Tag Archives: Paks II

Breaking news: Rosatom was Viktor Orbán’s piggy bank

Lajos Simicska, the former friend of and financial adviser to Viktor Orbán, at last revealed his long-kept secret about the Hungarian prime minister’s plan to buy RTL Klub, the Hungarian subsidiary of RTL Group, on Rosatom’s money, 24.hu reported about an hour ago.

The crucial conversation between Simicska and Orbán took place in 2014, right after the electoral victory in which Orbán’s party again won two-thirds of the seats in parliament. In the course of the conversation, which was mostly about Fidesz’s media program for the next four years, Orbán announced his plan to purchase RTL Klub, the most popular and profitable television network in Hungary. Once it was under his control, he would put an end to the network’s programing. When Simicska expressed doubts about the feasibility of such a move, Orbán wanted to know the approximate purchase price, which Simicska estimated to be about 300 million euros, or 100 billion Hungarian forints. Orbán’s reaction was: “No problem, Rosatom will buy it for me.” It was at this point, Simicska contends, that their friendship came to an end. A week later, when they met again, Simicska told Orbán that he would not be a party to such an undertaking.

Simicska originally told this story in a two-hour interview with Reuters, but the Hungarian businessman stopped the publication of the interview once he realized that Reuters refused to include this crucial part of his interview.

Viktor Orbán  never bought RTL Klub, but about three months after the conversation with Simicska took place the Hungarian government began its frontal attack on RTL Klub, announcing its intention to levy heavy taxes on the media based on advertising revenues. The move was structured in such a way as to specifically target the German-owned RTL Klub. The idea was to force its owners to part with the financially squeezed Hungarian subsidiary. Orbán’s plans were foiled by the German company’s forceful resistance.

Russian-Hungarian exchange of top security information

After a lot of suspense, the fate of Paks II, to be built by Rosatom and financed by the Russian government, has been settled. The European Commission threw in the towel. Admittedly, there is still a possibility that the Austrian government will take the case to the European Court of Justice as it did with Great Britain’s Hinkley Point Nuclear Power Plant. The British case is still pending, and a verdict against Hinkley Point might have some bearing on Paks II. But that is a long shot.

Although the specific points of the final agreement on Paks II are of great interest, here I would rather look at another, possibly nefarious instance of Russian-Hungarian relations: an agreement between Russia and Hungary “on the mutual protection of classified information.” News that this agreement would come into force on April 1 was announced on March 3, 2017 on the last pages of the Official Gazette. It was discovered by the staff of Magyar Nemzet. Interestingly, with the exception of very few media outlets, this agreement has been ignored.

What is even more surprising is that the agreement itself was signed in September 2016 without anyone noticing it. Bernadett Szél (LMP), for example, who is a member of the parliamentary committee on national security, had no inkling of the document’s existence. This is what happens when the opposition parties lack the resources to hire a research staff.

Of course, the agreement is not especially significant by itself because it only defines rules and regulations governing the transfer of secret information between the two countries. What is of considerable interest, however, is the extent of the working relationship between the Russian and Hungarian national security forces or, as the agreement states, “the competent authorities responsible for the implementation of [the] Agreement.” These “competent authorities” are the National Security Authority in Hungary and, in Russia, the Federal Security Service of the Russian Federation (FSB), the successor to the KGB of Soviet times.

The agreement reveals that top secret documents change hands between Hungary and Russia which cannot be shared by a third party. How many such documents are we talking about? The agreement at one point states that “for the transfer of classified information carriers of considerable volumes of classified information, the authorized bodies shall, in accordance with the laws and other regulatory legal acts of their States, agree on the modalities of their transportation, itinerary and escorting method.” There are also detailed instructions about the destruction of certain secret documents, including the proviso that “classified information carriers marked Szigorúan titkos!/Совершенно секретно (Top secret) shall not be destroyed and shall be returned to the authorized body of the originating Party, when they are no longer deemed necessary.” All this indicates to me a close working relationship between the Russian FSB and the Hungarian NSA.

We don’t know, of course, what kinds of top secret documents are being exchanged by the Russian and Hungarian national security agencies. It is certainly not immaterial what kind of information the Hungarian partner passes on to the Russians, especially in view of Hungary’s membership in NATO and the European Union. In fact, Magyar Nemzet specifically asked the Ministry of Foreign Relations and Trade whether the Hungarian authorities gave information about the details of cooperation between Russian and Hungarian national security forces to the European Union and NATO. No answer has yet been received. Bernadett Szél told the paper that she was certain the Hungarians don’t pass any sensitive information on to the Russians and that the European Union and NATO are fully aware of all such exchanges between the two countries. I wish I were that confident that the Orbán government is playing by the book.

