The expansion of the Paks II nuclear power plant (NPP) could now gain "new momentum" following Washington's decision to lift sanctions related to the project, Hungarian Foreign Minister Peter Szijjarto announced on June 29.

The sanctions imposed by the Biden administration in late 2024 against Russia had practically made it impossible to move forward with the largest infrastructure development being carried out by Russia's state nuclear group Rosatom, he added.

Washington placed Russia's Gazprombank on its sanctions list last November. Hungary relied on the Russian state-owned lender to process payments for nuclear fuel required for the operation of the Paks NPP and the construction of the two new blocks. State-owned energy company MVM, also the project operator, has not approved any payments related to the investment since the end of 2024; consequently, several subcontractors working for Rosatom have not been paid for completed work.

The sanctions have also negatively impacted the transparency of the project. In recent public procurement processes related to the expansion, Rosatom withheld not only the names of bidders but also those of the winning companies. By anonymising the procurement documentation, the Russian state nuclear company aims to shield its suppliers from potential sanctions-related repercussions, seeking to protect partners from penalties stemming from their cooperation with Rosatom.

Hungary commissioned the Russian group to build two new VVER-1200 reactors next to the current facility, based on a 2014 intergovernmental agreement, increasing the plant's capacity from 2,000 MW to 4,400 MW. The four existing blocks generate half of Hungary's electricity and cover one-third of national consumption.

Moscow and Budapest have reaffirmed their commitment to financing the €12.5bn project, with 80% of the funding provided by a Russian loan. The project has suffered years of delay as Rosatom failed to meet EU safety standards. The new blocks could go operational in the early 2030s.

Hungary's chief diplomat argued that the "politically motivated decisions" by the former US administration had put Hungary in a difficult situation, because the Paks upgrade project guarantees Hungary's long-term energy security and to maintain regulated utility prices.

"The production of the large equipment needed for the Paks nuclear power plant is ongoing in Russia and France," he added.

The control system of Paks II, often described as the "nervous system" of the power plant, is being supplied by a French-German consortium made up of Framatome and Siemens Energy, which won the international tender for the system in 2019.

Earlier this month, Siemens Energy announced that it will relocate its nuclear power plant control equipment unit, which supplies the upgrade of the facility, to Hungary.

Szijjarto said the move would enable the project to proceed according to its original timeline and could potentially circumvent restrictions by Germany, which have so far hindered delivery of the necessary technology. Berlin previously withheld export approval, classifying the system as dual-use technology, which under EU rules requires export licences from the country of origin. 

The European Commission's proposal to phase out Russian energy imports by the end of 2027 excludes nuclear energy, potentially ensuring that Paks remains protected from fuel supply disruptions.