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

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.

Viktor Orbán looked into Vladimir Putin’s eyes and was reassured

Yesterday, given the very crowded news day, I had  neither time nor space to discuss an article by Ildikó Csuhaj of Népszabadság about some of the details of the negotiations between Russia and Hungary over the Paks nuclear plant. What you have to know about Csuhaj is that she seems to have fantastic connections to important Fidesz and government officials and usually comes up with impressive “scoops.”

As we discussed in the comments, information coming from these circles cannot always be trusted and, in fact, one suspects that some of the leaks that reach Csuhaj might be purposely planted in the leading left-of-center paper. In any case, Csuhaj received lots of information about the Paks deal from her unnamed sources. Some of the information sounds entirely plausible. For example, that the plan to have the Russians build the extension to the power plant was first discussed in January 2013 during Viktor Orbán’s visit to Moscow.

I don’t know whether any of you remember, but the opposition belittled the significance of the meeting last January and pointed to the extremely short duration of the visit. The left media drew the conclusion that Viktor Orbán offered himself to Vladimir Putin but the president of Russia wasn’t interested. In brief, the meeting was no more than a courtesy visit. Today we know that during that visit Orbán got an offer of Russian collaboration on the Paks project. Apparently he pondered the issue for a few months and by the summer made the decision to go ahead. In mid-summer serious negotiations began, which continued all the way to the last days of December.

According to Ildikó Csuhaj’s source, what inspired the Orbán government to add two extra reactors to the existing plant was its desire to achieve sustainable economic growth. Building such a large project, especially if the story is true that 40% of the work will be done by Hungarian companies, will be a stimulus to employment and will give impetus to faster growth.

So far the story sounds plausible, but what comes after that must be taken with a grain of salt. According to the Fidesz story, Viktor Orbán began making inquiries at large German industrial concerns. Apparently, negotiations were conducted with RWE AG, the second largest utility company in Germany, and Deutsche Telekom. On the basis of these conversations, according to the Fidesz source, Orbán came to the conclusion that what German industry will need in the future is cheap energy. But those nasty German environmentalists are against building reactors on German soil. Given the Russian offer, Orbán apparently hatched the idea of building a large nuclear power plant that will be more than enough for Hungary’s energy needs. The rest of the capacity could be sold to Germany’s energy-hungry industrial complex.

The project couldn’t be financed from private sources as the Finnish nuclear power plant will be. Moreover, Orbán apparently made it clear that the plant must remain in state hands. Thus, a bilateral financial agreement signed by Russia and Hungary was needed which is a first within the European Union.

Csuhaj’s Fidesz source claimed that Viktor Orbán received the European Union’s blessing for the bilateral agreement. Allegedly, János Lázár talked to Günther Oettinger, EU commissioner for energy. The EU Commission even sanctioned closing the deal without a tender.

Apparently, the Edmond de Rothschild Group, a private Swiss banking concern which among other things offers investment advisory services, was especially helpful to the Hungarians in handling all these sticky negotiations with EU officials. The Rothschild Group advised the Hungarian government to get in touch with the law firm Hengeler Mueller, which has offices in Berlin, Düsseldorf, Munich, Brussels, and London. It is a large firm with 90 partners and 160 associates. They give “high-end legal advice to companies in complex business transactions.” It was allegedly this law firm that managed “to convince” the European Commission about the legality of the transaction.

Well, it seems that the European Commission has not yet blessed the deal. Eszter Zalán, the Brussels correspondent for Népszabadság, asked Sabine Berger, the spokeswoman of Günther Oettinger, who informed her that Oettinger’s office will examine the agreement and decide whether it conforms to European laws. This legal scrutiny may take weeks to complete. It also became clear that details of the agreement reached Brussels only in December. The announcement yesterday, however, didn’t come as a surprise to the European Commission.

Domestically, there is an outcry over the agreement, signed secretly with no consultation with the opposition, experts, or the general public. Fidesz politicians responded to this criticism by claiming that it was during Bajnai ‘s tenure that parliament authorized the government to conduct negotiations about doubling the capacity of the Paks nuclear power plant. They called members of the opposition, including Bajnai, liars for denying their authorization of the negotiations.

Well, this is not a correct description of what happened in 2009 when the topic of the enlargement of the power plant came up in parliament. Csaba Molnár, then minister in charge of transportation, communication, and energy, was the man who turned in the resolution to which Fidesz is now referring. In it there is not one word about permission to start negotiations with anyone concerning building two more reactors. It simply talks about authorization to begin a study of its feasibility, its environmental impact, future requirements of the population, etc. However, all Fidesz politicians keep referring to this resolution as authorization for making a deal with the Russians.

Finally, let me tell you a funny story that I read in today’s Magyar Nemzet. The article quotes Viktor Orbán as saying, “It was three years ago at one of the meetings of the Valdai Club that Vladimir Putin turned a bit to the right and winked; his eyes told me that everything will be all right. He talked about energy cooperation, about Paks, and about many other matters. He made it clear that Hungary can only win from all his plans. I looked into his eyes and saw that he means it, and Hungary will be a winner of all this.”

Putin turned a bit to the right and winked

I assume many of you remember another quotation, this time from George W. Bush, about Putin’s eyes. It was uttered in 2001: “I looked the man in the eye. I found him to be very straightforward and trustworthy. We had a very good dialogue. I was able to get a sense of his soul; a man deeply committed to his country and the best interests of his country.” So, I wouldn’t rely on Putin’s eyes if I were Viktor Orbán. And while we are at Putin’s eyes, John McCain said in 2007 : “I looked into Mr. Putin’s eyes and I saw three things — a K and a G and a B.” Viktor Orbán should keep that in mind when he gazes into eyes of Vladimir Putin, whom he apparently admires greatly.