A political deal was struck: The European Union, Hungary, and Rosatom

The independent Hungarian media has published about a dozen articles in the last few days about the revelations Benedek Jávor, Párbeszéd’s member of the European Parliament, managed to unearth about the European Commission’s decision to drop its objections to the nuclear power plant in Paks, to be built and financed by Russia. Less was written about it in the foreign press.

One of the Commission’s initial reasons for opposing the project was the lack of competition in awarding the tender to Rosatom, a company owned by the Russian state.

Benedek Jávor has been after these documents which, he suspected, would reveal that the rather abrupt shift in the Commission’s attitude toward the Hungarian project which occurred in November 2016 might have gone beyond legal or technical considerations. The EC officials were less than enthusiastic about providing Jávor with the documentation. In fact, he had to threaten them with legal action before he received the crucial documents that proved to him that a political deal had been struck between Brussels and Budapest which allowed the Russian-Hungarian nuclear project to proceed.

People have speculated for some time that Hungary had secret supporters within the European Commission. The chief suspect was Günther Oettinger, who visited Budapest in November 2016 in the company of Klaus Mangold, a German businessman with good Russian connections. As we now know from the newly released documents, there were others as well. The infringement procedure against Hungary was dropped when the EC cited “technical exclusivity” as the deciding factor, agreeing to Hungary’s argument that only Rosatom’s reactor fit the requirements for the project which, by the way, a lot of experts wouldn’t buy.

According to a well-known energy expert, “the term technical exclusivity is essentially a last resort.” He called attention to the fact that France made a similar argument in awarding the Flamanville nuclear plant’s contract to a company without inviting bids from others. He added that Hungary knew that the Commission would “roll over, as it did in the Flamanville case.” As we have now learned, the Hungarian government needed a little help in coming up with the “technical exclusivity” argument, and that help came straight from the “Brussels bureaucrats.”

It was at the end of 2014 that Jávor filed a complaint with the European Commission about the unlawful award of the Paks project to Rosatom without competition. For two years Hungary argued that the contract was legal because it was only Rosatom that would also provide a ten billion euro loan, and therefore Hungary had no choice. That argument led nowhere.

After two years the Hungarian government switched tactics and claimed that Rosatom was the only provider that would meet Hungary’s needs. As is clear from the documents, the Hungarian government was being coached by Tomasz Husak, the head of EU Commissioner for Internal Market, Industry, and Entrepreneurship Elżbieta Bieńkowska’s cabinet, who “walked Hungarian officials through the ‘main elements’ they should offer.” Polish friends can come in handy for Hungarians.

Once that was taken care of, the only question was what the European Union would ask in return. In the end, Hungary had to promise that in the future it will solicit bids for subcontracts, with the important proviso that they will be European companies. This option was described by Commission officials as a “global political solution.” It was most likely deemed a satisfactory alternative to what would have been the only legally acceptable solution: to proceed with the infringement procedure. Of course, Benedek Jávor is correct when he points out that a solution which overlooks one infringement of the law with the promise of not committing another in the future is “legally weak.”
Will the release of these documents have any further bearing on the future of the Paks II project? Can the decision be reversed? According to Politico, it cannot. However, the documents might have some relevance in the event of legal challenges to the Commission’s approval of Hungary’s state aid for Paks II, another EC decision in favor of Hungary.

One thing is sure: officials of Bieńkowska’s department will fight tooth and nail to defend the decision. Lucia Claudet, spokesperson of the European Commission, in answer to Jávor’s accusations, already denied any collusion between the EC and Hungary and announced that “any conspiracy theories or allegations of undue interference are unfounded.” According to Claudet, everything went according to the normal rules of dialogue between a member state and the European Commission.

In Jávor’s opinion, this agreement will have serious consequences for Hungary in economic terms. Originally, the Orbán government had negotiated a 40% Hungarian share of subcontracts but if, as Hungary has promised the European Union, 55% of subcontracts will be decided in open tenders, the Hungarian share might be very low. As Jávor figures, Rosatom will insist that the majority of work be done by the company, and therefore Hungarian firms will be squeezed out of the “investment of the century.” The real winners will be Rosatom and multi-national companies. Unless, as often happens, the bidding process is rigged.

What a bonanza! Hungary will have a nuclear power plant it doesn’t really need, a burdensome long-term debt load, and very little in the way of a short-term boost to the Hungarian economy. All in all, a wonderful investment.

