Tag Archives: Rosatom

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.

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.

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?

Paks, the European Union, and the Russian threat

It looks to me as if Viktor Orbán has managed to maneuver his country into an untenable position between Russia and the European Union. It has taken five years, but he has succeeded in making Hungary the target of both Moscow and Brussels.

First, he tested the patience of the European Union, which under José Manuel Barroso’s presidency seemed infinite. After a while, drunken with success, he imagined himself to be a statesman who could be an equal player on the world stage with the leaders of the dominant EU countries.

At first, he was satisfied with waging verbal battles with unsuspecting western diplomats unaccustomed to Viktor Orbán’s way of dealing with those who stand in his way. Later, he decided to solicit “an ally” who would add weight to his words. The desired Hungarian “sovereignty,” in his myopic worldview, could be achieved by balancing Russia against the European Union.

Viktor Orbán did not realize that the world around him had changed in some fundamental ways. Vladimir Putin had over the years acquired the unsavory reputation of being a reactionary autocrat, one of the many his country managed to produce over the centuries. As far as the West was concerned, doing business with Russia was fine, but having cozy relations with the lord of the Kremlin was definitely not. And Orbán in his usual fashion went out of his way to ingratiate himself with Vladimir Putin, just as he did with the leaders of China while the West watched warily. Their concern only grew when Putin annexed the Crimea and incited a rebellion in the mostly Russian-inhabited areas of Ukraine. But it was too late for the EU. Orbán had already committed his country to having Rosatom build two new nuclear reactors with the help of a Russian loan. And it was also too late for Viktor Orbán. His quest for an “independent” Hungarian foreign policy was doomed as soon as it became apparent that the West would not take the Russian aggression against Ukraine lying down.

It wasn’t only the Russian-Ukraianian conflict that changed the political landscape. There was something else that Orbán didn’t take into consideration. Last November Barroso’s presidency came to an end and with it perhaps Brussels’ lackadaisical attitude toward Viktor Orbán’s antics. The front runner, Jean-Claude Juncker, was the worst possible choice as far as the Hungarian prime minister was concerned. Orbán, following David Cameron of Great Britain, voted against him in the European Council, but the two of them remained in the minority. The reason for Orbán’s opposition was that it was known that Juncker supports a stronger,  more unified European Union, the last thing Orbán wants. What was even more worrisome was that Junker named Frans Timmermans of the Netherlands to be his first deputy, and Timmermans was known to be an outspoken critic of Viktor Orbán’s illiberal views. Orbán found himself in a very uncomfortable position because there were signs that the European Union, with an entirely new leadership, would at last crack down on Hungary’s repeated infringements of EU laws.

This change in attitude on the part of the EU might finally have arrived. Those familiar with Viktor Orbán’s political tactics might consider his references to the death penalty no more than a PR move to boost his flagging popularity and steal votes from the neo-Nazi Jobbik party, but I think it was one of the issues that made the European leaders have second thoughts about giving Orbán so much leeway. In addition to withholding billions of euros from Hungary, this is the first time that an official of the European Commission talked about Article 7 as a real option in connection with Hungary for “solving crises and in the interest of holding on to the values of the European Union.”

Vladimir Putin and Sergey Kiriyenko, May 5, 2015 TAA / Photo Alexey Nikolsky

Vladimir Putin and Sergey Kiriyenko, May 5, 2015
TASS / Photo Alexey Nikolsky

And now comes Vladimir Putin’s bizarre conversation with Sergey Kiriyenko, head of Rosatom. First of all, although this conversation took place in Putin’s office and looks like a private conversation, it was shown on Russia’s state television. Surely, it was meant to be a message for a wider audience. The conversation was about the Paks nuclear power plant. According to Putin, “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 assures 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.”

Practically all the Hungarian media interpreted Putin’s words as a threat to Hungary. One exception was the official “Híradó” (News), which provides news to Magyar Televízió and Magyar Rádió. There the headline read:”Putin is worried about Hungarian national interests.” The other exception was “Pesti srácok” (Kids of Pest), a far-right Fidesz Internet site, which claimed that “Putin is satisfied with the Hungarian government’s stand against the European Union,” a blatant misinterpretation of the conversation between the two men.

