Tag Archives: Paks Nuclear Power Plant

Viktor Orbán’s dirty political deal at the expense of the City of Budapest

Two years ago I wrote a post titled “Another Russian-Hungarian deal, good only for the Russians,” about the contract for 37 metro trains with 6 cars each to replace the by now almost 40-year-old Soviet-made metro cars servicing the M3 metro line. Their replacement was long overdue. The decision could no longer be postponed because of the frequent technical mishaps that could endanger lives. Soviet metro cars built in 1970 for the M2 line had already been replaced with brand new Alstom cars. The new M4 line also uses Alstom-built cars, and therefore it would have made sense to purchase the 222 metro cars for the M3 line from Alstom as well.

But this is not what happened. After years of often acrimonious discussions between the central government and Mayor István Tarlós, it was decided in the spring of 2015 that Budapest cannot buy new trains. The old rusted-out Soviet wrecks will have to be refurbished as a cost-cutting measure, and naturally the job will be done by the same Russian company (though subsequently renamed). The suspicion from the very beginning was that this Hungarian “favor” was part of the Paks II deal. After all, the Russian government would be giving Hungary a 10 billion euro loan to build a nuclear power plant, and therefore it was only fair that the Hungarians spend 222 million euros for the 222 metro cars. From the Russians’ point of view, it was a reasonable position to take, even though it was an unethical and illegal business deal. But what I find totally unacceptable is that Viktor Orbán, the great patriot, the prime minister of Hungary, lent his name to this thoroughly dirty deal that was disadvantageous to his own country. It was clear from the outset that the so-called refurbished, technologically outdated, non-air-conditioned cars are vastly inferior to the new super-modern ones even though the City of Budapest was going to pay almost as much for the refurbished cars as it would have for new ones.

But that’s not all. There is a twist in the story that makes the whole deal absolutely sickening. Many experts, after looking over the first cars that arrived in Hungary about a year ago, are fairly certain that these cars are in fact new. One could retort: what’s wrong with that? Actually, it sounds like a good deal. One pays only for refurbishing old ones and gets new ones instead. What a great bargain. Well, not quite. It seems likely that the manufacturer, Metrovagonmash, built a whole series of metro cars in 2008 which were not competitive with products built by Alstom, Siemens, Bombardier, etc. If the City of Budapest were to order new cars, Metrovagonmash couldn’t possible win the tender. Hence, the deal worked out by the two crooks, Viktor Orbán and Vladimir Putin. Under the guise of cost-saving refurbishing, the City of Budapest ended up with inferior new cars for practically the same price they would have paid if they had bought Alstom cars. This is how Viktor Orbán in the service of Putin was helping a Russian company in obvious financial straits. Because it has become evident lately that Metrovagonmash is ready to speed up production in order to be paid as soon as possible. They seem to need cash.

The old 1978 metro car

And the “refurbished” one

But now Metrovagonmash might be in trouble. After months of one technical failure after the other in the nine trains delivered so far, BKV (Budapest Közlekedési Vállalat / Hungarian Transit Co.) has lost patience. They refuse to accept any more cars and demand more than 800 million forints by way of penalty for non-performance. They also told Metrovagonmash’s management to come to Budapest to discuss the matter. And there will be a lot to discuss.

The first train with six cars arrived in Hungary during the winter of 2016, but the train still needed a lot of work. It made the long trip on existing railroad lines, which could have ruined certain parts of the train, including its engine, if it had been completed. So, the final touches were done in Budapest. Then, drivers had to be trained. At last, on March 20, the first train made its debut. But after a few hours the train had to be taken out of service. There was something wrong with the opening of the doors.

Ever since, there have been constant problems with the Russian trains. Although nine trains have been delivered, only four of them are actually being used. The rest are obviously not yet travel-ready, and those that are deemed so are under constant repair. It is bad enough when the doors don’t open, but it can be fatal when they open on the wrong side, as happened on June 13. Or, even worse, the doors open on both sides. Then it can also happen that the train is already on its merry way but the doors are still open. As one of the passengers said, “It was very frightening.” On June 14 the Russian engineers triumphantly announced that they had found the problem and from here on all will be well.

