Hungary, Russia sign Paks II implementation agreements

December 9, 2014


Hungarian government spokesman Zoltán Kovács announced today that Hungary and Russia had concluded three implementation agreements regarding the construction of two new 1200-megawatt reactors at the Paks nuclear energy plant.

“The signing of the private contracts will allow for the operative phase of the works to begin. This is a decision that is exceptionally important from the aspect of the energy safety and energy diversification of our country,” said Kovács, adding that Paks II “represents the cheapest and most effective method for energy safety, that will make us and our enterprises competitive.” He emphasized that the reactor will be 100% Hungarian owned.

Attila Aszódi, special government commissioner for the project, said discussions between Hungarian MVM Paks and Russian Rosatom had been going on since June, resulting in the signing of the three implementation agreements Tuesday morning.

The first agreement was an engineering, procurement and construction (EPC) agreement which, according to Aszódi, “was the most difficult part”.  The second is an agreement on running and maintaining the reactor.  The third agreement reportedly concerns the method of fueling the future reactors and disposing of spent fuel rods. Aszódi implied that the latter will be shipped to Russia according to the original plans. His estimate of the total costs of the project are EUR 12.5 billion (USD 16 billion) of which 80% will be covered by an EUR 10 billion Russian loan and 20% by the Hungarians’ own contribution. Engineering works will be carried out by an engineer’s planning office in Nizhniy-Novgorod, Russia.

As the agreements are “between private companies” they will not be published, according to Aszódi, because this would allegedly constitute an infringement of business interests.  Kovács said the Hungarian government is not expecting the EU to oppose the plans because no Hungarian public money is to be used, and thus Brussels cannot argue that this constitutes a kind of prohibited public funding activity.

Kovács’ statement that the 20 percent equity to be invested by the Hungarian partner will not involve public funds appears to contradict earlier statements to the effect that the Paks II project will involve a certain degree of public funding.

Russian ambassador: Paks II is a clean deal

Newly appointed Russian Federation ambassador to Budapest Vladimir Nikolayevich Sergeyev gave an interview to pro-government Magyar Hírlap about Russian economic plans in Hungary. Sergeyev told the newspaper that even though the South Stream project has been halted “in its current form”, this does not endanger the construction of Hungary’s new nuclear power plant reactor in Paks. He volunteered that Russia is contemplating devising a “new gas route” to Europe. Sergeyev said public opinion should “stop with the over politicizing of Russian-Hungarian relations”.  He defined diplomatic ties between Prime Minister Viktor Orbán’s Hungary and Vladimir Putin’s Russia as a “pragmatic partnership” that is “flexibly adjusting to realities, like Hungary’s membership in NATO and the EU.”

Sergeyev told Magyar Hírlap that in the case of the heavily financed Paks II construction plan and the Russian state loan of EUR 10 billion, “no political pressure was exercised on the Hungarian leadership.” According to him “Budapest did not provide any extra benefits for Moscow”, and chose Russian state-owned Rosatom because it made the “most beneficial offer” and offered to finance the project. He added that any information to the contrary is merely “speculation spread by opposition parties.”

Although there was no official tender advertised for the Hungarian reactor development project, reportedly American Westinghouse, Korean Electric Power of South Korea and French Areva were all candidates. Since the tender process was a closed one, no details are known to support any of the applying parties’ claims. According to earlier French press information, Russians used their secret service network to underbid their French competitors.

Sergeyev added that in the case of Paks II he cannot think of any scenario that could possibly jeopardize its implementation. According to Russia’s ambassador to Hungary, everything is proceeding to schedule, meaning that the construction will start in the first quarter of 2018.

Russia’s new envoy in Hungary was appointed by President Putin on September 25 to replace Aleksandr Tolkach. Sergeyev is a career diplomat and served in the diplomatic corps of the Soviet Union after graduating from the Russian State Institution of International Relations (IMO) in Moscow.  He was posted to Nicolae Ceausescu’s Romania between 1977 and 1981. Between 1987 and 1993 as well as 1997 and 2001, he was posted to the Soviet Union’s and then the Russian Federation’s permanent missions to the United Nations. Before being posted to Budapest, Sergeyev served as head of the Department of International Organizations at the Russian Foreign Ministry.

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