Although the available translations are rather poor and the subordinate clause “which they could have done” is not at all clear, I believe that Putin either suspects or knows that the European Union has already put pressure on Hungary and that Hungary might have to abandon the project. János Lázár has repeatedly assured the country that all is well and that work will begin on time, but these assurances were probably not grounded in reality. Although Euratom eventually approved the plan to have Russia supply fuel rods for the new reactors, there are still serious hurdles for Hungary to overcome. Negotiations are in progress and, judging from Putin’s unusual “conversation” with Kiriyenko, they might not be going well.

Not surprisingly, the Orbán government didn’t respond to Putin’s warning to Hungary and the European Union. Most likely the spin doctors are planning an appropriate response and perhaps tomorrow János Lázár, in his usual Thursday morning press conference, will say that all is well with Paks, the European Union, and Rosatom and that he doesn’t know what all the fuss is about.

Euratom, the European Commission, and Paks

Last night an article appeared in The Financial Times, written by Andrew Byrne in Budapest and Christian Oliver in Brussels. The reporters had heard earlier that the European Atomic Energy Community or Euratom, which must approve all nuclear supply contracts signed by EU member states, had serious reservations about the contract signed by Russia and Hungary and would most likely withhold approval of the plant’s fuel supply. By yesterday they learned that Euratom had definitely “refused to approve Hungary’s plans to import nuclear fuel exclusively from Russia.” Hungary appealed the decision without success and, according to “three people close to the talks, the European Commission has now thrown its weight behind Euratom’s rejection of the contract.” In brief, that part of the contract that gave Rosatom the exclusive right to supply Paks2 with nuclear fuel for the next twenty years must be renegotiated. As a result, for the time being at least, the Paks project is stalled.

András Giró-Szász, one of the many government spokesmen, argued that the information obtained by The Financial Times was inaccurate. He especially objected to the sentence in the article that read: “The EU has blocked Hungary’s €12bn nuclear deal with Russia.” Nobody “blocked” anything. Initially the Hungarian government talked about demanding a retraction from the newspaper. By the next morning, however, Zoltán Kovács, another government spin doctor, gave up on the idea, especially since The Financial Times had no intention of changing a story that had been verified by three independent sources.

The Hungarian charge might have been based on an erroneous translation of the verb “to block.” Although one of the word’s meanings is “to stop,” it can also mean “to obstruct” or “to impede.” In the latter sense The Financial Times correctly described the situation that developed as a result of Euratom’s decision, sanctioned by the European Commission. As the FT text continued, “The result is to block the whole Paks II expansion. To revive it, Hungary would need to negotiate a new fuel contract or pursue legal action against the commission.” So, the deal is not dead but it must be renegotiated. I might add that in Hungarian “blokkolni” (to block) means only to stop.

Another reason for the confusion, in addition to semantics, is Hungarian secretiveness. 444.hu learned that the Hungarian government insisted on secrecy in its negotiations with Euratom. Therefore, neither the head of Euratom nor the European Commission can say anything about the details of the situation that developed in connection with the Russian contract.

euratom

Since the Hungarian government has already lost its battle with Euratom and the Commission, the matter of the nuclear fuel supply must be renegotiated with Rosatom. János Lázár, in an interview on Kossuth Rádió this morning, referred to extensive discussions with “the members of the Russian negotiating team.” There has been some talk about getting nuclear fuel from other suppliers. Westinghouse has been mentioned several times as a possible source, even by János Lázár himself. However, Benedek Jávor, Hungarian MEP of the Greens, got in touch with Westinghouse and the firm denied in writing that there have been any talks between them and the Hungarian government.

What can the Hungarian government do under the circumstances? It could abandon the whole project. The Russians might be quite happy with such a decision since the Russian economy is in serious trouble and the Russian state might not have the resources to lend such a large sum to Hungary even if the project would be beneficial to Rosatom.