Tamás Szele in Huppa.hu is convinced that such an exchange of secret documents greatly favors Russia “because considering the weight and strength of the two organizations, it is hard to imagine the arrangement as one of cooperation between equal partners.” For Szele this means that “we have become unreliable diplomatic partners, surrogates of Russia with whom one cannot candidly negotiate or conclude secret agreements because everything that has been said or written will be in the Kremlin within an hour.” Let’s hope that Szele exaggerates, but as far as I know western diplomats are already worried about the trustworthiness of the Hungarian diplomatic corps. And as Attila Juhász of Political Capital, a political science think tank, said the other day, “the government seemed to have forgotten that Hungary is a member of the European Union and NATO. It replaced a friend with a foe, contemplating idly the growing use of Russian propaganda.”

Hungarian state media spread fake Russian news / Source: Budapest Beacon

There is another danger in this cozy Russian-Hungarian exchange of top secret information, which is the possibility that the Russians disseminate disinformation that may lead the Hungarian agents astray. Given our knowledge of Russian disinformation efforts in the United States and the European Union, I don’t think it is too far-fetched to assume such a possibility. The use of disinformation via the internet is one of Russia’s weapons in the destabilization of Europe.

The far-right Hungarian-language internet sites under Russian tutelage work hard to turn Hungarians against Western Europe and the United States in favor of Russia. This is bad enough. But the real problem is that the Hungarian government media outlets consistently join the chorus of pro-Russian far-right groups, which only reinforces the worst instincts of a large segment of the population. According to a recent study on the attitude of the Visegrád 4 countries toward Russia, “the Hungarian government disguises its pro-Russian stance behind a mask of pragmatism,” but there is reason to believe that the government media’s love affair with Russia is not against the wishes of the Orbán government. The Orbán government’s long-range economic and financial dependence on Russia in connection with the Paks II project further ties Hungary to Putin’s Russia, whose plans for Europe don’t bode well for Hungary either.

March 6, 2017

The men behind Paks II: Günther Oettinger and Klaus Mangold

Today János Lázár triumphantly announced that all of the EU’s questions about the Russian- built and financed Paks II nuclear power plant have been satisfactorily resolved. Hungary is free to begin its mega-investment which, according to most experts, is an unnecessary undertaking which most likely will also be unprofitable.

Coincident with, and not totally disconnected from, this announcement is the political storm brewing in Brussels over the appointment of Günther Oettinger, commissioner for digital economy and society, to be the replacement for Kristalina Georgieva, who in the last two years was EU commissioner in charge of the European Union’s budget and who also served as one of the vice presidents of the commission.

Georgieva’s departure is considered to be a blow to the Juncker administration. She was enticed by the Bulgarian government to leave her job as vice president and corporate secretary of the World Bank. After two years in Brussels she is returning to Washington as the chief executive officer of the International Bank for Reconstruction and Development and the International Development Association. Most people interpret her move as a criticism of the Juncker Commission’s way of doing business. According to politico.eu, “Juncker’s Commission will undeniably be weaker without Georgieva. But what makes her departure worse is that Juncker is compounding the loss by promoting Günther Oettinger to take her place.”

Oettinger has been in Brussels for a long time. Between 2010 and 2014 he was commissioner for energy. When Germany nominated him again in 2014, Jean-Claude Juncker gave him a lesser post as commissioner for digital economy.

Oettinger is known to be a man who says and does outrageous things. Back in 2000 he broke into the banned “Deutschland, Deutschland über alles” at a celebration of his German nationalist fraternity. A few weeks ago at a business conference he described a delegation of Chinese officials as having “their hair brushed from left to right with black shoe polish.” When talking about Merkel’s liberal social policy, he joked about “compulsory gay marriage.” First, Oettinger insisted that he had nothing to apologize for but, I guess under pressure from his government, he admitted that the words he used “have created bad feelings and may even have hurt people.” He is described as curt and comes across as “unintellectual and unserious—more likely to obsess over cars or football than trade deals or European Union directives.”

It was Günther Oettinger who as commissioner in charge of energy matters gave the preliminary go-ahead to the Paks project in December 2013. The incoming Juncker Commission, on the other hand, decided on a reexamination of the whole project. Although Oettinger was no longer officially responsible for energy, according to all available information he worked hard in the background to promote Orbán’s pet project.

