Tag Archives: Tomasz Husak

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

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

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

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

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

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

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

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

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

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

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

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

November 26, 2017