The other possibility is to renegotiate the deal and to convince Russia to allow other suppliers to participate in selling nuclear fuel to Paks2. But that might not be too attractive to the Russian partners. The revenues Rosatom receives from selling fuel to nuclear power plants all over the world are an important contributor to the Russian economy, especially now that the price of natural gas and oil is falling. The Russian government might be willing to finance, through its loan to Hungary, a Russian company, but it doesn’t sound like good business from the Russian point of view to finance nuclear rods supplied by, let’s say, Westinghouse or Siemens. Or at least this is what Miklós Hegedűs, an economist specializing in energy matters, said in an interview on HírTV this morning. Finally, the Hungarians can fight the decision of Euratom and the European Commission. Such a move would delay the completion of the project, probably for years. I myself don’t think that Viktor Orbán would venture into such a losing battle.

What we must also keep in mind is that the question of the nuclear fuel supply is not the only one that the European Commission is interested in. Another concern is the Russian loan itself. Is it a form of “state aid,” which is forbidden by EU law? Will it give Paks2 an undue advantage that will distort the Hungarian energy market? If the European Commission decides that this the case, the whole project will have to be scrapped. Still another concern is that the Russians received the job of expanding the nuclear power plant without any competition whatsoever. If the Commission finds the lack of competition a stumbling block, the fate of the project will be sealed.

At the moment, the appropriate cabinets of the European Commission are investigating whether an in-depth investigation of these aspects of the Russian-Hungarian agreement is warranted. Their decision will undoubtedly be influenced by political considerations. How much does the EU worry about Russian influence within the European Union and the role Hungary might play in Vladimir Putin’s power game? If they consider Russia a serious threat to European security, the Commission might be less understanding and forgiving than it has been in the past five years. Until now Viktor Orbán has been lucky, but it is possible that the Brussels bureaucrats will scrutinize Hungary’s blatant disregard of EU laws and its common democratic values more closely now, given Russia’s perceived threat to Europe.

New details on the Russian-Hungarian agreement on Paks; Kim Scheppele’s “Hungary, An Election in Question, Part 2″

I’m returning briefly to the secretive Putin-Orbán agreement on the addition to the atomic power plant in Paks. Shortly after the news of the agreement became public, I heard rumors to the effect that what the Orbán government actually wanted was not so much a new power plant built by Rosatom but an outright loan of 5 billion dollars. The Hungarian media spent a few lines on this rumor, but the topic was dropped soon enough. Most likely the rumor couldn’t be substantiated. But now Népszabadság has returned to the topic. In a fairly lengthy article the reporter who has lately become a kind of Paks expert unearthed a number of new strands in the story.

The information comes from “an expert who is an adviser to the government with knowledge of the details” who asserted that the original rumor about the loan the Orbán government wanted so badly was in fact true. The government wanted a loan that it could use as it best saw fit. The Russian partner, however, wanted to link the loan to the extension of the Paks power plant. Although negotiations went on for about a year, the two sides couldn’t come to a satisfactory agreement. At this point István Kocsis, former head of Paks and later of MVM (Magyar Villamos Művek/Hungarian Electricity Ltd), was asked by the government to use his good offices with the head of Rosatom. It didn’t seem to bother Orbán that Kocsis had been charged with embezzling billions, a case that is still pending.

Apparently Kocsis achieved miracles and in no time Rosatom had a contract ready to be signed. Népszabadság‘s informant claims that the Hungarians couldn’t change a word in the terms of the contract. There is, in fact, the suspicion that the reason the Hungarian text is so awkward is that most likely it was a translation from Russian. Earlier difficulties arose as the result of Hungarian insistence that the loan be extended to Hungary even if for one reason or another the power plant couldn’t be built or the project were protracted. At the beginning Rosatom insisted that the money would be lent to Hungary only as the work progressed. We still don’t know exactly what is in the agreement but, as Népszabadság‘s informer said, we may find out that “in the final analysis the Orbán government didn’t bring two reactors but ‘a new IMF loan’ from Moscow.”