The second player in today’s story is Klaus Mangold, a wealthy German businessman and a former member of the board of automaker Daimler. Mangold, who is sometimes referred to as “Mr. Russia” in the German press, runs an industry lobby for stronger economic ties with Russia and so has been lobbying against Western sanctions on Russia.

According to some sources, Mangold has had a long-standing interest in the Paks II project. In fact, he may well have been the person who initiated it, acting as an intermediary between Putin and Orbán. 444.hu found proof of Mangold and Orbán meeting in December 2012, “reviewing German-Hungarian and Hungarian-Russian economic relations, particularly questions of energy and its financing,” which would indicate that the meeting might have included a discussion of enlarging Paks with Russian help. So, argues 444.hu, negotiations about Paks began as early as December 2012. Subsequent talks between Russia and Hungary were conducted in secret. It was only in January 2014 that the Paks contract was signed.

Günther Oettinger may no longer be the commissioner in charge of energy matters, but he hasn’t given up his role as a secret backer of the Paks II project. Nowadays, he attends conferences in Budapest on digital economic matters and uses them as opportunities to discuss matters concerning Paks with Viktor Orbán. One of these trips took place on May 19, just before János Lázár’s trip to Brussels and Russian Foreign Minister Sergey Lavrov’s visit to Budapest. This time Oettinger arrived on Klaus Mangold’s private jet. 444.hu learned that there was a dinner meeting attended by the two Germans and the Hungarian prime minister.

Klaus Mangold, Viktor Orbán, and Günther Oettinger

Klaus Mangold, Viktor Orbán, and Günther Oettinger in Budapest, May 19, 2016

That Oettinger flew to Budapest on Klaus Mangold’s private jet merited further investigation, but the reporters of 444.hu got nowhere with either the European Commission or Mangold’s office. A few days later Benedek Jávor, a member of the European Parliament (Group of the Greens/ European Free Alliance), wrote a post in which he expressed his disapproval of an EU commissioner lobbying for a project that is no longer in his portfolio. And there is another problem. Mangold is not a registered lobbyist, yet Oettinger met him despite EU guidelines forbidding meeting with unregistered lobbyists. Then, there is the question of the trip itself. Did Oettinger pay for it or was it a gift? According to EU rules, a commissioner cannot accept any gift over 150 euros.

So, Jávor began an investigation of his own. He wrote a letter to the European Commission:

According to an article published on 21 June 2016 in the Hungarian online magazine 444.hu, Commissioner Oettinger met with Hungarian Prime Minister Viktor Orbán and German consultancy manager Klaus Mangold on his trip to Budapest, on 19 May 2016. During this meeting, the nuclear project Paks II was allegedly discussed.

Klaus Mangold currently leads a German consultancy firm, and used to be Chairman of the ‘Eastern Committee of the German Economy’. He is an important mediator between German firms and the Russian political scene. According to the Hungarian newspaper Figyelő, Mangold had already been a mediator in the previous 2013 Paks case. It has been reported that Commissioner Oettinger arrived in Budapest on Mr. Mangold’s private plane.

This meeting took place only a few days before Hungarian Minister János Lázár, of the Prime Minister’s office, came to Brussels to discuss the Paks II project.

We therefore ask the Commission the following:

  1. By what means did Commissioner Oettinger travel to Budapest?
  2. What information does it have about the content of this meeting?
  3. Has it investigated the possible use of state subsidies for the Paks nuclear project (SA.38454 (2015/C)(ex 2015/N)) and/or the infringement procedure in which the Commission objects that no public procurement preceded the Rosatom mandate discussed at this meeting?

Oettinger took his sweet time answering (on November 3, 2016):

  1. Due to the lack of commercial flights to arrive in time for the meeting with Prime Minister Orban, the Commissioner responsible for Digital Economy and Society joined Mr Mangold’s private plane.
  2. The Commission had been invited to a conference in Budapest about digitisation of industry and automated driving which was opened by Prime Minister Orban. Prime Minister Orban and the Commission met in order to prepare the conference and to discuss the setting up of national initiatives for the digitisation of industry (as outlined in the communication by the Commission of 19 April 2016(1)).
  3. The Paks II nuclear project was not discussed.

Two days ago the story was finally out in the open. Eszter Zalan of euobserver.com wrote an article inquiring whether Oettinger broke any ethics rule by traveling on a private plane of a German businessman with strong Kremlin ties. The article points out that on May 18 there was a choice of four commercial flights from Brussels to Budapest, and therefore Oettinger is simply not telling the truth.

