Why the Budapest-Belgrade railway ended up bypassing major Hungarian cities

It was almost ten years ago, on 17 December 2014, that Hungarian Prime Minister Viktor Orbán, Serbian Prime Minister Aleksandar Vučić and Chinese Prime Minister Li Keqiang signed the agreement on the construction of the Budapest-Belgrade rail line. The project has been criticised in Hungary numerous times, both for professional and political reasons, and for a very long time the government has been unable to provide a meaningful explanation as to what the country stands to gain from it.

However, in the past few years, and especially in the autumn of 2024, a series of partly unrelated pieces of information have emerged which, in hindsight, shed a different light on the project. These help us understand the criteria that may have been used in the decision-making process and what each party was hoping to achieve with the investment. The story of the Budapest-Belgrade railway project reveals the far-reaching consequences of a political decision which overrode professional arguments, but also sheds light on the strategy that the Hungarian government has consistently pursued for the past decade.

The seemingly unrelated events are as follows:

• In 2022, CATL and in 2023, BYD each announced their plans to build a gigantic factory in Hungary. These are the two biggest corporate investments in Hungary's history;
• In September this year, it was revealed that 200,000 tonnes of crushed stone from the Orbán family's mine in Gánt were delivered as track ballast for the Hungarian section of the Budapest-Belgrade railway line, a substantial part of which is being built by Lőrinc Mészáros's (PM Orbán’s childhood best friend) companies;
• In early October, Foreign Minister Péter Szijjártó, accompanied by Lőrinc Mészáros, announced in Kiskőrös that the open line track construction works on the Hungarian section of the railway line had been completed;
• At the end of October, Serbian President Aleksandar Vučić announced in Budapest that the Serbian section of the Budapest-Belgrade line would be opened on 24 November (this was later postponed to 8 December);
• On 1 November, a portion of the Novi Sad (Serbia) railway station, the renovation of which had been botched – or, as the official version goes: the portion that had not been renovated – during the construction of the Budapest-Belgrade railway collapsed, killing 15 people;
• On 15 November, János Lázár, Minister of Construction and Transport announced that the government had decided to rebuild two sections of the Budapest-Szeged railway line. This line runs practically parallel to the Budapest-Belgrade railway line and the renovation will cost hundreds of billions of forints.

In the continuation of this article, we will examine from three different angles how the government has by now quietly admitted that it should have listened to the professionals instead of making political decisions, how the Budapest-Belgrade railway fits into the Orbán government's decade-long China-friendly policy, and how this project is yet another example of the massive corruption that is a key element of the government's policy.

The line drawn at a desk in Beijing

The Hungarian government made the decision on the construction of the Budapest-Belgrade railway line in 2014, and in 2015 the project was formally agreed with the Serbian and Chinese sides. Why the Chinese and the Serbs would benefit from the project was clear from the outset – they would gain a rail link between the Chinese-owned port of Piraeus, Belgrade and Western Europe – but what the Hungarians would gain was unclear. We still do not have this information, but what is evident is that their decision was not based on the advice of the experts in the domestic railway industry, and they did not have the development of domestic public transport in mind.

As soon as the first news about the construction of the Budapest-Belgrade railway line broke, there were those who argued that

Hungary would have been much better off if the Hungarian section of the line had been routed through Kecskemét and Szeged instead of Kiskőrös and Soltvadkert.

This is because there are two parallel railway lines running between Budapest and Belgrade, both of which would have needed renovation and an upgrading to a double track if they were to handle heavy traffic.

According to transport experts, Hungary would clearly have been better off if the renovation and upgrading had been carried out on the line which passes through Szeged, Kecskemét and Cegléd. This would have considerably improved public transportation for the residents of two county capitals as well as the rail links between the industries of two large cities. Moreover, if the line had been brought in to Liszt Ferenc Airport, half of Hungary would have had easier access to the airport.

This route is a bit longer, but it doesn't make much difference for the transported goods whether containers from China or Serbia have to travel half an hour more or less. From a Hungarian point of view, the only counter-argument would have been that this route would have been slightly more expensive to develop, but this argument is really only valid if the improvement in the transport conditions for the residents of Kecskemét and Szeged is not in itself regarded as valuable.