The way the Orbán government spends money every penny will be needed. As it is, the national debt is higher than ever. It is over 80% even with the large infusion of money the government laid its hands on from the private pension funds. If we discount this “stolen money,” the national debt would be over 90% of the GDP. The government so far has spent more than 600 billion forints buying up private utility companies and is embarking on very ambitious plans to create a so-called “museum quarters” in Pest, which will accommodate the museums and Hungary’s National Library that are currently housed in the Royal Castle. This project is necessary because Orbán wants to move the entire government to the Castle District. The president’s office would move from the Sándor Palace to the Royal Castle and Viktor Orbán would presumably move into the Sándor Palace.

Yesterday another interesting tidbit about the Putin-Orbán agreement saw the light of day. An LMP member of parliament, Bernadett Szél, initially demanded access to the document but her request was refused. LMP will sue the government on that issue. She was, however, granted a half-hour interview with Mrs. László Németh, who admitted to her that the Orbán-Putin agreement was signed before the Hungarian government had a chance to authorize the deal. Lately, it seems, Fidesz politicians often slip and tell the truth by mistake. Like Lajos Kósa about the tape of Ferenc Gyurcsány’s speech at Őszöd. The next day he had to “correct himself.” That was the case with Mrs. Németh as well. Her ministry immediately corrected her. The ministry’s spokesman claimed that it is clear from the January 31 issue of the Official Gazette (Magyar Közlöny) that the authorization was dated January 13 and it was on January 14 that the agreement was signed. My only question is: why did they publish the text of the authorization only on January 31?

Finally, let’s not forget about the Holocaust Memorial Year. András Heisler, president of Mazsihisz, decided to step down from the advisory board of the House of Fortunes. Since Mazsihisz (Federation of Hungarian Jewish Communities) opposes the establishment of this new museum, Heisler saw no reason to remain a member of the board. Moreover, as he said, the board is totally inactive. Mária Schmidt, who is the government-appointed director of the project, called the board together only once.

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Hungary: An Election in Question

Part II: Writing the Rules to Win – The Basic Structure

Professor Kim Scheppele, Princeton University

How did the governing party Fidesz stack the deck so much in its favor that the upcoming Hungarian election’s results are not in doubt?

Fidesz started immediately after its election victory in 2010 to reshape the electoral system to ensure its hold on power. The Fidesz parliamentary bloc, which enacted constitutional changes without including or consulting any opposition party, slashed the size of the parliament in half, redrew all of the individual constituencies unilaterally, changed the two-round system to a single first-past-the-post election for individual constituencies, and altered the way votes were aggregated.

Moreover, Fidesz has granted dual citizenship and therefore voting rights to ethnic Hungarians outside the borders who are overwhelmingly Fidesz supporters, while at the same time maintaining a system that makes it comparatively harder for Hungarian citizens living or working abroad to vote.

The media landscape and campaign finance rules overwhelmingly benefit Fidesz and a series of last-minute changes to the law just before the campaign started put the newly united center-left opposition at an even greater disadvantage. In addition, the governing party has captured the election machinery which is now staffed with its own loyalists.

The sum total of all of these changes makes it virtually inevitable that Fidesz will win.

The devil is in the details, so let’s walk step by step through these various ways that the governing party has changed the rules in its favor.

As one of its first acts in office, on 25 May 2010, the Fidesz parliament amended the constitution it inherited to cut the parliament’s size in half. This was a move lauded by all sides of the political spectrum, as the old 386-member parliament was widely perceived as too large to be effective and too expensive for a small country in debt. The new 199-member parliament that will be seated after the 2014 elections will represent new electoral districts that had to be newly drawn to accommodate this new, smaller parliament. Redrawing the districts was not only widely welcomed, but also required by the Constitutional Court, which had ruled (first in 2005 and again in 2010) that the old districts had become too unequal in population size to give all citizens an equal vote.