In a way Oettinger’s flight with Mr. Russia is of secondary importance. What is much more worrisome is the visit of Oettinger and Mangold to Budapest in order to advise Viktor Orbán on how to handle a commission probe into the Paks project. But, as often happens, the use of the jet makes bigger waves than the less tangible accusation of foul play on the part of a pro-Russian lobbyist and a pro-Russian prime minister.

Oettinger, like so many people in such situations, keeps giving contradictory statements. By now his story has changed somewhat. In his latest version the Hungarian government paid for his plane ride. “We did not explicitly ask HU [Hungary] about their payment—neither for plane nor for hotel they also offered,” he said. He claims that “governments often offer transport & accommodation for missions of Commissioners when they invited for meeting, conference,” he tweeted, adding “I was invited to a dinner with a Prime Minister to discuss EU digital policies. It is my job to explain & discuss.”

The European People’s Party’s reaction to the Oettinger story is what it always is when one of their own is being questioned about a wrongdoing. Manfred Webber, who is the leader of the EPP group, told journalists that he had “complete confidence” in Oettinger. He called him a “very experienced commissioner” and said there was “no doubt at all whether Günther Oettinger is doing a good job.” The Socialists and the Democrats are naturally less charitable. They called on Oettinger “to clarify his unfortunate actions and unethical behavior.”

444.hu not undeservedly feels proud that one of its investigative pieces was picked up by the international media. And it is still on Oettinger’s case. Its reporters discovered that the EU commissioner paid a visit to Budapest during the past weekend and that he was planning to return to the Hungarian capital today. The occasion for Oettinger’s visit this past weekend was apparently a party given by the Strabag Construction Company. According to 444.hu, this trip was not recorded on the commissioner’s calendar. The occasion for his latest trip is another conference on digital cars and, again, he has a planned meeting with Viktor Orbán. Isn’t it amazing how the busy Hungarian prime minister has so much time for and interest in digital cars? All in all, Günther Oettinger’s activities in Hungary are highly suspicious, and they should be seriously investigated. However, most likely nothing will happen. Apparently he has the strong support of Chancellor Angela Merkel.

November 17, 2016

After an attack on the media, an assault on Energiaklub

Today I will report briefly on some new developments that may add to our understanding of the current political climate in Hungary.

Still about the media

To continue with the sad state of the media. The announcement that Népszava, the daily that proudly calls itself a “szociáldemokrata napilap,” was sold couldn’t have come at a worse time, only a few days after the demise of Népszabadság. The Swiss Marquard Media, which bought the paper, is no stranger to Hungary. It has been present in the Hungarian media market ever since the 1990s. Currently it owns Playboy, Runner’s World, Men’s Health, JOY, and InStyle. In Poland Marquard publishes Cosmopolitan, Esquire, Harper’s Bazaar, and Playboy. In addition, the company owns several magazines in Germany, Austria, and Switzerland.

Népszava will be an odd man out in Marquard’s portfolio, but we should keep in mind that in the 1990s Marquard owned Magyar Hírlap, which in those days was my very favorite Hungarian daily. At that time the editor-in-chief of Magyar Hírlap was the same Péter Németh who is heading Népszava’s editorial team today. He assures us that Jürg Marquard, whom he knows, would never in his life behave the way the private equity financier Heinrich Pecina has. Népszava had some very difficult times in the past, and one can only hope that the paper’s future will be ensured by this purchase. With the disappearance of Népszabadság, Népszava is now the only daily on the left. Mind you, when it comes to their attitudes toward the Orbán government, I see very little difference between the social democratic Népszava and the conservative Magyar Nemzet.

fedel-nelkul

Remaining with the topic of the media. The editorial board of Népszabadság made an absolutely brilliant move. The editorial team of the paper and regular outside contributors decided to write articles for the next issue of a weekly paper called Fedél Nélkül (Without Shelter), which is produced by homeless people and sold on Budapest street corners by about 1,600 of them. The journalists and contributors will take care of the added expenses, and all income from the sale of the papers will go to the licensed distributors of Fedél Nélkül.