That turned out to be false optimism. A week later a new/old train arrived at the Western Station metro stop but the doors didn’t open at all. The train arrived later than expected and was absolutely jammed. During the next 12 minutes, the driver asked for patience and apologized for the inconvenience several times. Eventually he announced that the train must be shunted in order to enter the station again when the doors are supposed to open. As time went by, the passengers expressed their dissatisfaction not only with the train but with the government. They said nasty things about Lőrinc Mészáros, Fidesz, the stadiums, and claimed that conditions were better in the 1980s. As time went by, panic set in. Some women cried, others, the more claustrophobic types, were so eager to get out that in two of the cars strong guys tried to pry open the emergency exit. That, by the way, was quite a feat, given the less than satisfactory construction of the emergency exit. Several men were required to turn the handle that was needed for the operation.

This incident was the straw that broke the camel’s back. BKV will not send more old cars Russia to be “refurbished,” it is claiming a penalty for non-performance, and they talk about future severe sanctions. Erzsébet Gy. Németh, DK member of the Budapest City Council, who was the only representative who voted against the deal initially, demanded that István Tarlós break the contract with the Russians. In any case, the Közlekedési Hatóság (Transport Authority) has withdrawn all six refurbished subway trains from use.

Erzsébet Gy. Németh, being an opposition politician, also demanded István Tarlós’s resignation. Although I find Tarlós an objectionable person, this time I must say that this whole dirty deal is not his fault. He had no choice. The old cars were becoming dangerous; the City had to take out a loan, which couldn’t be done without a government guarantee. The guilty one is Viktor Orbán, who perhaps one day will have to answer in court for what I consider to be abuse of power by knowingly forcing a disadvantageous deal on the City of Budapest for political gain. According to the Hungarian penal code, if he is found guilty, a three-year jail sentence is the minimal punishment. Wouldn’t that be nice, after the scores of innocent people he dragged into court on trumped-up charges?

As I was reading the description of what happened in that metro car where the doors wouldn’t open, I was thinking that there have been occasions in world history when something that ordinary sparked a revolution. The fact that people verbally abused the government in a country where fear is palpable is remarkable by itself. Slowly we may be edging toward a moment when dissatisfaction will burst into action.

June 25, 2017

Viktor Orbán’s friends: Vladimir Putin, Recep Erdoğan, and Ilham Aliyev

Yesterday around noon Moscow time the Kremlin published a short announcement regarding a telephone conversation that had taken place earlier that day. It was brief and to the point: Vladimir Putin and Viktor Orbán “discussed current issues on the bilateral agenda, in particular the implementation of agreements reached during the visit to Budapest by the President of Russia on February 2, 2017. The two leaders also stressed the importance of the construction, carried out by Rosatom State Corporation, of two new power units at the Paks Nuclear Power Plant, as well as joint gas projects.” About half an hour later the news of the telephone conversation was also announced in Budapest. It was even briefer than the Russian version. “Prime Minister Viktor Orbán and President Vladimir Putin held a telephone conversation about current questions of Hungarian-Russian bilateral relations.”

Most newspapers and internet sites republished the short MTI announcement without any comment or interpretation. I found only two exceptions. One was 168 Óra, which was certain that it was Viktor Orbán who called the Russian president “only a few hours after he had returned from the NATO summit in Brussels,” implying that perhaps the topic of conversation wasn’t so much Paks, as the Kremlin communiqué claimed. Perhaps Viktor Orbán reported to Putin on his impressions of the NATO summit.

