Russia, Hungary, and the European Union: Paks documents released

It’s time to make sense of all the contradictory pieces of information that have reached the public in the last couple of days concerning the European Union’s attitude toward the Russian-Hungarian agreement on the Paks II nuclear power plant. The central question was whether the Orbán government notified Brussels, as it was obliged to, about the details of the agreement.

Energiaklub, a non-profit organization that deals with questions of energy and the environment, wrote a letter to the European Commission’s Directorate-General for Energy on February 17 asking for “access to the documentation related to the notification, under the Euratom Treaty, of the PAKS nuclear power in Hungary.” The answer was: “This investment project has not yet been notified to the Commission under Article 41 of the Euratom Treaty, and therefore at the moment no documents can be found in the Commission’s possession.” Critics of Viktor Orbán were only too happy to find that his administration seemed once again to have been caught lying. Soon enough, however, the relevant documentation was made public on the website of the prime minister’s office.

But before I talk about these newly released documents, which give us only a little more knowledge of the whole Paks affair than we had before, I would like to jot down a few dates by way of a road map.

I began collecting material on Paks and nuclear energy on October 18, 2013 when Viktor Orbán, then in India, boasted that Hungary would have extremely low energy prices in the not too distant future. He brought this up as an economic enticement for Indian investors. He also emphasized his commitment to nuclear energy.

Source: nuclear-news.net

Source: nuclear-news.net

Then for almost two months we heard nothing about nuclear energy. Finally János Lázár broached the subject and talked about advanced negotiations with Russia for Rosatom to construct two new reactors in Paks. What we didn’t know was that on December 10, 2013 János Lázár wrote a letter to Günther Oettinger, commissioner for energy. The released document is a cover letter to “the Draft International Agreement with the Russian Federation.” The letter also indicates that the Commission had been notified earlier, at its November 26, 2013 meeting, that “Hungary intends to enter into an international agreement with the government of the Russian Federation on the cooperation in peaceful use of nuclear energy.” Attached was the draft agreement “in accordance with Article 103 of the European Treaty.” The letter also reveals that talks between Brussels and Budapest about Hungary’s intention to sign such a treaty had taken place even before that date because Lázár assured the commissioner that they took “into consideration the comments obtained from the Commission.” The conversation between the commissioner and the Hungarian government is described as “open and constructive.” The confusion described above was most likely due to Energiaklub’s reference to Article 41 as opposed to relevant Article 103 of the Euratom Treaty.

A month later, on January 13, Viktor Orbán traveled to Moscow where Mrs. László Németh, minister of national development, on behalf of the Hungarian government, signed a document about which we still know very little. A couple of days later curious Hungarian journalists inquired from Günther Oettinger’s office what the European Commission thinks of the Russian-Hungarian agreement. They were told on January 15 that the Commission had not passed judgment on whether the lack of competitive bidding was an obstacle to the European Union’s blessing for the deal. However, they were told by the spokesman for Oettinger’s office that such a probe will take place some time in the future.

A good two weeks after his trip to Moscow, Orbán decided to write a letter to José Manuel Barroso, president of the European Commission, in which  he informed Barroso about “the recent developments with regards to nuclear energy cooperation between Hungary and the Russian Federation.” From the letter it becomes clear that there had been a response from Brussels to János Lázár’s December 10 cover letter attached to the copy of the draft treaty. According to Orbán, “the Commission raised no objection to the draft agreement” and therefore “my government signed the intergovernmental agreement on January 14, 2014.”

Orbán in this letter tried to downplay the fact that the job of building the nuclear power plant was given without any competitive bidding process. He added that “Rosatom, the Russian nuclear state authority, will be in charge of the implementation of the design and construction work. However, whenever any such work or services cannot be provided in-house, the Russian party will undertake an open and non-discriminatory tendering process.”

And finally, Orbán tried to reassure Barroso that the Russian-Hungarian deal actually serves European interests. “We believe that the long-term cooperation of Hungary with the Russian Federation in the field of nuclear power will contribute to strengthening the energy security of the EU as a whole.” It was at about this time that John Lukács, the conservative Hungarian-American historian who had fairly close ties with Viktor Orbán earlier, wrote him an open letter in which he warned about the deadly embrace of Putin’s Russia. I translated Lukács’s letter and Orbán’s rather impertinent reply.

