On December 27 I read a brief announcement in Magyar Nemzet, which didn’t seem to rouse much interest in the Hungarian media. In the December 23 issue of Magyar Közlöny, the government’s official publication of all new laws and ordinances, there had been a news item about the government’s decision to immediately transfer 8,4063 billion forints to the Hungarian National Film Fund headed by Andy Vajna, an American-Hungarian former film producer, who in the last few years has been a special favorite of Viktor Orbán. The article, titled “The Film Fund is getting further billions,” skimmed over the fact that this large sum was transferred from money that had been set aside for the recapitalization of the company created specifically for the Paks II project. Instead, the reporter expressed his astonishment that Vajna’s fund only this year received 12.3 billion forints. He didn’t worry too much about where this money came from.
I, on the other hand, focused on the source of these billions. Paks II is, as we have often heard, of strategic importance. It will ensure Hungary’s energy independence in the future. How could it be that Orbán suddenly would find culture more important than his pet project, on which he staked his reputation when he was repeatedly accused of being Putin’s puppet who is ready to serve Russia’s interests in weakening the European Union? I immediately jotted down the question: “Is Paks dead?”
A day later I read an article in Bloomberg that related the story of Vnesheconombank (VEB), which for years has been used by Putin to pay for special projects, “from the Sochi Olympics to covert acquisitions in Ukraine to oligarch bailouts.” Now, this state bank itself is in need of rescue, which may cost the Kremlin $18 billion or 1.2 trillion rubles. This is the same bank that is supposed to lend €10 billion for Paks II. Could there be a connection between the financial troubles of VEB, as well as of the whole Russian economy, and the possible scrapping of the Paks II project? We have been inundated with stories coming from Russia about the economic fallout of plummeting oil and gas prices, the expenses incurred in the invasion of the Crimea and the war in Syria, and the U.S.-EU boycott. Inflation is currently 12.1% and, while a year ago one U.S. dollar was worth 40 rubles, today the exchange rate is 70 to 1. For all these reasons there have been conjectures that, given the state of the Russian economy, the Russian government is incapable at the moment or in the near future of financing Paks II.
Russia’s financial difficulties are only the part of the problem. In November the European Commission called on the Hungarian government to suspend all further projects in connection with the construction of the Paks II nuclear power plant because Budapest didn’t follow EU rules governing open bidding procedures. The reaction of the Orbán government was defiant; they swore that everything is going ahead without the slightest attention to the infringement procedure. In fact, János Lázár promised to bring suit against the Commission if necessary.
In addition, it is likely that the European Commission is in the middle of an investigation into possible hidden state subsidies in connection with Paks II, which are also against EU laws. The Hungarian government would have to prove that the enormous investment in the two new reactors is financially justified. At present, most experts say that it is not.
In order to prove that Paks II is a financially viable project, the government came up with an “independent evaluation” by the Rothschild Group. In no time, however, it was discovered that the study was anything but independent. The Rothschild Group was instrumental in preparing the ground for the contract between the Hungarian government and Rossatom, the Russian state company that is supposed to build the reactors. Moreover, a former undersecretary of the Orbán government in charge of energy matters is today an employee of the Group and works for the company out of Budapest.
The latest news on the possible fate of Paks II arrived on the last day of 2015 when the public learned that three tenders had been invalidated because the company in charge of the project “will not be able to sign the contracts.” A more detailed reason for invalidating these tenders was not given. The three tenders were for important studies in connection with the proper implementation of the project to the tune of 100 million forints. They were supposed to describe how the new reactors would be integrated into the existing system. If these studies are no longer necessary, it might mean that the whole project has been abandoned.
I vividly recall some commenters on Hungarian Spectrum insisting that there was no way Viktor Orbán would ever give up this project, which he considers the crown jewel of his years as prime minister. It is true that he is between a rock and a hard place, but I suspect that Russia’s financial troubles are the source of his retreat. Since he is fully aware of the snail’s pace of the European Union, if he could get the financing he would immediately embark on the project. By the time the European Court of Justice rendered its judgment, half of the project would be built. Knowing him, he would opt for that strategy, trusting his proverbial good luck. So, if Paks II is scrapped, it will be because Russia is incapable of lending 10-12 billion euros to Hungary.
We can be sure, however, that the public explanation of the government’s failure to build the reactor (assuming it does not proceed) will be the European Union’s interference in Hungary’s internal affairs. The fault will lie with those “swindlers or at best unfit idiots who try to turn us out of office in the most dastardly, the most cunning, and the most boorish way.” Just as László Kövér recently described West European politicians. Blaming the European Union will bring further popularity. Many Hungarians already believe that evil foreigners want to destroy them, and if they learn that Brussels made their “energy independence” impossible, they will feel even more liked a besieged fortress surrounded by enemies.