There is a new enemy: The Energiaklub

Energiaklub is a well-established NGO concerned with environmental issues and alternative energy sources. It is a fierce opponent of building a new nuclear power plant in Paks. On September 29, 2016, the Baranya Megyei Kormányhivatal, a regional administrative arm of the government, accepted Paks II’s version of the environmental safety of the project. However, some key issues concerning the project are still questionable, and some of the government’s safety claims have no basis in fact. This is at least what Energiaklub and Greenpeace claim. These two organization will appeal the decision. Energiaklub’s experts “are convinced that Paks II will be a polluter” and that “it is dangerous and expensive.” In their opinion, “both in economic and social terms the expansion of nuclear energy is a dead end.”

On October 13 representatives of the National Tax and Customs Administration (NAV) appeared at the offices of Energiaklub. Without much ado or explanation they packed up all documents related to one of Energiaklub’s projects called “Answer to climate change, local climate adaptation.” The leadership of the organization is convinced that “this is the second act of the Norwegian affair” because this particular project is funded by Norway, Iceland, and Lichtenstein. Orsolya Fülöp, policy director of Energiaklub, believes that NAV’s unexpected visit is not so much against Energiaklub as against Norway.

I, as an outsider, see it differently. I see a connection between Energiaklub’s decision to appeal the verdict of the Baranya Megyei Kormányhivatal on the environmental safety of Paks II and NAV’s sudden interest in one of the organization’s projects. Moreover, the appeal was not the Energiaklub’s only “sin.” They have been calling attention to the corruption that surrounds the Paks II project. According to one of the organization’s energy experts, at least 10% of the projected €12 billion will end up in private pockets. My guess is that the Orbán government had enough of this pesky organization’s criticism of the prime minister’s pet project. Or perhaps they are planning to kill two birds with one stone.

Hungarians and freedom of the press

The Publicus Research Institute came out with a poll* conducted between October 11 and 13 which asked 1,000 people about their attitude toward freedom of the media and the suspension of the publication of Népszabadság. The results are surprising. Almost 90% of the Hungarians surveyed consider the existence of an independent press very important and 85% had heard about the suspension of Népszabadság. Two-thirds of the people think that Fidesz has a substantial influence on the media. Moreover, they said that since the collapse of the Kádár regime, government power over the press has never been stronger.

Another surprise is that 43% of the adult population read Népszabadság more or less regularly. Even 37% of Fidesz voters did so. Naturally, MSZP voters were the most faithful readers of the paper (57%), but Jobbik voters were not far behind (47%). Another interesting finding is that more readers were between the ages of 18 and 44 than over 45.

The great majority of the people are convinced that Népszabadság had to be silenced because it criticized the government and Fidesz politicians, or because Fidesz limits the freedom of the press in general, or because it was an opposition paper. Only 22% believe that the reason for the shuttering was financial. So, there is hope.

*The poll was taken for Vasárnapi Hírek. The detailed results can be found on the website of the Publicus Research Institute.

October 15, 2016

What will Viktor Orbán have in his satchel when he goes to Brussels on October 3?

I don’t even know where to start because there are so many fascinating topics to pick from. Perhaps the most significant comes from Magyar Nemzet. The paper learned from “diplomatic sources” that Germany is ready to come to Hungary’s aid in some of the most serious infringement procedure cases in return for Viktor Orbán’s more moderate stance on the refugee issue and a “more constructive attitude” towards issues concerning the European Union.

Magyar Nemzet got hold of a secret government background study which dealt with the gravity of the situation posed by the 21 infringement procedures leveled against Hungary that are under consideration at the moment. The document that described the “economically or politically significant” cases paints a grim picture of relations between Budapest and Brussels.

Of the 21 cases the two most significant are Paks II and the Budapest-Belgrade railroad project. I don’t think I have to say much here about Paks II. We all know far too much about the shady deal Viktor Orbán negotiated with Vladimir Putin that will put Hungary in debt to Russia for at least 30 years. It is a well-known fact that the European Union has had great misgivings about Paks II because the project was awarded to the Russians without any competitive bids. In addition, the profitability of the project is in doubt; perhaps only hidden state subsidies would keep it afloat. On the other hand, I don’t think I have ever written about the high-speed rail connection between Budapest and Belgrade that was negotiated with China. Magyar Nemzet reported about two weeks ago that an infringement procedure is in place in connection with the construction of the railroad.

In December 2014 Hungary, Serbia, Macedonia, and China signed an agreement on the modernization of the Budapest-Belgrade-Skopje-Athens railroad, “which will allow the fastest transportation of Chinese goods from Greek harbors to Europe.” Under the agreement a consortium led by the China Railway Group was awarded a $1.57 billion contract to build the 160 km Hungarian section. Two Chinese companies will finance 85% of the project; the rest will be paid by Budapest. The European Union has many concerns about the project. Once again, the profitability of the project is in question. The railroad might end up being a white elephant, just like the choo-choo train in Felcsút. 444.hu calculated that the construction of the Hungarian section would cost about 400 billion forints but that only 4,000 people travel on the line daily, which is 1% of all railroad travel in the country.