By February 7 the Hungarian parliament, after five hours of debate, voted for a treaty about which the members knew practically nothing, even as opposition to the Russian-Hungarian deal was growing in the country. Most Hungarians didn’t want an extension to Paks, and they especially didn’t want to have the Russians building it. Foreign observers also envisaged a “Comecon reborn,” which looked quite possible after “realigning Ukraine as a satellite state under Vladimir Putin.” Nick Butler of the Financial Times emphasized Hungary’s “acceptance of Russian technology in its nuclear sector” and added that this huge investment will be financed by a Russian loan. He noted a reassertion of Russian power across the region and wrote that “the advance is not military but economic with energy issues to the fore.”

Barroso’s answer came on February 7. He referred to the progress made toward a common European energy policy. He attributed this success to the Commission’s “respect for Member States’ basic choices concerning their energy mix.” He 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.” But it seems that Orbán is still not entirely in the clear because “there are … other aspects of EU law to be observed, such as the rules on public procurement and state aid.”

Many people are convinced that the hidden state subsidies and the lack of public procurement are insuperable obstacles. Although who knows. Viktor Orbán always finds ways to come out on top.

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74 comments

  1. HiBoM :
    I did actually meet Mr Petrovics Ofner personally in the 90s (do you still have the hip flask Laci??) and can confirm he is a real life person. He was completely incoherent and confused even then (which we attributed to the hip flask) and time has done nothing to unmuddle his brain. Good grief man, is the issue of cattle trucks or 3rd class carriages really an issue when the end result was that the people were liquidated when they got off?

    I answer your personal slander only because I am very surprised if serious policy makers read such a blog anymore, although it is one of the few in English language. Very,very hard job for Eva to both write, direct, and also moderate without the newer LinkedIn format, and would encourage her to take the group over to such. .Joined when Professor Deak was quoted from my Alma Mater, from Columbia, having seen others earlier actually interact on this blog such as Charles Gati who taught me when Ivan Boldizsar first came to the States at Union College. Refer to my response to Eva if u r interested in follow-up.

  2. Wake up ‘guys’. there are several people who partake in our ‘discussions” who are purposely trying to foster discord for their own pleasure or getting paid to disrupt.

    In any and all cases those that seem suspiciously naive need to be IGNORED and not helped kindly or even bothered with.

    Evil persons with evil intentions should not be kindly recognized as ‘neophites’ needing advice. They are looking for JUST that attention.

    Remember: today with the least amount of Goggleing a person with good intentions can obtain the necessary answer to any of their probing or intepretive questions. If they are not able to accomplish this simple task, then let them stay in the dark but noone should be taking up rehashed information and requesting ‘to be ‘taught’. That process is called baiting.

    It is evil and it occurs constantly in evil circles. DONT FALL FOR IT! Let it pass if it happens to mistakenly pass through the gates of inspection…

    Keep this forum clean from evil baiting.

  3. @andy:

    I think you’re right – Mr Paul e g has asked around a thousand questions … it’s funny in a way, because he never ever answers questions that were put to him (by me e g …)

    PS: His next question will probably be: When did you ask me something ? And I’d be stupid to start this time consuming task to find out what I did ask him two days ago …

  4. Dr. L. PETROVICS Ofner :

    HiBoM :
    …Very,very hard job for Eva to both write, direct, and also moderate without the newer LinkedIn format, and would encourage her to take the group over to such. .

    Since you offered no date or comment number, might you annex a direct LINK to the specific “Linked-in” page or link to such example page? so there would be no need for further clarification.

  5. andy, do you have a link for the takarékszövetkezet scandal? I haven’t really been paying attention to it and it sounds like dynamite as a story. Thanks.

  6. Andy, you stated in an earlier post that the government having nationalised the takarékszöveketek is now selling them to a single individual and that this deal has been declared a state secret. I have no reason to doubt your honesty, I’m not attacking you, but it is surely reasonable to ask where you read it, so that any of the readers (some of whom have enough Hungarian to read an article but perhaps not enough to Google) of this blog can learn more. It sounds like the greatest scandal of the lot on first hearing.

    Is that too much to ask?

  7. The European residence permit sale takes place via 6 offshore companies and 1 Budapest-based company. Fidesz vice chief Antal Rogan signed their licenses.

    The whole arrangement does not benefit the Hungarian state.

    But, as I calculated last June, the otherwise unnecessary intermediary firms rake in at least $69,000 a permit.