According to our sources, at the time, both Ilona Dávid, the then head of MÁV (Magyar Államvasutak – Hungarian Railways) and Róbert Homolya, former state secretary for transport policy lobbied actively for the reconstruction of the Szeged-Kecskemét line, but the politicians were not open to the idea. Instead, they opted for the complete reconstruction of the line which bypasses the major Hungarian cities and connects Budapest directly with the Serbian town of Subotica. As a result, there is no double-track railway from Budapest to most of the county seats, but there is one to Subotica. Szombathely, Zalaegerszeg, Veszprém, Nagykanizsa, Kaposvár, Szekszárd, Pécs, Kecskemét, Szeged and Salgótarján are all without a double-track line.

It is still not clear whether the lobbying of the Hungarian railway professionals and MÁV failed before or after Viktor Orbán did. Telex has been told that it was after him, i.e. at first, the Hungarian leadership agreed to the route originally proposed by the Chinese, and was unable to have it modified later on. As one of our sources put it:

"The Chinese insisted that the railway should be built on the shortest, straight path between the two cities and couldn't understand why the Hungarians wanted a more complicated route that would pass through several other towns".

In any event, to this day, the government continues to officially maintain that it made the right decision, and at every opportunity, all the parties concerned keep emphasising what a step forward the Budapest-Belgrade railway, which bypasses major Hungarian cities, will be for the Hungarian railways. Meanwhile, however, it has been admitted on the quiet that the other route should in fact have been renovated, and the complete, segment by segment reconstruction of that track has been announced.

As part of this:

• by the end of last year, the Szeged-Subotica railway line was renovated,
• the Budapest-Cegléd section has been undergoing renovation since 2020;
• And János Lázár has just announced that the government will spend HUF 600 billion on renovating and converting the section between Szeged and Cegléd into a double track line.

These three projects cover the entire railway line connecting Budapest with Subotica via Szeged and Kecskemét. So, ten years after the first agreement on the Budapest-Belgrade line, we are now at the stage where we are also renovating and upgrading the line that runs parallel to it to a double-track line. Except, of course, the Szeged-Subotica line, which has not been given a second track, even though János Lázár is planning to have a tram-train between the two.

It is also telling how successive governments in the last decade(s) have allowed the line linking Budapest to Szeged to fall into disrepair. Today, trains are running at slower speed on this line than they did in the 1990s, and for a while, replacement buses had to be brought in so maintenance on the tracks could be carried out. None of this bothered the government for a long time. The reason why the renovation is now in the spotlight is because this is the line that would be used to transport cars built at the BYD factory in Szeged towards Western Europe. In other words, it's due to a common economic interest with the Chinese.

By now it's plain to see why making friends with China paid off

The question as to why the Budapest-Belgrade railway line is worthwhile for Hungary, despite the fact that it avoids major urban centres, has haunted the project for ten years. After the investment was first announced, Finance Minister Mihály Varga suggested that the railway would be worth it for Hungary because of the customs duty on Chinese goods, but when the figures were checked, it turned out that this was a rather exaggerated claim.

The 160-kilometre section of the investment's Hungarian stretch cost almost HUF 800 billion, 15 percent of which the Hungarian state is covering from its own resources, while the remaining 85 percent is being paid for by a Chinese loan. The Hungarian government has declared the details of the roughly HUF 700 billion loan contract confidential for 10 years, but part of the Serbian loan contract has been leaked, and it shows that they received the loan at a very favourable interest rate of 2-2.5 percent, but with very strict payment conditions.

The government has failed to explain why, regardless of the terms of the loan, it was worth it for Hungary to spend HUF 800 billion on this line, or why it would not have been worth spending the same money on other, more prominent rail lines.

Speaking about the line's reconstruction in December 2017, Viktor Orbán actually said it himself when he admitted: 'How it will pay for itself in forints is secondary'.

It also emerged later on that there were a number of reasons why the implementation of the project in its current form was extremely important to the Chinese. For example, because this way, the Chinese company building the train control system on the Hungarian section will gain a reference in the European Union that will allow it to work in other EU countries. There are also reports that the Hungarian side repeatedly attempted to change the details of the agreement, but the Chinese were not willing to do so. Therefore, the participation of the Hungarian government was a very important gesture and a commitment towards China.

For a long time, the Chinese-Hungarian friendship was mostly verbal and seemed akin to the Uzbek-Hungarian Potato Research Centre: the Hungarian leadership constantly made diplomatic gestures and granted important economic favours to the Chinese side, but received almost nothing in return. That changed after the coronavirus outbreak, and since then, Chinese companies have been announcing a succession of investments in Hungary – so many, in fact, that in the last two years a quarter of the Chinese investment in Europe came to Hungary.

