Hungary backs Russian sanctions but will not scrap €12.5bn nuclear plant deal

 Hungary backs Russian sanctions but will not scrap €12.5bn nuclear plant deal
Viktor Orban said Hungary approved sanctions grudgingly.
By bne IntelliNews February 28, 2022
Hungarian Prime Minister Viktor Orban assured his Polish peer Mateusz Morawiecki on February 26 that he supports "imposing far-reaching sanctions on Russia, including the blocking of the SWIFT system", Hungarian media reported, citing a Twitter post of the Polish PM.
In his first television interview since the conflict, Orban also said Budapest will not scrap the expansion of its Paks power plant by Russia’s Rosatom, but opposition politicians say he may be forced to do so if sanctions are imposed against Russian banks and companies.

Initially, a handful of countries, including Germany, Italy, Cyprus and Hungary, objected to cutting off Russia from SWIFT. Budapest has since joined the EU consensus after Germany jumped on board, local media write.

Hungary remains in a precarious situation as it relies heavily on cheap Russian gas. Budapest has become Moscow’s most loyal ally in the EU since Orban took power in 2010. He defends cosy ties with Russia, saying Hungary needs long-term gas contracts that offer lower prices in order to maintain the cap on retail gas prices. 

Under a renewed long-term gas contract, signed last September, Hungary is getting 4.5 bcm a year from Gazprom, including 3.5 bcm delivered from the south, through Hungary's interconnector with Serbia, and 1 bcm via the pipeline running from Austria.

The surge in energy prices is making the central price-fixing of gas a costly game. Since October, the gap between the retail and wholesale price of gas  for household users is close to €2.2bn. Further increases in global prices would widen the budget gap.

Hungary’s illiberal strongman, who copied Russia's anti-NGO law amongst others, has been reluctant to call the invasion aggression but has aligned Hungary with the EU stance on the sovereignty of Ukraine and supporting sanctions. 

The condemnation of Moscow’s aggression was left to President Janos Ader, whose mandate expires in May. He strongly denounced the Russian attack on Ukraine, as one of the largest military operations seen in Europe since WWII, but Hungary was also forced to endure a similar one in 1956, the president’s office cited Ader as saying at a meeting of the heads of state of the Bucharest Nine (B9) group in Warsaw on Friday.

Over the weekend, Hungary’s diplomacy also made a push for the conflicting sides to sit down for peace talks in Budapest, but experts see little chance of that taking place in the Hungarian capital.

In his first television interview since the conflict began on February 27, Orban stressed that Hungary must stay out of this military conflict, "because for us the most important thing is the security of the Hungarian people". The deployment of troops or military equipment to Ukraine is out of the question.

Backing up his argument, he said Hungary won't give weapons to Ukraine, because "with those weapons, they could shoot at Hungarians living in Transcarpathia".

This came a day after Russians killed an ethnic Hungarian serving in Ukraine's navy.

When asked about sanctions, Orban reiterated that he is against sanctions, but "there is war now, and now is not the time to be smart but to be united".

He noted that energy issues, including the expansion of the Paks nuclear power plant (Paks II), must be left out of the sanctions list.

Hungary’s opposition called for the government to scrap the €12.5bn project, financed largely by Russian loans. The government has been tight-lipped about the future of the largest investment in Hungary on record, but analysts warned that with Vnyesekonombank (VEB) on the EU’s sanctions list, the financing of the project would be in danger.

Green MEP Benedek Javor, a long-time opponent of the nuclear expansion, said that the government should acknowledge that the project is dead given the future possible ban on technological transfer in addition to rising financing costs. The cutting off of Russian banks from the SWIFT system will also hurt VEB, which is financing the €10bn loan.

The main constructor of the project, Rosatom, has failed to receive the final permit for building two 1,200MW blocks at Paks, which accounts for half of the country’s electricity production, for failing to meet safety standards. The €12.5bn investment is five to six years behind schedule.

The operator of the nuclear plant said "fuel supply is assured and security of supply is guaranteed for the long-run", although it did not specify.

The Russian invasion has caught Hungarian officials by surprise. Authorities were ill-prepared for the influx of refugees on the first days of the conflict, unlike in Slovakia and Poland, where humanitarian assistance was available immediately on the spot.

By Sunday, authorities began to shift resources to eastern border towns near Ukraine, setting up shelters and offering healthcare services to people crossing the border. Charities, NGOs and local governments assisted refugees in the first days, but state help was nowhere to be seen.

By Sunday, more than 70,000 Ukrainians entered Hungary, most of them ethnic Hungarians from the western part of the country.

A government decree published on Friday allowed Ukrainian nationals as well as citizens of other countries lawfully residing in Ukraine to submit applications for asylum in Hungary. Only a handful of people sought asylum.

Ukrainian officials were not letting men aged 18-60 enter Hungary, although that has varied greatly depending on whether they held a Hungarian passport.