Orbán blocked the idea that could have pushed Russia out of Hungary’s nuclear plant expansion

Last spring, there were extraordinary maneuvers around the long drawn-out Paks nuclear power plant expansion project, which has been significantly delayed for years now.

Although the nuclear sector had not been affected by the Western sanctions imposed on Russia for its attack against Ukraine, there was speculation that this could happen sooner or later. Even within the Hungarian government, which has long been building an increasingly close alliance with the Kremlin, there were questions about whether the Russians would be able to complete Paks II, as the planned new reactors are called.

These concerns went so far that, according to a Direkt36 investigation, an idea began forming among the state actors responsible for the Paks expansion that could have led to the Russians being slowly squeezed out.

One of the key players in these considerations was Paks II Ltd., the Hungarian state company in charge of the project. Early last year, the company’s management decided not to confront the Russians directly, but to instead entrust the French company Framatome with the construction of another nuclear power plant under the name Paks III, albeit probably at a different site. At the same time, the Hungarian government would have no longer provided the Russians with any major assistance, which they envisaged would have led to the failure of the Paks II project.

After a few weeks of hesitation, the idea finally came to nothing. According to sources familiar with the events, even though the idea was supported by Minister of Energy Csaba Lantos, Prime Minister Viktor Orbán said no. Orbán insisted that the Russian project should continue.

This was not the only time recently that the Orbán government was forced to make a decision on nuclear issues because of the war. A similar situation took place last year in connection with the Paks I nuclear power plant, which is still in operation.

After the outbreak of the war, most of the Eastern European countries using a Russian-built nuclear power plant sought to become independent of the Russians in terms of fuel supply. As the US company Westinghouse already supplied fuel for this type of reactor, several countries contracted them. Paks I, which also uses Russian fuel, was close to concluding an agreement with the Americans in the first half of 2023, as were nuclear plants in neighboring countries.

However, the Hungarian government prevented this at the last minute for political reasons. Because of bad relations with the Biden administration, they decided to cooperate with Framatome, the French competitor of the US Westinghouse. The Orbán government made this decision even though the French currently have no fuel that could be used at Paks I.

Orbán’s press chief responded to our inquiry: “For any questions, speculations, or rumors about the Paks project, please contact the Ministry of Foreign Affairs and Trade.” The Ministry of Foreign Affairs, which oversees Paks II, and the Ministry of Energy, which is in charge of Paks I, did not respond to our questions.

The Russians should suffer alone

The idea to reduce dependence on Russia was prompted when it became clear by January 2023 that Germany was reluctant to deliver a key piece of equipment for the construction of Paks II. The German contribution mattered because even though the main contractor for the project was Russia’s Rosatom, some equipment had to be supplied by Western companies as subcontractors. One of these was the control system responsible for the safe operation of the nuclear power plant, which was to be supplied for Paks II by a consortium of German and French companies.

This idea was thwarted when the German government refused to allow Siemens, a German member of the consortium, to supply it. The reason was that sanctions against Russia prohibit the supply of technology that could be used by the Russians for military purposes in addition to civilian ones. The German government concluded that they had to examine the question of whether the control technology fell under this category.

Foreign Minister Péter Szijjártó strongly criticized the German attitude.

“It is outrageous that the Green Party ministers in the German government are blocking the Paks expansion for ideological or political reasons,”

Szijjártó said at the end of January 2023, referring to the fact that within the multi-party German coalition government, the ministries of economy and foreign affairs are headed by ministers of the Greens.

After the German decision, it became clear to the Hungarian government that although the EU sanctions do not seem to directly affect the nuclear industry, they are indirectly related to it. As the government believed that the country still needed a new nuclear power plant, it started considering different alternatives. “The idea behind the brainstorming was how Paks II would be built,” a source close to the government described the situation.

Paks II Ltd, the state-owned company responsible for the expansion of Paks which was headed by a new management following the 2022 parliamentary elections, played a major role in the brainstorming. The project, previously overseen by the Minister responsible for the construction János Süli, was transferred to Foreign Minister Péter Szijjártó after the election in 2022, and a new CEO, Gergely Jákli, who is close to Szijjártó, was appointed to lead Paks II Ltd. Former Development Minister Tamás Fellegi, who has been close to Orbán for decades, also joined the company’s board.

The company came up with the idea to try to use the war to put pressure on the Russians, or even to get rid of Rosatom which has been struggling to make progress even with the planning of the project. According to one source, Paks II was considering a less confrontational solution that would not involve the termination of the contract with the Russians. They considered the contract as favorable for the Hungarian side, and one that would pressure the Russians to deliver the nuclear power plant.

Instead, it was suggested that the Hungarian government would launch a “Paks III” project, which would have been entrusted to the French company Framatome which has considerable experience with nuclear projects. According to a source familiar with the idea, the new nuclear power plant would not have been built in the town of Paks in central Hungary, as “Paks III” was only the working title of the project.

According to the assumptions, the parallel construction of Paks III would have put the Russian-developed Paks II in a difficult situation, because the Hungarian state would not have provided any substantial assistance to the Russians from that point on.

“If we hadn’t helped the Russians, the project would have collapsed anyway,”

said one source, referring to the fact that Russia’s Rosatom had already been struggling to bring its plans into line with Hungarian and EU regulations. The source said the Hungarian side would only have fulfilled its contractual obligations and without considerable help the Russians would probably have struggled to manage on their own.