Now Magyar Nemzet’s sources claim that these two projects will be given the green light by the European Commission thanks to the good offices of Berlin. What Germany, specifically Angela Merkel, would like in exchange is for Viktor Orbán to tone down his anti-refugee rhetoric and to work with the other member states in arriving at a common solution to the problem at hand. Hungarian sources stressed that Viktor Orbán’s policies regarding the refugee crisis “might be dangerous for Angela Merkel” at home. Figyelő learned earlier from a German diplomatic source that “the referendum might be a turning point, after which the Hungarian government might be more constructive. It is possible that Orbán might even offer helpful suggestions.”

Magyar Nemzet claims to have already noticed a less belligerent Viktor Orbán with respect to Germany. The paper also called attention to László Kövér’s statement, in a long interview with Magyar Idők, that a strong Europe cannot be imagined without Germany. I must admit that I haven’t seen any great change in the anti-EU rhetoric of Viktor Orbán and others, but we will see what happens after Sunday. If I were Angela Merkel, I wouldn’t rush into anything. I would first want to see concrete signs of true cooperation, not just words. As we know, Orbán’s words are worth nothing. And even if, in a desperate attempt to salvage his two pet projects, he changes his tune in the next months or so, it is folly to think that three months later he will not continue his uncooperative behavior exactly where he left off. In fact, I would predict that this is exactly what will happen. And by that time work on both projects will have begun and nothing will be able to stop them.

As I said, I find it difficult to believe that a different Viktor Orbán will emerge after the referendum. In fact, in an interview he gave to Magyar Katolikus Rádió he indicated that he will have all the ammunition he could possibly need in his negotiations with the European Union. He talked about the referendum as the beginning of something new. If it is successful, he “will put ‘hamuban sült pogácsa’ into his satchel” and will head toward Brussels.

pogacsa

So, let’s stop for a minute and try to explain what Orbán had in mind. Every dictionary I consulted translated “pogácsa” as cake, which is outright wrong. It is more like a biscuit or a scone. For those who would like to try their hand at making pogácsa there are plenty of recipes available online in English.

But back to Orbán’s reference. According to a Hungarian folktale, the children of a poor man go on a long and dangerous journey. Their mother makes these special biscuits for them, baked in ashes, but only the oldest’s “pogácsa” is made out of white flour. The youngest’s and the stepchild’s biscuits are made out of bran. The youngest child, the hero of the tale, shares his biscuits with a beggar, a fox, a mouse, and ants, with all those who helped him on his way. It seems that Orbán knows only the first part of the story. The part about the generous hero escaped his attention.

September 30, 2016

Hungary is looking for a new source of funding for Paks-2

This morning one of the very first articles I read about Sergey Lavrov’s visit to Budapest, in Népszabadság, had the following headline: “Good Hungarian-Russian relations don’t depend on the extension of Paks.” The Russian foreign minister uttered these words at the joint press conference he and Hungarian Foreign Minister Péter Szijjártó gave after their meeting. My first thought was that something had gone very wrong with Viktor Orbán’s pet project, the extension of the Paks Nuclear Power Plant, to be built by Rosatom and financed by a state-owned Russian bank. The Paks project has been severely criticized by both the Hungarian opposition and the European Commission.

Sergey Lavrov, unlike his Hungarian counterpart, is an exceedingly skilled diplomat who chooses his words carefully. I therefore suspected that something is going on which the Hungarian government had decided not to divulge. This wouldn’t be the first time that we learn from Russian sources details of Russo-Hungarian relations that Budapest decided to keep secret. As the day went by, I became increasingly suspicious because other Russian sources, for example reports on Lavrov’s visit by TASS, the Russian news agency, emphasized the issue of Paks. Rosatom’s contract to build Paks-2, as the project is called, is obviously important to Russia. As Lavrov said, “we consider this project to be a strategic one [and] we are convinced that this project will contribute to strengthening Hungary’s energy security, creation of new jobs, and development of the Hungarian economy in general.” Szijjártó assured the Russians that “the Hungarian side is committed to the implementation of this project in compliance with the plan.”