November 26, 2017
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1956
Guest

Overthrow this regime, and cancel the Rosatom deal.

exTor
Guest

comment image

On what basis will Hungary “have a nuclear powerplant it doesn’t really need”? I understand the cost and corruption issues, however (according to Wikipedia: https://en.wikipedia.org/wiki/Paks_Nuclear_Power_Plant) the current facility supplies only 40 percent of Hungary’s electric consumption.

If it is agreed that Hungary needs to plan for future electrical needs, what’s the big deal about dealing with the Russians? Would it have been cheaper to have dealt [financed] with Europeans instead?

MAGYARKOZÓ

Member

That’s not a very difficult one to answer, is it? Hungary has plenty of sunshine and also some wind and water resources. By the time Paks 2 comes online, all of those will provide energy that is not just nicer to the planet, but much cheaper than nuclear energy.
The deal stinks. But, alas, it stinks not just of dodgy Hungarian-Russian schemes, but of the rottenness that selfish Hungarian politicians knew very well was very much present in the EU system, and which they have exploited with some guile.

Member

Oh, yes it does stick just as muxh as the whole article. If it was US who supplies the technology, noone would ever question the deal. Obviously as a $10bn investment, it is0a few others’ interest to object the deal through what they call the “independent” media. Solar power is way far from being able to provide similar amount of energy economically. It is just not yet worth it in Hungary. Wind power is similar issue. Stop playing the energy exert if i can suggest, read the studies in the subject to better understand what’s behind the nuclear power station deal in Paks.

Observer
Guest

tr2011
1. The Orban mafia shenanigans have nothing to do with energy policy (what policy?) since the regime does as it pleases. Insulating, energy saving in Hu offers almost instant and great returns, but was sidelined (as it yields less spoils).
2. Paks 2 was brought forward seven years, for no apparent reason (but, as with all other gov projects, to rip off hundreds of billions as early as possible).
3. With accelerating development of technologies, cold fusion included, the Paks decision should have been made as late as possible.
4. The option of extending the current operation was not even considered afaik.

These are all illustrations of how such corrupt regimes with their counter selection run the host bodies to the ground.

Michael Kaplan
Guest

Sad news. Not only are the non competitive cost factors of concern, but of course, there is the question of actual need. The worst outcome, given the choice of Russia, is the safety of this project. I still remember the impact of Chernobyl. The country is clearly in the hands of a mafia criminal class.

petofi
Guest

The only thing that the Paks deal does is ensure that Hungary remains a vassal state to Russia for atleast the next 50 years.

B. Hempf
Guest

Of course it’s always politics. Orban knows this, he always knew. He’s not like those latte sipping delusional liberals who believed that hype that the “EU is more than just an economic union”. Right. It’s the Common Market for chrissakes. It’s about f****ing money, OK? Good morning!

This is how Orban wins, he knows that the EU has no principles. It’s always about the money in the end, about keeping those cushy jobs in Brussels and about avoiding conflicts at any and all costs.

And with those corrupt jackasses in Brussels smart people with a vision like Orban and Putin will always win. Always.

Jean P
Guest

This is how Orban wins, he knows that the EU has no principles.”

This is how Orban wins, he knows that everybody surrounding him have no principles. The EU, the Fidesz gang, the church, the opposition, the Hungarians in general and even the Poles.

Mihaly
Guest
That’s typical Fidesz explanation, but lets face facts. The real losers here are the Hungarians. The main problem with the deal of the EU was that the deal was made without multinationals being able to get their share. They don’t care care if the Hungarian population gets a power plant that it doesn’t need. With this new deal the multinationals will get their share. Conclusion: the EU got what it wanted. It’s up to the Hungarians to elect another party if they don’t like the deals this government is making, or protest heavily if the political alternatives aren’t acceptable. The EU is about more then money, but it depends on the governments of the independent nations if they use it. The old communist block is given serious support to built up a good running democracy, but they are not really interested. Politics in the east is about getting rich and nothing else. This leaves the EU to fight for their own economic interest which is of course still the most important pillar of the EU. And with this they will always win, because petty criminals like Orbán have no vision. For Orbán himself it doesn’t matter he made a bad… Read more »
Marty
Guest
“It’s up to the Hungarians to elect another party if they don’t like the deals this government is making, or protest heavily if the political alternatives aren’t acceptable.” Right. It’s up to Russians to elect somebody else than Putin or protest. It’s up to the Zimbabweans to elect somebody else than Mugabe’s successor E. Mnangagwa aka “the Crocodile” or protest. It’s up to the Angolans to elect somebody else than MPLA’s Dos Santos’s successor Joao Lourenco or protest…. Since when is Hungary a democracy? Look, if the latte sipping bureaucrats in Brussels still want to assume (as they apparently do) that Hungary is a democracy just because there are regular elections then your arguments hold. But what if, suppose for a moment, those paper pushers are wrong? I guess assuming that Hungary is a democracy is the most convenient situation. As if nothing happened in the last 7 years in the media (carrying out total brain washing campaigns one after the other, purchasing any available media etc.), in party finance, corrupt national power networks, people’s fear of appearing political and the like. This isn’t to say that Orban lacks some significant popular support but which autocrat doesn’t have some significant… Read more »
wrfree
Guest

