Russia reportedly offers to take over abandoned Czech nuclear project

By bne IntelliNews May 13, 2014

Tim Gosling in Prague -


Russia has approached the Czech Republic with an offer to revive the cancelled €10bn project to expand the Temelin nuclear power plant, local media report. Such an offer mirrors a deal struck with Hungary earlier this year, though Moscow's chances of success in the Czech Republic are unlikely given the Czech prime minister's recently stated opposition to the Hungarian solution.

The tender on adding two new blocks at Temelin was scrapped by state-controlled utility CEZ in April, after the government made it clear it would not offer the project any state guarantees. The state-controlled Czech energy giant had spent years insisting it could just about scrape the cash together to fund the project, despite dwindling prices on the regional power market. At the same time, CEO Daniel Benes insists that the plan is not dead, and that the Czech Republic is at risk of power shortages in the medium term without adding significant capacity. 

Russian state nuclear agency Rosatom, which headed a consortium that was behind one of the two remaining bidders for the project when it was cancelled, says it is ready to offer to finance the project itself, according to Lidove noviny. According to the report, Czech officials rejected the offer out of hand, insisting that only a fully transparent tender is the way forward in such projects. However, there are now suggestions the Russians are building some support within the Czech government through their lobbying.

"The Russian side has tried on all occasions to give our Czech partners all the information concerning the project," Rosatom's Czech representative Leos Tomicek told the newspaper. "Of course the possibility of a loan was also discussed… We offered to perform the Temelin nuclear power plant upgrade with our money."

The idea is hardly novel. In January, the Hungarian government suddenly pulled plans to run an international tender for the expansion of the Paks nuclear plant and handed the job to Rosatom instead. Moscow will provide a €10bn loan to Budapest to fund the project. Somewhat surprisingly, the EU has so far offered little resistance; Brussels has for years being pushing energy diversification from Russia, which is trying to use its huge budgetary reserves to increase its influence over Central and Eastern Europe's energy markets. However, the deal is still awaiting a final decision from Brussels on whether it clears public procurement regulations.

Czech Prime Minister Bohuslav Sobotka is not a fan of the Hungarian deal. Just last week he told Lidove noviny: "I personally am not a supporter of the Hungarian way of building new nuclear sources. I prefer a transparent tendering process, which guarantees the quality, safety and a good price." However, members of his coalition cabinet now suggest a green light for the Hungarian deal could persuade them to take a different view of the Russian cash.

Rosatom's attention has moved to Minister of Industry and Trade Jan Mladek. Despite the fact that Rosatom had earlier offered to include funding or even a partnership as a means to get the upper hand over its final competitor in the tender, the Japanese-owned US company Westinghouse, the minister has officially suggested the Russian offer is unrealistic. 

However, he also makes clear it has not been ruled out completely. "We follow with interest what will happen with the Russian business with Hungary, and then we will see... From this point of view, the delay of the Temelin extension is useful; we can learn from the Hungarian case."


The nuclear deal with Russia appears to have pushed Hungarian Prime Minister Viktor Orban and his Fidesz government even further out of Brussels' orbit. With stunning timing, on May 10, as the rest of Europe rallied to condemn the separatist referenda organized for the next day in eastern Ukraine, Orban demanded Ukraine grant autonomy to the 200,000 ethnic Hungarians that he says live in the country. "Fairly remarkable comments from Orban which will be viewed as 'unhelpful' to say the least in [Washington] and some other European capitals," suggested Tim Ash of Standard Bank. 

While much of Orban's political capital at home is based on antagonistic barbs directed at the EU, he tends to temper his message when it comes to international issues, insisting Budapest remains a committed member of the bloc. In addition, Fidesz has just won a large majority in parliament in April elections. That would suggest there's little political pressure on him to beat his oft-favoured nationalist drum right now, even with EU parliament elections approaching. 

Indeed, while Hungary has hardly made the most hawkish comments against Russia during the crisis next door in Ukraine, it has generally toed the western line. However, having hammered international companies hard since coming to power in 2010, many suggest the reasonably strong economic recovery being seen now is likely to be short lived. The government has a policy to try to replace western investors with alternatives from the east, and with Beijing proving typically tricky to pin down, Russian cash has been the first to arrive.

"Orban had been a strident anti-Communist, but in very recent years seems to have repositioned himself to a new 'realpolitik' relationship with Russia, ie. looking to secure cheap loans from Russia to build nuclear power capacity and thereby ensure energy security for Hungary," notes Ash. "[T]his all tallied with recent efforts to re-establish state control over the energy sector in Hungary, or at least rein in Western energy companies which had hitherto dominated the sector."

Euro bundles

Tibor Szanyi, who heads the list in the upcoming European parliamentary election for the opposition Socialist Party, claimed at a press conference on May 12 that Orban has recently declared a “jihad war” against Europe, but that his government still “expects euro bundles” from Brussels at the same time, reports MTI.

However, the EU is clearly struggling to provide enough "bundles" to keep many of its member states happy. Much has been made of Russia's dominance of the energy markets in the eastern end of the bloc and the effect that has on their willingness to support sanctions against Moscow over its annexation of Crimea and moves to destabilize the interim government in Kyiv. 

However, the Kremlin is a past master at dividing Europe. That practice is only accelerating during the Ukraine crisis, and is made easier by the scarcity of cash around Europe. Slovakia has dug in its heels against sending EU gas to Ukraine via its pipelines. Bratislava won a gas price discount from Gazprom in April. Bulgaria, Serbia and Austria have all recently offered support to the massive South Stream gas pipeline, planned to carry Russian gas imports into the EU while avoiding Ukraine.

The offer of cheaper energy is clearly a pull for the populations of much of the region, regardless of their worries over Russian intentions. A recent poll by Median showed that 53% of Czechs said they are with Ukraine and the West in the ongoing crisis, while only 14% support the Kremlin's side of the story. 40% of Czechs fear Russia may pose a threat to the sovereignty of Central European countries within the next decade.

However, the ongoing geopolitical scrap doesn't apparently affect the Czech view on Russian involvement in their energy market. Overall, 60% say developments in Ukraine should not influence decisions on the expansion of Temelin. Only 26% think Russian bidders should be ruled out of the nuclear project.


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