It was pretty clear even before Lavrov’s arrival that conversations would focus mostly on trade and economic cooperation. In anticipation of his meeting with Lavrov, Szijjártó said that because of the economic sanctions against Russia, trade between the two countries has slowed, and therefore Hungary is seeking direct investment opportunities in Russia. In passing, he also mentioned seeking better relations between Russia and the European Union, which is in Hungary’s interest. According to Russian sources, one of Lavrov’s missions in Hungary was to get Hungarian support in lifting the EU’s economic sanctions against Russia.

Source: TASS / Photo: Alexander Schorbak

Source: TASS / Photo: Alexander Schorbak

Lavrov gave an exclusive interview to Magyar Nemzet in which he expressed his hope that “the Hungarian government, which in the past more than once declared its commitment to the [Paks] project, will be able to give satisfactory answers to Brussels’ questions.” Indeed, János Lázár will make a trip to Brussels in a couple of days to discuss the project once again. He is optimistic that the EU will reach an accommodation with Hungary. He announced that he is expecting “a significant step forward” as a result of his conversation with Margarete Vestager, European Commissioner for Competition, whose main objection is that Rosatom received the job to build Paks-2 without a competitive bidding process.

My suspicion of this morning was strengthened this afternoon when, after days of inexplicable silence on the part of the Hungarian media, Népszabadság reported that a few days ago János Lázár said in parliament, in answer to a question of Bernadett Szél (LMP) regarding the Paks project: “Hungary’s money market’s position has greatly improved lately and therefore Hungary is ready and able in the near future to replace the [Russian] loan with capital obtained on the open financial market. Therefore we might be able to finance the project under more favorable conditions.” How this critical announcement was missed by the Hungarian media is simply beyond me.

Since the Hungarian government argued at the time it signed the loan agreement with Russia that the country couldn’t possibly obtain such a large 30-year loan from private sources, Lázár’s announcement is baffling. Moreover, private banks are disinclined to lend money for nuclear power plants because their construction usually takes twice as long as anticipated and costs twice as much. Therefore, it is unlikely that Hungary would receive such a loan from non-Russian sources, especially for a project built by Rosatom.

What lies behind this change of plans? One possibility is that Vnesheconombank simply doesn’t have enough money to finance such a huge project. Last year the Russian government had to sink 19 billion euros into the bank, which was struggling after financing the Sochi Olympics. The other possibility is that the Hungarian government thinks that getting non-Russian funding would appease Brussels, which then would drop its objection to the project. Benedek Jávor (PM EP), who as a member of a Green party is deeply critical of the Paks project, has an explanation for why the EU rejects Russian funding, which unfortunately is not at all clear from the Népszabadság article. His theory is that the European Commission finds the interest rates stipulated in the Russian contract unacceptable (probably a form of state subsidy). If the project were to be funded by non-Russian private sources, this objection would be eliminated, but the project would cost a great deal more.

If the first version is correct, Russia is reneging on its promise to finance the construction of Paks-2, which was presumably the most advantageous part of the deal Hungary had with Russia. Now, if the project is still on but Hungary has to go to the private market in search of funding, Russia gets what it wants without having to make financial concessions. That is, Rosatom will build Paks-2 and the Russian state won’t have to provide favorable financing. The money for the project will flow from western investors into Rosatom’s coffers. This sounds to me like a win for Russia, a loss for Hungary.

May 25, 2016

Putin’s messenger boy: Viktor Orbán in Moscow

A month ago the Hungarian public learned that Viktor Orbán would pay a visit to Moscow sometime in February. Rumors began to fly about the reason for this visit, especially since government sources emphasized that the invitation came from Vladimir Putin. Later this story was modified: a year ago, when the Russian president visited Budapest, the decision was made to hold personal meetings at least once a year.

Most observers suspected that this meeting had something to do with the Paks II nuclear reactor project, which will be financed by a Russian loan of €12 billion and built by Rossatom, a Russian state company. What the commentators were unable to decide was whether it was Russia’s desire to scrap the whole project, given Russia’s exceedingly difficult financial situation, or to speed it up. It’s been stalled because the European Commission keeps coming up with objections. In fact, final EU approval of the project is still up in the air.

A few days later Hungarian papers began talking about another important reason, from Putin’s point of view, for such a meeting. The Russian president is looking for “allies”, whom Orbán’s critics would call Trojan horses, in the European Union, countries that would champion lifting the economic sanctions currently in force against Russia.

