Hungary’s Orban to head to Moscow amid claims enthusiasm for nuclear deal is cooling

By bne IntelliNews January 18, 2016

Hungary’s Prime Minister Viktor Orban will travel to Moscow on February 17 to meet Russian President Vladimir Putin again. The pair will discuss the Russian-funded expansion of Hungary's Paks nuclear plant, an arrangement currently being probed by the EU.

The meeting comes two years after Budapest tore up an international tender in January 2014 to hand Russia the €12.5bn contract to expand Hungary's only nuclear power plant. In return, Moscow agreed to lend Hungary €10bn in funding. The pair signed contracts on the design, construction and maintenance of the two new 1,200 megawatt reactors in late 2014.

Over the past few months, the European Commission launched several investigations into the project. Brussels says it suspects it does not comply with EU competition and state aid rules. At the same time, the EU would be unhappy to see Moscow heavily invested in a nuclear plant inside the bloc.

Orban has also come under fire for meeting Putin over the past couple of years, despte the annexation of Crimea and sanctions stand off with the West. However, the latest planned meeting may not run as smoothly as the last, when the Russian leader visited Budapest in February and handed his host a new gas deal. Magyar Nemzet claims  the meeting comes as Hungary’s formal commitment to the Paks project has been growing weaker.

Orban’s cabinet chief, Janos Lazar, insisted on January 15 that such claims are inacurate, and that despite the EU investigations the project remains on track. Hungary has still not starting drawing down the Russian loan, but the official says the first tranche may be taken in the first half of the year.  

Brussels has launched three probes into Paks regarding public procurement, state aid and classified contracts. The latest was launched in November, when the European Commission raised concerns that Hungary’s plan to finance the construction of two nuclear units is incompatible with state aid rules. Earlier this month, the commission said Budapest has so far failed to explain how the Paks project does not conflict with state aid rules and also expressed doubts about its profitability and effects on competition.

The government in Budapest has pledged it will continue with the project. However, that hardly looks a realistic solution. Budapest potentially faces huge fines and long project delays should it try to simply ignore Brussels, and will likely launch a hunt for loopholes to smuggle the project through, suggest analysts. 

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