    One of the firms, Hungary State Special Debt Fund (HSSDF), based in Grand Cayman reported the sale of 415 permits last year to the Chinese.

    http://www.vg.hu/penzugy/negyszaznal-is-tobb-kinai-vett-magyar-letelepedesi-ertekpapirt-422478

    The 6 offshore companies:

    1. Hungary State Special Debt Fund (89 Nexus Way, Camana Bay, Grand Cayman KY1-9007)
    (Liang Wang, Attila Boros) to China and Vietnam;

    2. Discus Holdings Ltd (236, St. Paul Street, Valletta, VLT1215, Malta)
    (Janos Zsoldos) to S Africa, Indonesia, Kenya ,Nigeria, USA, Kazakhstan, Thailand, Turkey and Azerbaijan;

    3. Innozone Holdings Limited (195 Arch. Makariou III Avenue, Cy-3030 Limassol, Cyprus)
    (Gabor Foldvari) to India, majority owners of companies registered in Cyprus ;

    4. VolDan Investments Limited (Schaan)
    (Josef Hermann) to former Soviet Union and former Yugoslavia;

    5. EURO-ASIA Investment Management Pte Ltd (28C Stanley Street Singapore)
    (law firm Engel) to Singapore;

    6. S&Z program Limited (Schaan)
    (Walter Wachter) to Muslim countries and companies registered in Switzerland;

    The Budapest-headquartered company is

    Arton Capital Hungary Pénzügyi Tanácsadó Kft. (1068 Budapest, Székely Mihály u. 8.)
    (Radostina Veslinovna Balogh) to United Arab Emirates

  8. Dr. L. PETROVICS Ofner, This is not a “group”, this is Dr Balogh’s personal blog and we comment here as guests. Moving anything over to LinkedIn is a seriously bad idea, as it requires membership in a social media platform that is both basically useless for anyone outside a handful of professions that have adopted the platform and notoriously bad to work with. (Want to know how bad? Try to cancel your LinkedIn membership sometime without having to give up your email address as well! LinkedIn is the Purgatory of social media sites.)

  9. wolfi :
    @andy:
    I think you’re right – Mr Paul e g has asked around a thousand questions … it’s funny in a way, because he never ever answers questions that were put to him (by me e g …)
    PS: His next question will probably be: When did you ask me something ? And I’d be stupid to start this time consuming task to find out what I did ask him two days ago …

    Please wolfi don’t let facts get in the way of spouting nonsense. Facts are so boring so you must not let them get in your way. If you do they might stop you from speaking at all! By the way I like how you are trying to avoid being answerable for what you say in advance.

    “It will take too much time. Sooooo much time. It is so time consuming…”

    It is so funny that you think “How can I FIND OUT what I asked two days ago???” Is a good argument 😀 A person who refuses to answer questions because it takes much time and he “can’t remember what he said two days ago”. Such a person is lecturing others about asking and answering questions. It is truly remarkable, One can rarely see such a perfectly self-destructing argument even on the internet.

  10. To go back to the original topic, contrary to An’s claim there were several news sites that published false information on the subject. These included cink.hu HVG.hu and VS.hu. Out of these, HVG and VS published new articles with the correct information and Cink.hu simply. does not care. They are only in it for the clicks and the ad revenue.

  11. Mr. Paul :

    wolfi :
    @andy:
    I think you’re right – Mr Paul e g has asked around a thousand questions … it’s funny in a way, because he never ever answers questions that were put to him (by me e g …)
    PS: His next question will probably be: When did you ask me something ? And I’d be stupid to start this time consuming task to find out what I did ask him two days ago …

    Please wolfi don’t let facts get in the way of spouting nonsense. Facts are so boring so you must not let them get in your way. If you do they might stop you from speaking at all! By the way I like how you are trying to avoid being answerable for what you say in advance.
    “It will take too much time. Sooooo much time. It is so time consuming…”
    It is so funny that you think “How can I FIND OUT what I asked two days ago???” Is a good argument A person who refuses to answer questions because it takes much time and he “can’t remember what he said two days ago”. Such a person is lecturing others about asking and answering questions. It is truly remarkable, One can rarely see such a perfectly self-destructing argument even on the internet.

    You’ve got to admire this guy.

    Madness, yes, but such persistence!

  12. What did you call those cases, when petofi attacked you? Was it madness or some other adjective that correctly described it?

  13. @El Chapito
    Fully agree with the opinion expressed, particularly the “philosophy” of Brussels bureaucrats. I have personal experience in a case where the EU would have been reasonably entitled to reclaim substantial amounts (many millions of euros) not spent by the recipient state in the way they should have been (most probably because of incompetence rather than corruption). EU auditors and internal lawyers were more interested in closing the hearing at 4:30pm and leave for the week-end than to get to the bottom of the matter. We exhausted them, buried them under masses of documents they did not read and arcane lines of argument so they were happy to “tick the boxes,” covering their a—s, and it was all sweet and dandy for the state party I was (exceptionally) representing.