Then, on January 22, sputniknews.com announced that “Hungary plans to buy about 30 Russian helicopters with the value of the contract expected to reach $450 million.” The announcement was made by the spokesperson for Russia’s Center for Analysis of World Arms Trade. Putin is a tough negotiator, and it has been clear for some time that Russia wants something in return for that €12 billion loan. That’s why Budapest’s M3 metro line, which would badly need a total remake, including new cars, will have the old Soviet cars restored by a Russian company. The  price of the job keeps going up and already exceeds the price of brand new western-built subway cars.

Although Hungarian papers kept bringing up the subject of Russian helicopters, by now the idea has been dropped, probably as a result of a warning from the United States. Népszabadság learned a few days ago that in the last couple of weeks the United States “through diplomatic channels called the attention of the Hungarian government to the fact that the purchase, for both security and political reasons, would be unfortunate.” After all, Hungary is a member of NATO, and it is customary for a NATO country to buy weapons and military vehicles from other NATO countries. It seems that Orbán got the message.

Hungarian government sources, as usual, said nothing about the topics to be discussed in Moscow today. Again, the Hungarian public learned only from Russian sources that “the parties intend to discuss the possibility of increasing bilateral cooperation which will include the prospects of development of economic and trade relations, promotion of joint projects in energy and high technology, as well as cooperation in the cultural and humanitarian spheres.”

Ahead of the meeting the well-informed government propaganda paper Magyar Idők pretty well “predicted” what the talks would be about. The economic influence of Russia in the region of former communist countries has declined considerably in the last year. A few years ago Russia was among the most important trading partners of these countries. Russia has lost about €7 billion in trade with the region. All of these countries realize the dangers of depending on Russian energy sources and are trying to lessen any negative impact. This is dangerous both economically and politically for Russia. In brief, Putin needs Orbán. Therefore, it is unlikely that the Paks II project is in danger.

Putin and Orban, Moscow

No earthshaking announcements were made after the Putin-Orbán meeting, and I don’t think that much more was discussed during their talk than what we learned during the press conference. Before the meeting there were a few polite introductory words by both Orbán and Putin. Orbán as usual went too far with his remarks. He uttered only a couple of sentences, but the message was not the best. After emphasizing Russian-Hungarian friendship he added: “It may sound immodest, but we can say that all that is good in our relationship is our doing and what is not, is not [our fault].” Turning against the European Union so openly is despicable. One could also question the wisdom of Orbán’s saying that “without good Russian-Hungarian relations the Hungarian economy and Hungarian industry would be unable to function.” Emphasizing Hungary’s dependence on Moscow is not the best strategy. Despite all his bravado, Orbán’s inexperience is occasionally confounding.

During the press conference Orbán said that Russia is a useful partner of Hungary and expressed his delight at the yearly high-level meetings planned between President Putin and himself. He finds it a miracle that in these difficult times Russian-Hungarian friendship is becoming ever better. Orbán seems to have promised to intervene on Putin’s behalf when it comes to the renewal of the sanctions this summer. At least one could surmise this from his remarks at the press conference. In fact, this may have been the primary reason for the meeting: asking Orbán to raise his voice against the sanctions. Putin told the reporters that he and Orbán discussed “the possibilities of the revival of a full-fledged dialogue between Russia and the European Union.” And Putin said that he greatly “appreciates the efforts of the Hungarian leadership and Viktor Orbán himself.”

With the exception of Jobbik, all opposition parties condemned Orbán’s pilgrimage to Moscow. Attila Ara-Kovács, DK’s foreign policy advisor, charged Orbán with denying all European values and cooperation and accused him of  “throwing the country’s energy independence” to the wind by making a secret agreement with Russia. Együtt considered the meeting not only superfluous but also troubling in the current international situation, a day before the summit in Brussels. LMP, as a green party, naturally concentrated on the issue of Paks II which, in the party’s opinion, should be scrapped altogether. According to MSZP, Orbán should have made clear at the press conference that Hungary is a trustworthy member of NATO and the European Union. The MSZP spokesman hopes that Orbán didn’t receive “party instructions from Moscow a day before the summit.”

From the Hungarian point of view this meeting was unnecessary and most likely injurious as far as the country’s relations with her allies are concerned. Suspicions about Viktor Orbán, which are already abundant in western political circles, will most likely intensify. But Orbán probably had no choice but to show up in Moscow. This is what happens when one is in the embrace of the Russian bear. With his decision sometime in late 2009 to turn to Russia to expand the Paks nuclear power plant on Russian money, he became the messenger boy of Vladimir Putin.

February 17, 2016