The old districting system already favored Fidesz because the larger districts were in the urban strongholds of the left and the smaller districts were in the rural districts of the right. As a result, rural conservative votes were given more weight because it took fewer of their votes to elect an MP. But the way that Fidesz redrew the districts for 2014 gave their party an even greater advantage than they had before.

Without any consultation with opposition parties, Fidesz enacted a new “cardinal law” in 2011 that simply set the boundaries of the districts (Law CCIII/2011). While most election laws provide principles for drawing districts and assign some neutral or at least multi-party body to actually draw the boundaries, the borders of the districts in Hungary are now written directly into the law. Moving a district boundary by even one block requires a two-thirds vote of the parliament. The districts are therefore heavily entrenched and were not the result of either a public or an inclusive process. No justification for these districts was offered by the governing party.

Of course, not all districts in any electoral system have identical numbers of voters. But how much can districts vary before they deny equality of the vote?  The Commission for Democracy through Law (the Venice Commission), recommends no more than 10% variation as the international standard. The Venice Commission is not terribly clear about what this means, but given that the Venice Commission is working with a principle that demands that votes be weighted as equally as possible, one can guess that this means that districts should not vary by more than 10% in population overall.

The Hungarian law is fiendishly clever in appearing to come close to that standard while being miles away from it. The Hungarian Election Law (Act CCIII of 2011 – section 4(4)) mandates that the districts should not vary by more than 15%. The Venice Commission was not thrilled with the difference, but let it pass. They shouldn’t have.

A closer reading reveals the trick. The Hungarian law requires that districts vary by no more than 15% calculated from the mean number of voters in the district. This is not an overall 15% deviation, as the Venice Commission presumed, but is instead a standard that permits districts to vary by 15% below the mean and 15% above it.

An example demonstrates what a huge difference this makes. To aim at an average district containing 100 voters, a 10% overall deviation would permit districts to vary between 95 and 105 voters. (Divide 95 by the 10 voters that separate the largest and smallest districts and you get about 10%). The Hungarian law would permit districts to vary between 85 and 115 voters – 15% above the mean and 15% below the mean of 100. The gap between 85 and 115 voters in a district would be 35% overall! (Calculated the same way as above: 30/85 = 35%.) This is a huge difference that the Venice Commission did not seem to see.

In the actual districts were constructed as a result of the new election law, the variation became even larger than that. As you can see in the chart below, the smallest districts in Hungary now have about 60,000 voters while the largest districts have nearly 90,000 voters, roughly a 50% gap. (The horizontal axis shows the number of eligible voters in the new constituencies based on voter data from 2010, and the vertical axis shows the number of districts in the new scheme with that number of voters.) Not only are the actual districts highly unequal, but this variation has no apparent justification.

sizeThe Size of Parliamentary Districts in Hungary after Redistricting
Source: Calculations by Gábor Tóka, Central European University

Hajdú-Bihar County, in the eastern part of Hungary, provides a case in point. A last-minute amendment to the 2011 election law divided the city of Debrecen into two districts of highly unequal size. Now, one district has 87,278 voters and the other, right next to it, has 60,125 voters. These are very nearly the largest and smallest districts in the country, side by side, without official explanation.

The government may have given no reasons for its districts, but this huge variation in district size is not random. As Political Capital shows, the left-leaning districts are systematically 5,000-6,000 voters larger than the right-leaning districts, which means that it takes many more votes to elect someone from a left-leaning district than to elect someone from Fidesz.

The borders of these new districts also appear to be drawn to Fidesz’s advantage, since they just happen to break up the areas where the opposition alliance voters have traditionally been strongest and they scatter these opposition voters over a new Fidesz-majority landscape. Historically left-leaning districts were partitioned and blended into historically right-leaning districts, creating fewer districts where left-leaning candidates are relatively certain to win.