Re: ‘The only thing that the Paks deal does is ensure that Hungary remains a vassal state to Russia’

It hurts. Paks cannot be about ‘energy’. Far from it. We will only see many stuffing themselves at the Rosatom feeding trough. The corruption to come on this will be absolutely magnificent.

Russia now doesn’t have to ‘nuke’ anybody. It just plants the bomb and let’s others blow themselves up. And ‘Neutron Vlad’ and his acolytes orbit away with the loot. People over there will be paying for this one big time.

Guest

I’m wondering:

Around 50% of the costs will be financed by a loan from Russia so what happens when Hungary isn’t able/doesn’t want to pay back that money?
The loan will be in €, not Forint I presume.

petofi
Guest

The Russians will get the three islands–Margit, Csepel, ‘Hajos’–in return…

Mihaly
Guest

I am not sure if you live in Hungary, but I do. You don’t have to fear for your life (yet) to protest here. You can’t compare the situation with Russia or Zimbabwe. So protesting people can and should.
Even if the elections are very distorted and unfair, people can still vote for someone else. Even if the alternatives are not convincing, surely you can vote for something better than a mafioso.

Marty
Guest
Mihaly, the point is that the leader cannot be voted out. There are protest and regular elections in these places too. Parties, opposition figures etc. It just happens that the same people remain in power. Mugabe, by the way according to The Economist which referred to the African Union, wrote that he won in a free and mostly fair elections last time. It was supposedly a better quality election than the 2014 Hungarian one which was free but unfair according to the OSCE. It’s really a PR game. You think Hungary is freer than Putin’s Russia or Angola, probably, but not by much. The basic question is can the leader realistically be ousted from power via elections? I think Orban cannot be and although this is partly the fault of the weak opposition mostly it’s because of the political system which is about much more than the voting right on election day or the ability to protest (though I would also refer to the protests in front of Orban’s house [i.e. the lack of them] or today’s event when somebody wanted to raise a Tibetan flag and in 20 seconds 6 policemen prevented him). Yes, you can protest on paper,… Read more »
Marty
Guest
One more thing. The Paks 2 deal is a clear, overt effort by Orban to bind Hungary to Russia for decades to come. It was always about that as it makes no economic sense (other than to the Orban-clan which will amass further billions). In what sense is this in the EU’s interest? (We established that legally the EU’s decision was questionable.) I get that, OK, Orban promised to offer something to Western suppliers but the bottom line remains that Hungary will continue to Russia’s bidding from within the EU. This is when it is Russia’s clearly stated strategic goal to destroy (at least weaken and divide) the EU because even though as we all know the EU is ultimately an impotent and lose alliance it’s still an alliance and as such it could – in Russia’s paranoid view – be a kind of powerful actor opposing Russia. Orban will get a new lifeline from Russia to continue its sabotage which he has been doing for years. And you argue that this was a normal, acceptable EU decision just because it supposedly promotes equal opportunity for EU suppliers? No, this was a conscious disregard by the EU of its long… Read more »
petofi
Guest

As I’ve said before, Puting has all the monetary resources of Russia–a few trillion annually–to bribe who he wishes. And does.

petofi
Guest

Trust in voting?
You idiot troll.
Or have you missed the recent history of Orban creating 1,000,000 voters in Romania and Serbia..?

petofi
Guest

Hungarians never lose. If things get really bad, the Hungarians can round up all the jews, expel them (or send them to Poland) and steal their goods. Past practice perfected…

Guest

A bit OT:
I always thought that the goal of the EU was a United States of Europe but now I tend to agree with the others here – it’s only about the money!
Well at least as long as there’s economic cooperation the risk of a war in Europe is much smaller than in the preceding centuries.
But the economic and social inequalities will continue – maybe some politicians in the developed West even aim for this?
The less developed states in the East (even if they proudly call themselves East Central Europe they are just an appendix to the Balkan) will continue as a reservoir of cheap labour …

On the other hand that atomic monster not too far away – well when it starts working I’ll probably be dead so:
What, me worry?