The other was a longer opinion piece by Gábor Stier, Magyar Nemzet’s Russian expert. Stier is a pro-Russian journalist specializing in foreign affairs. As opposed to 168 Óra, he is certain that it was Putin who called Orbán. Stier might be a great friend of Russia, but even he doesn’t believe that the conversation between the two men was about “current bilateral relations.” Putin visited Budapest only a couple of months ago, and about two weeks ago the two men spent some time together in Beijing at the summit of the Chinese Belt and Road Initiative. Stier also can’t imagine that, now that all the obstacles have been removed to the financing and construction of Paks, the nuclear power plant merited a telephone call.

So, why was such an encounter arranged? Stier believes that the key to the content of the exchange lies in the brief Russian reference to “joint gas projects” which, in Stier’s opinion, is the construction of the “Turkish Stream,” which “would benefit not only Moscow and Budapest but the whole Mediterranean region.” Now that U.S. policy toward Europe is changing and “its relations with Russia may become more pragmatic, there is a chance that Washington will not hinder these plans,” says Stier. In that case, he believes, Berlin will be less antagonistic to the project. Apparently on the same day Putin also phoned Borut Pahor, president of Slovenia, an event that, according to Stier, supports his interpretation of this unexpected telephone conversation between Putin and Orbán. This second telephone conversation, however, was prompted by the twenty-fifth anniversary of diplomatic relations between Russia and an independent Slovenia, which took place on May 25, 1992. I’m therefore less sure than Stier that the phone call had anything to with the pipeline.

Given the paucity of information, all of the above is just conjecture, but the frequency of Putin-Orbán meetings and telephone conversations is striking. So is Orbán’s increasing diplomatic isolation, at least when it comes to Western countries. On the other hand, relations with autocratic countries like Turkey and Azerbaijan are excellent.

Let’s take a look at Turkish-Hungarian relations of late. President Recep Erdoğan was supposed to visit Hungary already in 2016, but the trip had to be postponed because of the Turkish military coup that occurred in July. According to the latest information, the trip might take place soon, to coincide with the opening of the restored “türbe” (tomb) of Gül Baba (d. 1541), a dervish poet and companion of Sultan Suleiman the Magnificent, which is in the hills of Buda.

There was also at least one telephone conversation between the two men that Orbán initiated. Orbán congratulated the Turkish president on his victory at the polls that made him an autocrat for life. In return, Erdoğan suggested bilateral talks in Beijing at the summit. At that time Erdoğan also invited Orbán to Ankara, which Orbán naturally gladly accepted.

Recep Erdoğan in Budapest in 2013

I might also add that while Orbán often justifies his anti-Muslim stance and Hungarians’ unwillingness to have Muslims in their country by reminding the world of the 150-year occupation of the central part of Hungary by the Ottomans, a veritable love affair is going on between the Hungarian and Turkish governments.

Not too many people are aware of the fact that Suleiman the Magnificent (1494-1566) died during the Battle of Szigetvár in Hungary. His body was taken back to Istanbul to be buried, but his heart, liver, and some other organs were buried just outside of Szigetvár. The Battle of Szigetvár is also an important site for Hungarians, who celebrate the heroism of the captain of the fort, Miklós/Nikola Zrínyi/Zrinski, who also died there. In any case, the Turkish government has generously contributed to archaeological work conducted to find the exact location of Suleiman’s burial. For its part, the Hungarian government is planning enormous busts of both Suleiman and Zrínyi. A rather strange way to commemorate the victory of 20,000 invading Ottoman troops over 2,500 Hungarian-Croatian defenders.

Another politician Orbán has warm relations with is Ilham Aliyev, president of Azerbaijan, who visited Budapest in 2014. Two years later Viktor Orbán and his wife paid a visit to Baku, where the two men agreed to repeat their visits to each other’s capitals. This year it is Aliyev’s turn to visit. Mind you, the Hungarian media had to learn from Azeri sources that their president will visit Budapest in October. Aliyev inherited “the throne” from his father in 2003, and he has been president ever since. This spring Aliyev designated his wife, Mehriban Aliyeva, first vice president. She would replace him in the event of his death. In 2016 at Orbán’s suggestion President János Áder bestowed a high state decoration on Aliyeva.

