insight: hungary - paks moscova

Paks Moscova: Russia to Build Two Further Nuclear Reactors in Hungary
Visegrad Economy
by Hélène Bienvenu and Sébastien Gobert
27. 3. 2014

http://visegradrevue.eu/?p=2404

With the energy future of the Visegrad region still in limbo, Hungary is taking unexpected steps to secure its position with the help of Russian financing and technology. Was the deal signed to supply the German industry with a cheap source of energy?

Sometimes issues linger for a long while before they come to a sudden and unexpected resolution. Something similar happened in Hungary recently when Prime Minister Viktor Orbán announced, seemingly out of the blue, that he had closed a deal with Russian President Vladimir Putin regarding the extension of Hungary’s existing nuclear power station at Paks to include two further reactors. (Hungary already has two reactors, satisfying about two-fifths of the country’s energy requirements.) Construction would be financed through a loan from the Russian side, the details of which are yet to be released. It was also announced that negotiations between the two sides had been taking place behind the curtain for years.

It has been clear for a while that Hungary needed to finalise an arrangement to secure ways of meeting its growing future energy needs. However, even the fact of these growing energy needs has been disputed. The influential NGO Energia Klub believes that with investment into energy efficiency for both households and industry, Hungary’s energy requirements could be held level in the future. Meanwhile, those who project growing energy requirements have been seeking alternatives for years. In addition to the nuclear option, Hungary held a stake for a long time in the South Stream and Nabucco gas pipeline projects, which were always slow in materialising. Environmentalists have argued that the country could also follow the German path and gradually switch to environmentally friendly, sustainable forms of energy. The debate has been simmering for a long while, but cost calculations have remained opaque and there have been wide differences in expert opinion as far as the energy potential of the different possible solutions. In contrast to neighbouring countries, Hungary has never implemented an adequate subvention scheme for renewable energy.

Orbán: A long term solution has been found

The Prime Minister’s announcement dropped into the middle of this debate seemingly from nowhere. The government asserts that a long-term solution to Hungary’s energy requirements has now been found. The green opposition protests against committing to a nuclear option in a post-Fukushima world when EU partner Austria has been nuclear-free since 1978 and Germany is about to reach that stage soon. They also remind voters that Hungary’s main problem has been unilateral energy dependence on a single source – Russia (in gas, oil and uranium) – and the new resolution only increases the country’s vulnerability instead of alleviating it. The liberal opposition protests mostly against a longer-term commitment to Putin’s authoritarian Russia, as well as the further indebtedness of an already highly indebted Hungary. With general government debt at around eighty percent of GDP, the new investment will add at least ten percentage points of debt, raising the country from an average level of indebtedness in the EU to a high level. To this the government has responded by asserting that the Paks corporation (MWM) rather than the state will be the recipient of the loan, as a result of which national debt will not increase. The repayment will only start when Hungary turns the first of the two new reactors on, presumably around 2023-25.

Speculation: Is Germany the hidden actor in the background?

Newspaper reports about German industrial and banking groups having been involved in negotiating Hungary’s Russia deal have lead to speculation about excess potential from Hungary’s doubling nuclear capacity eventually being sold on to German industry, which fears that the phasing out of nuclear energy in that country may lead to an unreliable industrial energy supply. However, experts have objected that intermediary countries Slovakia and Austria do not have the transit potential, or indeed the will to enable Hungarian nuclear energy to be sold on to Germany.

The sudden Hungarian move appears to be final, as Viktor Orban’s ruling Fidesz party is set to win the parliamentary elections in April of this year with a clear majority. It has already redrawn the energy game of the region. It is especially interesting to see what effect it will have on Czech nuclear extension debates, where Russia has also been one of the contenders.