Jean P
Guest

“..when it starts working I’ll probably be dead so:
What, me worry?”

Yes, the problems to whose creation we old people have contributed are our grandchildren’s problems to solve. Not our’s. Let them figure out how to dispose of used reactor fuel and atmospheric carbon dioxide.

Or what?

Guest

Jean, you don’t know Alfred E. Neuman, never heard of him?
https://en.wikipedia.org/wiki/Alfred_E._Neuman
Again – if (the majority of …) Hungarians want it that way, what then should the “unelected latte sipping EU bureaucrats” which are so hated or detested do?
Declare war on Hungary?
Or just let them rot in their own *expletive deleted*?
It’s obvious that Hungarians don’t want help – but of course they want more money from the EU, because it is their right???
Again, the clever ones are leaving …

Jean P
Guest

I have met Alfred E. Neuman in person. Actually in several different persons.

No Alfred E. Neuman worries about posterity.

petofi
Guest

No, wolfi, the ‘clever ones’ have already left!

petofi
Guest

@ Jean P

Need not worry–Trump will solve all problems by blowing the world to smithereens.

Bastiat2
Guest

Well, if you follow the price hike of the Flamanville project cited; Hungary had good reasons to deal with the Russians, who are usually much cheaper than other European firms. Furthermore, Hungary does need more power plants and choosing nuclear is the best way to avoid increasing even more CO2 rejects in the European atmosphere.

Marty
Guest

Of course this isn’t true. Hungary has existing nuclear power plants whose lives have been prolonged (by 30 years) so there’s absolutely no need to rush and build new plants now.

Especially at a time when renewables are on the rise and their price keep decreasing. Why couldn’t Orban wait and revisit problem in let’s say ten years when we have more info on the renewables?

Orban’s construction projects, actually Hungarian projects (metro, stadiums, roads, railways) regularly and without fail end up costing several more than originally planned. This will happen with Paks 2.

The cost of the Paks 2 does not include the to be built storage structure for the spent fuel rods and the dismantling of the plants. If you add those costs to the already high construction costs the price of electricity will have to increase several times.

There won’t be enough cooling water in the Danube to service the new plants so dams on the Danube will have to be built.

And so on.

There are so many arguments against Paks 2 that no sane person could support it. If one cares to think about it a little.

wrfree
Guest

You know thinking about it a little makes the utility of Paks 2 very plain to two European players. Simply put Orban et al have no qualms whatever in supporting Russian strategic interests in Europe. The duo seem to be quite in lickstep. No no it’s lockstep isn’t it? Wait until the nuclear baby comes home to roost. Nuclear power always come with a ‘price’ as it doesn’t have a great track record right now. It’s just a matter of time when radiation will leak in more ways than one.

Observer
Guest

Marty

Your right, but it’s much worse:
– Paks 2 may (a large probability) ruin Hungary adding 13 to 20 thousand billion Ft to the gov debt, i.e. a 50% jump.
– And if Paks 2 cannnot sell the expensive energy produced (dead certain now, and a large probability) it will produce no revenue. Disaster assured.

I have much more material, but this is the essence of the financial implications imho.

petofi
Guest

Yeah, and their stuff blows up periodically, too.
Buying Russian technology is almost as stupid as the US government using
Kaspersky anti-virus stuff. What schmucks!

Member

Who do you mean by tge “independent media”??

Guest

A bit OT:
Just read that Rosatom is also responsible for the “Atomic factory” where that accident(?) with Ruthenium 106 happened – about which we still know nothing essentially …
http://www.spiegel.de/wissenschaft/technik/ruthenium-wolke-spuren-fuehren-zur-atomfabrik-majak-im-suerural-a-1180081.html
Typical policy of giving no information – I don’t think this would be possible in a civilised country in the West. The media would be up in arms, parliament would act, …

PS:
Just found an official statement by Rosatom – it wasn’t us … So who was it?
http://www.rosatom.ru/en/press-centre/news/mayak-production-association-is-not-the-source-of-the-exceeded-content-of-ruthenium-106-in-the-atmos/