Putin, Erdoğan, Aliev—these are the people Orbán feels comfortable with. And they are are the ones who are willing to visit the Hungarian capital on a somewhat regular basis. A sad commentary on Hungary’s standing in the world of diplomacy.

May 27, 2017

Orbán: “one of the greatest virtues is to know where one’s place is”

Anyone who has the patience to sit through 40 minutes of a bad English translation of the joint press conference given by Vladimir Putin and Viktor Orbán can’t help noticing that the two politicians were not in the best of moods. Two years ago, during Putin’s last visit, Orbán was glowing. This time he was somber and so was Putin. Commentators who claim that the whole trip was nothing more than an opportunity for Putin to show that he is welcome in a country belonging to the European Union and for Orbán to demonstrate that he has an important ally were most likely wrong. Something happened during the negotiations between the two leaders that was disturbing, especially for Viktor Orbán.

But first, let’s see what issues the Russian partner wanted to discuss during Putin’s visit to Budapest. According to a summary issued by the Russian foreign ministry, from the Russian point of view the financing and construction of the Paks II Nuclear Power Plant extension had absolute priority. Rebuilding the old Soviet-made metro trains on the M3 line came next in importance, a project that is already underway. In addition, it looks as if Russia is eyeing the project of reconstructing the M3 line in lieu of the €120 million Hungary owes Russia as a result of the bankruptcy of the jointly owned MALÉV. Moscow also wants Hungary to show more interest in cultural matters pertaining to Russia. The ministry’s communiqué noted with satisfaction that there is a revival of interest in the Russian language. As for bilateral economic cooperation between the two countries, the document was vague.

Péter Szijjártó while in Moscow assured Sergey Lavrov of Hungary’s plans to promote Russian culture in Hungary. He announced that Leo Tolstoy will soon have a statue and a street named after him in Budapest. He revealed that the Hungarian government will spend a considerable amount of money on the restoration of three Orthodox churches in the country. As for Hungarian investments, Szijjártó specifically mentioned Hungarian technological investments in the field of agriculture and construction. In addition, he brought up a few projects allegedly under construction and financed by the Hungarian Eximbank.

Not mentioned among the items Hungary is offering to Russia was a memorial that was just unveiled in Esztergom. Even though if Orbán had a free hand he would gladly remove the Soviet memorial on Szabadság tér (Freedom Square), his government accepted a statue, “The Angel of Peace,” done by a Russia sculptor, Vladimir Surovtsev. The statue was erected in Esztergom because it was in the outskirts of that city that, during World War I, a huge camp for prisoners of war was set up. More than 60,000 soldiers–Russians, Serbs, and Italians–spent years there, at first in miserable conditions. Cholera took many lives. To erect a memorial to commemorate the dead and the sufferers is certainly appropriate. What is less logical is that the Russian NGO responsible for the project insisted on including a reference to the soldiers of the Red Army who died in and around Esztergom during 1944-1945. In any event, Vladimir N. Sergeev, Russia’s ambassador in Budapest, said at the ceremony: “It is symbolic that the unveiling of the statue takes place at the time of the Russian president’s visit to Hungary. This shows how important and how strong our cooperation is.”

Perhaps, but it may not have been on display during the meeting between Putin and Orbán, especially when they were discussing Paks II. That the financing of the nuclear power plant was on the agenda was most likely a fact that Viktor Orbán was not eager to share with the public. But his Russian friend practically forced him to reveal it. It was not a friendly gesture.

Let me describe the circumstances in which the incident took place. A journalist from the by-now completely servile Origo asked Viktor Orbán whether the question of financing Paks II was discussed during the conversation. The reason for his question was the Hungarian government’s repeated assertion that by now Hungary could, unlike back in 2014, finance the project on the open market at a lower interest rate than Hungary is currently paying on the Russian loan. János Lázár, head of the prime minister’s office, in fact indicated that the government was ready to renegotiate the deal. As it stands now, in the first seven years the interest rate on the loan is 4.50%, for the second seven years it is 4.80%, and in the last seven years it is 4.95%. According to Népszava’s calculation, the interest on the loan is approximately 300 billion forints a year, or one percent of Hungary’s GDP.

