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.
“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?