However, the Hungarian government also would not have minded if the Russians had got their act together in this situation and Paks II were to be built alongside Paks III. “This could have been a way to put pressure on the Russians in the negotiations,” a source close to the government said about the idea of Paks III. In the government, it was believed that the current large-scale battery factory development plans would require new energy sources anyway, so both newly built nuclear power plants might be needed.

“If BYD and CATL are built, Paks II would be needed for them anyway,”

a source said about the energy needs of the Chinese electric car plant planned for Szeged and the Chinese battery factory to be built near Debrecen.

The brainstorming about the Paks III plan took place last February-March. Several sources told Direkt36 that the ideas were crude and had not been worked out in detail, so they were only discussed in a small circle through informal channels. According to one source, although the proposal was not officially presented to the government, it was supported by Energy Minister Csaba Lantos. According to the source, Lantos believed that in the current situation, with the war in Ukraine going on, all alternatives for nuclear power plant construction without Russian involvement should be examined.

Orbán says no

The idea of working with the French not only came up during the brainstorming because of their considerable nuclear experience but also because of the rapprochement that has been developing between Prime Minister Viktor Orbán and French President Emmanuel Macron in recent years. One reason why the two politicians’ interests have converged is because they were both critical of strong US influence in Europe. According to a source close to the government, through his relationship with Macron, Orbán is hoping to show the outside world: “you see, we are not the Russians’ people.”

Orbán had a meeting with Macron around the same time as the talks about Paks III started within the government. The Hungarian Prime Minister was received by the French President in Paris on March 13, 2023. Although few details of the meeting were revealed, a few days later the Financial Times reported that the Paks project and nuclear issues were discussed at the meeting between the two politicians.

However, the plans for Paks III ultimately came to nothing. According to sources familiar with the events, Orbán insisted that Paks II should be built. “Orbán decided to stick to the Russian course,” explained one of the sources, who said that Orbán was motivated not only by legal and financial considerations but also by the time factor. A completely new project would have had to be licensed from scratch, which would have meant wasting almost ten years of work on the Paks II project.

Once Orbán took this decision, the Paks project entered a new phase. Szijjártó announced the start of the so-called implementation phase, a major milestone in the project’s history last August. The contract signed with the Russians divided the work into two major phases, the first one including preparation, design, and licensing, and the second one the actual construction. After the announcement, the Russians started the excavation work and ordered the equipment, which will take several years to produce.

All this is significant because Rosatom will now be able to draw down more funds for the project, as the financial implications of the various construction and production works are much greater. According to sources familiar with the details of the expansion, this was the reason why the Russians had been pressing for a long time to move to this phase of the work.

Professional interests overruled by politics

In the first half of 2023, Russia’s war against Ukraine created another situation in which the Hungarian government could have forced the Russians to compete in the nuclear field. This was not in relation to the ongoing construction of Paks II, but had to do with the Paks I nuclear power plant, which is still in operation.

For years, the EU has been urging Member States using Russian-built nuclear power plants to look for alternatives to Russian fuel. After the outbreak of the Russian-Ukrainian war, diversification in this area became even more important. There were two leading suppliers to be considered, the French Framatome and Westinghouse from the US. However – as a Hungarian expert in nuclear technology put it – Westinghouse has a big advantage over Framatome as the Americans have produced fuel for Russian-type reactors before and the Finns have used it in the past at the Loviisa nuclear power plant. The French do not currently have a similar product and nuclear experts say it will take several years to develop fuel for use in Russian units.

Several EU Member States with Russian-built nuclear power plants – such as Bulgaria, the Czech Republic, and Finland – therefore contracted Westinghouse after the outbreak of the war. The US company was also contacted by the management of Paks I. According to sources with knowledge of the matter, negotiations were so advanced that a contract with the US company was planned for the first half of 2023. It was envisaged that one of the four units at Paks would use US fuel until the end of its current operating life.

However, the contract was never signed. The process first stalled when Péter János Horváth, who has good Fidesz connections, was appointed as head of the plant in January 2023. Sources familiar with the situation say he apparently did not want the deal to happen. Negotiations with Westinghouse then stalled again last summer, as the Hungarian side lacked “political approval at the highest level,” a source said. According to sources with insight into the matter, the Orbán government’s antipathy towards the US Democratic administration played a role in this.

Based on a source with close knowledge of the operation of Paks I, even though the Russian fuel is of good quality, it would have been important from a supply security perspective to have US fuel in stock in case something happened to the Russian supply in the future.

Although the French currently have no fuel that would be usable in Paks, the Hungarian government has begun to talk about French Framatome as an alternative. As Telex previously reported, at a private event in September 2023 Orbán spoke about plans for Paks I running on French fuel in the future. A few days later, the Energy Ministry, led by Csaba Lantos, signed a cooperation agreement with Framatome, which covered several areas, among them fuel supply.

According to a source with insight into the matter, the background to this was the EU’s desire to reduce Russian dependence in the nuclear field. “The question is whether to replace Russian dependency with American dependency or to solve it within the EU,” said the source, who added that France’s Framatome is clearly Westinghouse’s current competitor in nuclear power plant construction, fuel production, and uranium enrichment. And in this geopolitical power game, the Orbán government would move together with the French.