Orbán flatly denied that the question of financing (or refinancing) had come up. However, about one minute later when Putin took over from Orbán, he announced that he had “informed the prime minister that Russia is ready to finance not only 80% but even 100% of the project.” So, he contradicted Orbán, practically calling his host a liar. It seems that the Hungarian request or demand to renegotiate the loan was discussed and rejected. Instead, Putin offered him an even larger loan by way of compensation.

Perhaps here I should bring up a baffling statement that Orbán made. When he was asked by the reporter from MTV’s M1 about the two countries’ cooperation in the international arena, Orbán’s answer was: “Russia and Hungary move in different dimensions when it comes to geopolitical, military, and diplomatic questions. To my mind, one of the greatest virtues is to know where one’s place is.” Is it possible that this rather bitter observation had something to do with Orbán’s less than pleasant conversation with Putin? Did he realize that there is no way out of Putin’s deadly embrace? Perhaps.

Of course, it is possible that Orbán, who is not the kind of man who readily admits that he made a mistake, will just go on merrily forging even closer relations with Russia. On the other hand, he may realize that he is not in a position to be a successful mediator between Russia and the rest of the western world.

As usual, it is hard to tell where Orbán stands only a day or two after his meeting with Putin. He was one of those EU leaders who “pledged the need for unity and for Europe to stand on its own two feet” at the European Council summit in Valletta, Malta yesterday even though before his arrival he announced that the U.S. has the right to decide its own border control policy and that “he is puzzled at the ‘neurotic European reactions’ over the travel ban.” Nonetheless, behind closed doors he joined the others who were united in their condemnation of Donald Trumps’ comments and attitudes toward the European Union. François Hollande was one of the most vocal critics of Trump at the meeting and, when asked what he thought of EU leaders who are leaning toward Trump, he said that “those who want to forge bilateral ties with the U.S. … must understand that there is no future with Trump if it is not a common position.” Orbán should understand that, having lost his battle with Putin over the financing of the Paks Nuclear Power Plant. We will see how he decides.

February 4, 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

Infringement procedure against Hungary on account of the Paks nuclear power plant

Well, it’s official. 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 hasn’t followed EU rules governing open bidding procedures. Here is the official press release:

Commission opens infringement against HUNGARY for lack of compliance of the Paks nuclear power plant project with EU public procurement rules

The European Commission decided today to launch an infringement procedure against Hungary concerning the implementation of the Paks II nuclear power plant project. Following exchanges of information with the Hungarian authorities and a thorough assessment of the terms of the award, the Commission still has concerns regarding the compatibility of the project with EU public procurement rules. The Hungarian government has directly awarded the construction of two new reactors and the refurbishment of two additional reactors of the Paks II nuclear power plant without a transparent procedure. 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). The Directives consolidate the basic principles of the Treaty on the Functioning of the European Union of transparency, non-discrimination, and equal treatment. These principles seek to ensure that all economic operators have fair chances to participate in a call for tender and to win a contract. The European Commission has decided to send a letter of formal notice to Hungary, which constitutes an official request for information and is the first step in an infringement procedure. The Hungarian authorities now have two months to respond to the arguments put forward by the Commission.