Although the CATL factory has primarily been in the Hungarian press over environmental concerns, both it and the BYD car plant currently under construction are in fact two investments that were the envy of Hungary's neighbours and Western Europe at the time they were announced. In other words, assuming that Chinese working capital investment is going to contribute to the development of the Hungarian economy, after a long period of time, in recent years it has become clear how Hungary will benefit from its close relationship with China.

It is, of course probable that the Hungarian leadership's decision to participate in the Budapest-Belgrade project under these circumstances was ill-considered, and they too have realised this in the meantime. However, it is now clear why, despite the many concerns raised, they did not wish to harm Chinese interests in any way.

It ended up costing 800 billion. Is that okay?

– It's good to look at these machines, isn't it? – Péter Szijjártó asked Lőrinc Mészáros on 9 October 2024, while standing on the track-laying machine of V-Híd Zrt.

– This is what the 21st century looks like, someone answered, while the camera showed Hungary's richest man (Mészáros).

– We’re getting pretty serious, isn't that right?! – the foreign minister said.

– Yes we are, grinned the entrepreneur, whose railway construction company made a profit of HUF 50 billion last year by executing state contracts.

– The days when it was all about pickax and pitchforks are over, aren't they? – the minister asked, but received no reply, so along with those present he concluded that the track-laying machine was like a spaceship.

It was at the beginning of October that Péter Szijjártó announced in Kiskőrös that construction on the open-line tracks of the Hungarian section of the Budapest-Belgrade railway line outside Budapest had been completed. As part of this, V-Híd, owned by Lőrinc Mészáros, and its partners have built 150 kilometres of double-track railway and are now working on the stations.

The 160 km section in Hungary is being built by a consortium of Hungarian and Chinese companies at a total cost of almost HUF 800 billion. This means that the lowland section, which is free of major natural obstacles, will be renovated and built at a cost of HUF 5 billion per kilometre and HUF 5 million per metre.

Details of the contract are not public, but we do know that the embankment and track laying is carried out by V-Híd and its subcontractors, while the installation of the safety equipment is being carried out by China Railway Signal & Communication (CRSC). Construction of the Budapest-Belgrade line started in October 2021, which coincides with the time when the turnover of Lőrinc Mészáros's V-Híd skyrocketed compared to the previous period.

As the graph above shows, the revenue of V-Híd was only HUF 39.1 billion in 2020, but by 2023 it was more than four times as much at HUF 168.5 billion. Although exactly how much of this is due to the construction of the Budapest-Belgrade railway line is not known, it is certainly several hundred billion forints.

V-Híd's data also show a profit margin of 21 percent in 2022 and 30 percent in 2023. Of course, we don't know how much money they made on the Budapest-Belgrade line, but

if we assume that V-Híd agreed to the construction of the tracks for half of the investment's cost, i.e. HUF 400 billion, then based on the above, roughly HUF 100 billion of this could end up as Lőrinc Mészáros' private assets in the coming years, if he collects the profit as dividend.

This is, of course, only the most visible part, as V-Híd also partnered with other companies owned by Mészáros in the project, not to mention the fact that the railway stones for the construction were supplied from the Orbán family's quarry.

Based on all of the above, it can be stated that the government's main concern in the realisation of the Budapest-Belgrade project was to boost the capital of the firms owned by friends and family – a process that critics call corruption, but according to pro-government philosopher András Lánczi, "what they call corruption is in fact the main policy of Fidesz". In other words, when one wonders why – despite all the criticism – this seemingly pointless project was so important to the government, (apart from friendship with China), this is the answer that comes to mind.

Things didn't go so well in Serbia

The Serbian section of the Budapest-Belgrade line cost roughly thirty percent less per kilometre than the Hungarian section. The difference was partly due to the fact that EU regulations do not have to be complied with there, so Serbian and Chinese companies were able to work with their own technology and well-proven methods.

The project also included the Novi Sad railway station, part of which collapsed on 1 November, killing 15 people. On the day of the accident, the minister concerned and the company responsible for the country’s railway infrastructure said that the collapsed canopy was not part of the renovations. Since then, however, a number of photographs have been released, showing that the structure had indeed undergone modifications, placing additional pressure on the six-decades-old structure.

It is not yet clear who was at fault, but it appears that both the public authorities overseeing the construction and the companies carrying out the work were involved. What is certain, however, is that the tragedy is a huge loss of prestige for Serbian President Aleksandar Vučić, as it was one of his most important megaprojects.