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EU Blocks Hungary-Russia Nuclear Deal

The EU has blocked Hungary’s €12bn nuclear deal with Russia, a decision that is likely to inflame tensions between the Kremlin and Brussels

This article originally appeared in The Financial Times

The ruling from the European Commission is a setback for Viktor Orban, Hungary’s prime minister, who has courted the Kremlin despite the conflict in Ukraine

Russia and Hungary agreed last year to build two 1,200 megawatt nuclear reactors in the town of Paks, 75 miles south of Budapest, in a deal that would have extended Moscow’s commercial reach deep into central Europe. Contracts for designing, building and maintaining the plants were awarded to a subsidiary of Russia’s state-owned nuclear group Rosatom in December.

<figcaption>Russian President Vladimir Putin (left) with Hungarian Prime Minister Viktor Orbán (right).</figcaption>
Russian President Vladimir Putin (left) with Hungarian Prime Minister Viktor Orbán (right).

But critics of Mr Orban feared the deal would increase Hungary’s already heavy energy dependence on Russia.

Many EU officials also expressed concern that Moscow was using energy policy to divide Europe and undermine the bloc’s consensus on sanctions imposed on Russia over its actions in eastern Ukraine.

Arguments have raged for weeks over the technical, financial and fuel provision agreements of the contracts with Rosatom. All nuclear fuel supply contracts signed by EU member states must be approved by Euratom, which imposes financial and technical requirements on fuel suppliers.

In the end, Euratom refused to approve Hungary’s plans to import nuclear fuel exclusively from Russia. Hungary appealed against the decision but, according to three people close to the talks, the European Commission has now thrown its weight behind Euratom’s rejection of the contract.

The decision, details of which were kept secret, came at a meeting in Brussels last week of all 28 EU commissioners, including Hungary’s Tibor Navracsics.

The result is to block the whole Paks II expansion. To revive it, Hungary would need to negotiate a new fuel contract or pursue legal action against the commission.

The ruling throws a spanner in the works of a project that Mr Orban has put at the centre of his strategy to build closer links with Russia.

“If the Russians now refuse to modify the original contracts, this will be the end of the road for the project,” said Javor Benedek, a Hungarian member of the European Parliament’s Green group. “The report is very clear that the fuel supply agreement does not comply with European law.”

Mr Orban won €10bn in financial backing for the scheme from President Vladimir Putin of Russia in January 2014.

Budapest’s decision to award the bulk of contracts for the two reactors to Rosatom without a public competition prompted the commission to launch a probe into whether the deal violated public procurement and state aid rules. The investigations are continuing.

The Financial Times in February reported that EU experts were examining aspects of the deal, including the role of Rosatom subsidiaries to supply reactor fuel.

The four reactors currently in operation at Paks produce 40 per cent of the country’s electricity and the central European country relies on Moscow for 60 per cent of its gas imports and 80 per cent of oil imports.

Almost all details of the contracts have been kept secret and Hungary’s parliament last week extended official secrecy provisions on the contracts for 30 years, citing national security concerns.

A spokesman for the government said there were no obstacles to the deal proceeding as planned.


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