As expected, the Orbán government is defiant. János Lázár in his usual fashion expressed his total disgust with Brussels and promised to bring suit against the Commission if necessary. In his harangue against the EU he judiciously avoided talking about the actual case, the lack of an open tender, which is an EU requirement. Instead, he talked about the EU allegedly prohibiting Hungary from signing bilateral commercial agreements with so-called third countries or such country’s citizens. Hungary has “the right to sign agreements with China, the Arab countries, or for that matter with Russia.” But of course, this is not the issue here. After all, as we learned from José Manuel Barroso’s letter addressed to Viktor Orbán, which I published on Hungarian Spectrum today, the contract with Rosatom was considered to be legal as far as EU law was concerned. The way the contract was awarded, however, was another matter. Barroso in his letter made this eminently clear. Barroso did not, as Lázár now claims, “promise his support of the project in principle.” On the contrary, he called attention to the problem of “the rules on public procurement and state aid.” That was a signal of further probes into the legality of the deal.

Nuclear Power Plants in the European Union

Nuclear power plants in the European Union

Lázár is trying to divert the conversation from the real issue–defiance of EU laws that are on the books to ensure fair competition. Instead, he is trying to show that the controversy is the result of the outsize influence of western multinational corporations. After all, he said, Paks II is one of the largest projects underway in Europe. Large amounts of money can be made by being one of the contractors or suppliers. So, according to Lázár, the issue “is not political but commercial.” Well, indirectly it might be commercial, but what the EU is directly complaining about is an illegal process. The Hungarian government transgressed several European laws and directives that are supposed to ensure equal opportunities to all.

János Lázár was right on one point. He bitterly complained about the length of time it took to deliver the infringement procedure. After all, it was about two years ago that the Hungarian government began final negotiations on the Paks II project. Indeed, it is hard to imagine that it would take two years of solid work to come to the conclusion that Hungary was in the wrong when it signed a contract with Rosatom without open competitive bidding. Népszabadság noted that despite all his blustering, Lázár said nothing about Hungary’s total unwillingness to repeat the bidding process, this time with multiple applicants.

Attila Aszódi, the government commissioner in charge of the project, was asked by many media outlets to comment on the situation. Aszódi is described in his curriculum vitae as an “energy engineer” (energetikai mérnök). Before he was called to head this project he was a full professor at the Institute of Nuclear Technology at the Budapest Engineering University. So, I guess one cannot be terribly surprised that Aszódi is not well versed in legal matters. In his numerous interviews he painted a simplistic picture of the Hungarian position. In his opinion, since the European Union “raised no objections of principle to the agreement from the perspective of article 103,” it means that “the Paks II project itself must be legal.” A huge misunderstanding of the issue.

Meanwhile it turned out that the Hungarian government has spent a fair amount of money already on the project. Moreover, it has drawn on its loan agreement with the Russian government which, if the project comes to a halt, will have to be paid back immediately in one lump sum.

The most amusing news I read in the Hungarian media today was Rosatom’s reaction to the EU suspension of the Paks II project. The mammoth Russian firm announced that “Rosatom follows the dialogue [between EU and the Hungarian government] and fully shares the opinion of János Lázár concerning the legality of the project.” What a surprise.

The Hungarian government is desperately trying to find an effective way to make the problem disappear. One point they emphasize over and over is that no nuclear plant anywhere inside the European Union was built after an open bidding process. So far I have not heard any reporter who could prove or disprove this assertion. It would certainly be a worthwhile undertaking to find out whether the statement is true or not. And if true, what makes the Hungarian case different.

Exchange of letters between Viktor Orbán and José Manuel Barroso on the Paks project, January-February, 2014

It turned out that I had saved the crucial Viktor Orbán-José Manuel Barroso exchange of letters (January 23-February 7, 2014) concerning the Paks II project to be built by Rosatom, a company owned by the Russian Federation, at the time I posted “A brief summary of the Russian-Hungarian agreement on the Paks nuclear power plant” on March 13, 2014.

Since then, this exchange of letters has become a crucial piece of evidence in deciding the fate of the whole Paks project. It thus might be useful to have the complete texts at our disposal.

Viktor Orbán to José Manuel Barroso, January 23, 2014

Orbán letter Barroso

José Manuel Barroso to Viktor Orbán, February 7, 2014Barroso letter

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?