    Your comment on ICSID is questionable, particularly since arbitrators have had no qualms awarding billions in cases involving South and Central American states where the sanctioned state behavior was clearly political. There are other examples of very substantial non-ICSID investment awards against states (such as the Czech Republic and Russia) for decisions that were politically motivated (the Czech Republic paid out on the award but Russia did not). It is true nonetheless that there is a fine balance that ICSID has to keep between the interest of private parties and sovereignty of states it it wants to remain relevant. ICSID however shall not be discounted and seen as relevant only for non-political cases of minor importance. As a matter of fact, the ADC/ADMC v. Hungary ICSID case concerning the nationalization of Budapest Airport by the first Orban government was effectively dealing with a politically motivated decision. The arbitrators nonetheless sanctioned the illegality of the privatization and awarded restitutio in integrum, which was a rather unusual step but the behavior of Hungary under the first Orban and then the Medgyessy governments was egregious by any standards.

  14. qaz:

    Nobody wants to discount ICSID, but also remember that that ADC was awarded some 90m USD. A couple of years later the airport was sold for about 2bn USD.

    Even if the sales price was inflated because of the global bullishness which eventually caused the collapse in 2008, it shows that yes, ICSID acts, but it is probably not as tough as it could be (perhaps this award had to do with the legal fact that the claimant did not even claim more, I dunno, but the difference is just enormous).

    The issue with ICSID is that countries are the repeat customers, and many of them actually are. Arbitrators thus have a much higher chance of getting nominated by a state than by a claimant. And arbitrators want to get appointed again, its fantastic business and prestige, so they will be understanding of national issues. I don’t say they are always favor states (they cannot do so because than they would look biased, they have to walk a fine line), but this is the basic disposition and they are always mindful of the long-term interest of the tribunal as well.

  15. My humble opinion is based on pure speculation. In a year, in which the EU is electing a new President of the European Commission and has its hands full with Ukraine and the Russians, The villain of Europe and his nefarious, scummy government sneaked in Paks II, under the noses of the EU regulators. Even if they would have means to void the Rosatom agreement, they would hesitate, since agreement about Ukraine is far more important, than anything involving Hungary. It may be that the EU commissioners and most member states already given up on this snide and rouge member, and let Hungary destroy itself, which is inevitable within foreseeable time. The EU can wait out the self destruction of Hungary for 4-12 years, which is a short period historically, as they have after Yugoslavia broke up and the Serbs made a killing field of it.

  16. andy – simple :

    Dr. L. PETROVICS Ofner :

    HiBoM :
    …Very,very hard job for Eva to both write, direct, and also moderate without the newer LinkedIn format, and would encourage her to take the group over to such. .

    Since you offered no date or comment number, might you annex a direct LINK to the specific “Linked-in” page or link to such example page? so there would be no need for further clarification.

    Hello Andy, The reference can be found in discussion 49 where Eva!s helpful link led me to the USHMM quote, I provide. The focus is on Szakaly, the degree and nature of his revisionism, and far more important, a possible “road map” to align Hungarian textbooks to reflect the reality and magnitude of the Holocaust

  17. @Andy, so are you saying that Orbán’s selling of the local nationalised banks to a single secret individual is actually your own scoop? I find it odd that it hasn’t made headlines otherwise.

  18. @Mr Paul:
    I’m still waiting for any comment from you that gives information – which everybody else here is looking for and not disinformation and diversion which to me seems your main activity here!

    Maybe you could start comment No 8 by tappanch – what do you have to say re these companies? Don’t you find it strange?

  19. Thom: Perhaps we could say, that the “Eurocrats” care, but unable to project their influence, so they gave up on the Stadium builder viktor, who is following the recipe of Mussolini, developing a fascist dictatorship. As we can see, the vocal majority of the people support this populist dictator, and together with the people behind the Jobbik party, they developed a strong anti-EU sentiment.
    The Eurocrats can wait, until there is a power shift and depending on the direction, either let Hungary exit from the EU or they can work with a more pro-EU government to restore some of the lost democratic values and infrastructure again, because the Fidesz/KDNP/Jobbik fascist government destroyed it completely, under the direction of the Stadium builder viktor dictator.

  20. Mr. Paul :
    What did you call those cases, when petofi attacked you? Was it madness or some other adjective that correctly described it?

    When did he attack me? The only time I can think of was when he clearly thought I was you!

  21. Nick Butler of the Financial Times emphasized Hungary’s “acceptance of Russian technology in its nuclear sector” and added that this huge investment will be financed by a Russian loan. He noted a reassertion of Russian power across the region and wrote that “the advance is not military but economic with energy issues to the fore.”

    I guess recent developments have proven Nick to be wrong. I occurred to me that Hungary was once again willing decide to align it’s self with a pariah state with intents to invade it’s neighbors.

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