One of the most obvious gerrymanders occurred (again) in Hajdú-Bihar County. In the 2006 election, which went nationally by a wide margin to the Socialists, the county voted three of its nine districts for the Socialists and six for Fidesz, as you can see in the chart below, on the left. If the results from the 2006 election were tallied in the newly drawn six districts for that country, as shown on the right, Fidesz would now win every district. The map reveals that this all-Fidesz result was accomplished by drawing the districts to divide up the compact concentrations of Socialist voters so that they would become minority voters in Fidesz-dominant districts.   Examples like this one can be found all over the country, as left-leaning districts were partitioned to break up clusters of opposition voters to mix them with even more conservative voters from neighboring areas.

hajduThe US may have invented the gerrymander, and so it may seem presumptuous for an American to complain about the new districts. But the Hungarian gerrymander is different from the (also outrageous) American type. In US national elections, gerrymanders occur at the state level, which means one party cannot redistrict the whole country at once. In the US, districting plans are also subject to judicial review to check the worst self-dealing. In Hungary, however, the whole country was redistricted by one party all at once so the Hungarian gerrymander is far more decisive. And there is no judicial review to correct excesses. In addition, unlike in America where the governing parties in the states get a new shot at gerrymandering every 10 years, after each census, it will take a two-thirds vote of the parliament to change any district in Hungary’s future.

Hungarians don’t just cast votes for individual representatives in districts of the sort we have just seen, however. Hungarians cast two votes in national elections. In addition to casting ballots for representatives in the voters’ individual constituency, voters cast second ballots for party lists. Those votes are aggregated across the country and additional parliamentary seats are awarded to parties based on these results, above and beyond the seats won in the individual districts.

In the new parliament as in the old one, MPs elected both ways sit together with equal status. While this dual system of MP elections appears to mitigate the effect of the gerrymander, the new parliament, unlike the old, allocates more seats to the individual constituencies than to the party-list mandates. The new parliament features 106 district mandates and 93 party-list mandates. Since individual constituencies are awarded on a winner-take-all basis, this tilts the system toward an even more disproportionate distribution of mandates than in the prior also-disproportionate parliament.

Individual constituencies in Hungary were allocated from 1990 to 2010 in a two-round run-off system. Unless a candidate won 50% or more in the first round, a second round would be held between the highest vote-getters to determine who won the mandate. This system meant that many political parties would field candidates in round one, and then form coalitions before round two after the relative viabilities of the individual candidates could be assessed. Hungarian political culture grew up around this system so that parties were not accustomed to bargaining before any votes were cast.

The new electoral system in Hungary eliminates this second round, benefiting Fidesz, as the largest single party. It can now win districts outright without needing majority support because it only has to get more votes than any other party on the (single) election day to capture the constituency. Given that the districts have been drawn to give Fidesz an advantage overall, one can imagine other parties will have a hard time winning constituencies which have been constructed precisely so that Fidesz is the largest party.

The design of the new system means that the democratic opposition would only have a chance to win individual constituencies if the various opposition parties of the left could create a grand coalition before the election so that they didn’t run candidates against each other. But this was a result that everyone familiar with politics in Hungary knew would be hard to accomplish. The parties in the “democratic opposition” (excluding Jobbik) are sharply divided both by ideology and personality. But unless these parties could set aside their differences to unite, they would surely lose.

The announcement on 14 January that five parties in the opposition had managed to agree on a single list of candidates for the single-member districts as well as a common party list was therefore something of a political miracle.

But can the party leaders of the Unity Alliance bring all of their voters along with them? Many voters for the smaller parties on the left often don’t trust the larger Socialist Party which now dominates the coalition.  And some personalities in the mix are popular only within their own parties and unattractive to the others in the coalition. As a result, it cannot be assumed that votes for the five parties can simply be added together to produce a united whole that is the same size or even larger than the sum of the parts.

Because voters cast two ballots on election day, the individual constituencies are only part of the story, though they are the largest part. Parties will also run national lists to compete for voters’ second votes. The new conditions that came into effect since the last election actually make it easier than it was in 2010 to nominate candidates for the individual constituencies and to register parties with national lists, something that is consistent with a dominant-party strategy to divide up the opposition as much as possible.

