveled and lived in many places I can confirm that Hungarians are the most negative mindset nation in Europe.
Recent study found the Hungarians to be the most receptive to grand conspiracy theories.
Recently Hungarians topped the list with the longest TV watching in Europe, an indicator of the level of social life.
Ditto for alcoholism.
Hungary had the best economic and pretty good social indicators in 1990, just behind Slovenia and in front of Czechoslovakia. Now it is just in front of Romania and Bulgaria.
The slide back started sometime during the first Orban government and accelerated during his second term 2010-14, 2008 financial crisis notwithstanding.
Orban declared “back to the pre 1944 state of affairs” (álapotok), i.e. when in semi feudal Hungary the gentry used to deride banking, trade and industry as something for the (despised) Jews.
Shall I continue?

tappanch
Guest

The dominoes spring back: Slovenia, then Croatia, then Serbia, then Macedonia announced that they will turn back migrants from all countries but three (Syria, Iraq, Afghanistan) from today.

This measure leaves 92% of the migrants/refugees still eligible to reach Germany.

Remark:
The number of migrants/refugees making it to one of the Greek islands reached 690,000 on November 17.

Sea arrivals
Greece: 690,000
Italy: 144,000
Spain: 3,000

Source: UNHCR

petofi
Guest

re: back to Muslim ‘adaptability’–the case of Hasna Aitboulahcen who blew herself up last night in Creutzwald to help another terrorist escape.

Hasna–born in France; father arrived in the 1970s. She had not been seen in Creutzwald for 5 years. Father, all of a sudden at age 75, returns to Morroco last year but keeps his pied a terre in Creutzwald(!)–no doubt he’s suddenly become a globe-traveller.

Guest

And just an aside to the informative essay I noticed the two knights facing off in the picture accompanying this very informative essay. Perhaps telling in symbolically suggesting the kind of fight going on with the government and its opposition.

Knights near and opposing each other can’t take out the other off the board. Their movement always looks ‘direct’ one way but then they switch to the flank for attack. Have to say if Mr. Orban as chess meister he knows his best moves because he appears to win when he makes them. Thing is how long can his administration get away from making ‘unsound combinations?’ Wonder if he has a call in to North Korean architects for grand sweeping ‘plaza’ plans. Those guys always think ‘big’.

Guest
I have a hunch that the main “moves” Orbán is making are with a shrewd eye to the future – not for Hungary, but as an escape route for himself, when his empire finally tumbles. Foreign bank accounts no doubt figure largely in his manoeuvres, as repositories for his illegally amassed billions syphoned off from EU funding. A new Paks deal and money from Russia would shore up his fortune even further, ensuring he lives out the rest of his life in luxury, in far-flung lands where bank accounts are not scrutinized and where the long arm of the EU and the civilized world would find it hard to reach. I suspect he has been sizing up a palace or two in Russia, as well as doing the renovations on his little pied-a-terre in the Buda Castle. So a deal with Russia would be an investemnt not in energy, but in his own future. The rush is on to accomplish his master plan – get more money, move into the castle, declare himself “king of Hungary”, fool around with the ancient gold crown, possibly have it adjusted to fit his big-headed schemes, have lots of dinner parties with his mafia… Read more »
Observer
Guest

Can’t wait for that day!
However regimes like this don’t fall easily unless something dramatic happens like another 2008 financial crisis or , say, an FBI investigation into the Orban mafia corruption affecting US companies’ interests with international arrest warrants…
Let me dream a bit longer…

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