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EU Blocks €12 Billion Hungary-Russia Nuclear Deal Over Illegal Tender

A €12 billion deal between Hungary and Russia to build two new reactors at Hungary’s only nuclear power plant has been blocked by the European Commission. The deal would have led to Hungary importing nuclear fuel exclusively from Russia to power the nation’s nuclear plant. However, Eurotom, the EU’s nuclear watchdog, refused to pass the deal. Its decision was backed up by the EC despite an appeal from Prime Minister Viktor Orban’s government. The Financial Times reported that the decision is likely to agitate tensions between Russia and the EC.

The Financial Times also reported that last year Russia and Hungary agreed to build two 1,200 megawatt nuclear reactors at Hungary’s only nuclear plant, located 75 miles south of Budapest in the town of Paks. In December, public contracts for designing, building and maintaining the power plant were given to a subsidiary of Russia’s state-owned group Rosatom without a procurement tender. EC competition investigators are now looking into the legality of contracts awarded to Rosatom. An EC spokesperson told a press briefing last month: “From the public procurement’s state aid angle the Commission is in discussions with the Hungarian authorities regarding all the possible issues linked to this project, including possible state aid to public procurement aspects.”

In an article this month, Portfolio news site quotes the FT as saying “arguments have raged for weeks over the technical, financial and fuel provision agreements of the contracts with Rosatom.” In the end, the EC agreed with Euratom’s choice to block the expansion of Paks II. This means that Hungary would have to negotiate a new fuel contract or take legal action against the EC if it wanted to revive the deal.

The decision is a setback for Prime Minister Orban, who was using the project to build closer links with Russia. Benedek Javor, a Hungarian environmentalist and member of the European Parliament for Together – Dialogue for Hungary Alliance, told FT that Russia would have to amend the original contracts to comply with European law if it wished to continue the project.

Commenting on the refusal of the deal, Portfolio said that it was too early to say the nuclear project had failed. It added that the following period would likely consist of consultations, amendments and searching for compromises to the contract between Russia and Hungary. MEP Benedek Javor said earlier this month that there was a possibility US firm Westinghouse could be chosen to supply nuclear fuel for the two new reactors, provided compatibility issues were solved. He added that talks with Westinghouse were in an ‘advanced stage.’

Portfolio says that while it’s hard to predict whether Eurotom would accept a deal with Westinghouse, the Budapest-Brussels conflict wont just be about who will supply fuel for Paks II and other issues will almost definitely arise.

There does appear to be some discrepancy over who is correct over whether the whole deal has been halted – communication state secretary for the Prime Minister’s Office told state newswire MTI that it is not true and has asked the FT to issue a correction. But Hungary’s own EU Commissioner confirmed that the decision was in fact made in writing. There’s a great bit of debate at the end of the article “It is not true. Wait! Yes it is true” worth following.

What is for sure, however, is that when doing business with Europe, deals will most certainly always be watched with very scrutinous pairs of EC eyes, including, in this case, those of EC competition investigators and industry watchdogs on the lookout for violation of EU laws.