But the party-list system also builds in incentives for small parties to join together to form a larger alliance. To be approved to run a national list, parties must field candidates in at least 27 individual constituencies in at least nine of the 19 counties plus Budapest. While this guarantees that parties are truly national, it also aggravates the problems created by the loss of the second-round runoff in the individual constituencies. Any new national list adds to the “clutter” of individual candidates in the individual constituencies and further fragments the vote.

So it makes sense, under these rules, for small parties to form a common national list. To avoid competing head-on and perhaps pushing each other below the 5% threshold for entering the parliament, small parties on the same side of the political spectrum are pushed by the logic of the system to join forces. But as soon as they do so, they run into another problem. In all elections since 1994, parties have had to meet a 5% threshold of the popular vote to gain a fraction in the parliament. For two parties that run together, the threshold rises to 10% and for three or more parties, the threshold is 15%.

If the smaller parties were going to unite for 2014, then, they ran the risk of together missing the higher threshold required of joint party lists. The rules of the game have therefore pushed the small parties of the “democratic opposition” to do what they did – which was to join with the Socialists to form Unity. Only an alliance with the larger Socialist party guaranteed that these smaller parties would be able to enter the parliament given the higher thresholds for joined lists. Because many of the smaller parties were created precisely to distance particular groups of voters from the Socialists, however, this is an uneasy alliance at best.

So that is where we were as the campaign was launched, witnessing a democratic opposition alliance whose members do not like each other much but who have to work together if they are to have any hope of ousting Fidesz given the way that the rules are structured. The public squabbling that occurred as the grand coalition went together belied the name of Unity Alliance and weakened their electoral position. They have the campaign period to convey a new unified message, but – as we will see – that is going to be very hard.

An unusual debate on the new Hungarian nuclear plant: János Lázár and Benedek Jávor

The news from Russsia and Ukraine  is frightening. The major question now is whether Russia will be satisfied with the annexation of the Crimea or whether the Russian army will march in and occupy further territories at the “request” of the Russian-speaking inhabitants of Ukraine’s eastern provinces. I wonder what the Hungarian public will think if Russia manages to cut Ukraine in half and the Russian bear ends up quite a few kilometers closer to the Hungarian border. In addition, there are threatening Russian talks about Ukraine and its supply of natural gas, which naturally would affect the Hungarian energy supply. All this is happening in the wake of Viktor Orbán’s top-secret negotiations with Vladimir Putin about the expansion of Hungary’s only nuclear power plant in Paks, which will increase Hungary’s energy dependence on Russia.

Viktor Orbán was in a great hurry to close this deal, most likely because he wanted ensure that it was voted on while he has a guaranteed two-thirds parliamentary majority. But then came Vladimir Putin’s gambit, which casts the Paks deal in a different light. As it is, the majority of the population doesn’t want to build another power plant and a whopping 75% of them are against the Russians building it. The couple of months spent by the Orbán government trying to influence public opinion in favor of Putin’s Russia didn’t manage to erase the negative feelings Hungarians have when they think of the country’s almost fifty-year occupation by the Russians. With the events in Ukraine these fears have received a new impetus, which makes Viktor Orbán’s situation concerning Paks even more difficult. According to some observers whose opinions I trust, “Paks is dead in the water.” But for the time being the government is sticking to its guns and Viktor Orbán is acting as if nothing has changed. They even agreed to a debate on the expansion of Hungary’s nuclear capacity built by Rosatom on money lent to Hungary from the Russian state. It is about this debate that I would like to say a few words.

As we know, there was no debate whatsoever on Paks prior to the signing of the agreement although there is a great deal of interest in the issue. So a student organization of law students at ELTE called Joghallgatók Önképző Szervezete (JÖSZ) organized a post-signing debate. The law students active in the association invited János Lázár, representing the government, and Benedek Jávor of Együtt2014/PM, who is a staunchly anti-nuclear Green, to have an open debate. How did the students manage to convince such an important man as Lázár to participate? Gáspár Orbán, the prime minister’s son, is one of the leaders of JÖSZ. He was among the students who were busily arranging the podium just before the actual debate.

atomvita

The interest was great. The large lecture hall was completely filled half an hour before the debate began. What was strange, and it says a lot about Hungarians’ attitude toward transparency, is that the debate was closed to the media as the result of a last-minute decision by the dean. Of course, reporters from several Internet news sites in addition to a journalist from Népszabadság managed to sneak in with fake IDs. Moreover, the whole debate, lasting longer than an hour, was recorded and is available online. But for those who don’t speak Hungarian here is a brief description of what transpired.

While Fidesz leaders might look very confident and can overwhelm their audience when delivering speeches, when they are supposed to engage in real debates they run out of steam. This is what happened to János Lázár.

Let’s start with the structure of the debate. There were three distinct parts. In the first part the topic was the circumstances of the agreement; in the second, questions concerning Russian-Hungarian relations were addressed to the participants; finally, in the third, the economic aspects of building a new power plant were discussed.

The debate began with Lázár, whose position was that nuclear capacity must be expanded because the old power plant will not be able to function beyond a certain date. This is true, but that date is far in the future. It would be quite enough to start to build the two new reactors in 2020. While he claimed that there will be no added capacity he did announce that in the government’s estimate in the next few years the need for electricity will grow by 1,000 megawatts. So, is there or isn’t there a need to produce more electricity? To give you an idea of the simplistic view Lázár and his friends entertain concerning this issue, for him the choice is “either a power plant or no Hungarian electricity.” No other options are available.

Jávor insisted that Paks II, the two new reactors, are additions to the present capacity. In addition, he listed the following objections: (1) the majority of Hungarians reject building the new reactors especially if it is done by the Russians; (2) the details of the agreement are not transparent; (3) the new investment will increase the price of electricity and will not add to the growth of the Hungarian GDP; (4) there will be too much energy when all four reactors are operational; (5) the building of Paks is too much of a geopolitical commitment to Russia; (6) the reactors will create fewer than the 10,000 jobs the government is talking about; (7) there are environmental concerns; (8) with interest the debt will be more than the government’s figure of 4.6 billion dollars. Jávor compared the deal to an especially deadly version of Russian roulette in which only one chamber in the revolver’s cylinder is not loaded.

When the moderator asked Lázár whether the government acted in such a way as to ensure the “democratic minimum,” he completely lost his cool. He interrupted the moderator and brought up a procedural question in order to avoid answering the question. He reduced the argument to: “either a power plant or no electricity.” From here on he talked about the fallacy of his opponent’s arguments but couldn’t come up with any arguments of his own. When he exceeded the allotted time he ignored the moderator and kept going. When the moderator inquired from him about the government’s refusal to make the details of the negotiations public, he told him and Jávor that they “should turn to the Russians with their requests.”

When it came to the price of electricity produced by Paks II, Lázár kept saying “atomic energy produces the cheapest electricity prices.” Yes, answered Jávor, the electricity Paks currently produces is inexpensive because the original initial investment has already been paid down. But the energy produced by Paks II will have to reflect the price of the new investment, which will be very costly. Lázár called this argument nonsense.

They moved on to national security issues. Jávor maintained that Hungarian dependence on Russian energy will increase after building Paks II while Lázár argued the opposite. In his opinion there is nothing to worry about because “the Russians have been here for sixty years and they are here today because they were the ones who built Paks.” So, nothing will really change. For Lázár nuclear energy means “independence.” Having only natural gas imposes energy dependence. To the question of why the Hungarian government asked for a Russian loan and why they didn’t turn, for example, to the IMF, Lázár’s answer was simple: “No one else would give a loan to Hungary except Russia.”

The debate naturally led nowhere. But there is also a good possibility that the grandiose Orbán plan for a Russian-built nuclear plant in an EU country will also lead nowhere. The Czech minister of defense already made it clear that Rosatom will never be in the running to build the Czech nuclear reactor. I can’t believe that the European Union could possibly let Putin’s Russia get close to an atomic power plant in Hungary.