Minister-designate for Economy and Energy promises review of Paks II contracts

István Kapitány, the incoming Hungarian Minister of Economy and Energy, opened his ministerial confirmation hearing in Parliament by briefly introducing himself. The Tisza Party started negotiations with the former global vice president of Shell, who is among the handful Hungarians to have risen to the highest international position last October, and Péter Magyar eventually announced in January of this year that he would be the party’s leading figure on economic development and energy.

Kapitány arrived nearly 10 minutes before the scheduled start of the Economic and Energy Committee hearing, while Fidesz's Piroska Szalai, the committee's vice chair, came a few minutes after the hearing had already begun. Speaking before the committee, Kapitány noted that he had previously worked on three continents and in several countries, including a 10-year stint in Germany in the early 2000s, where he worked for Shell. He said that following his career in the private sector, he felt it was his duty to use his knowledge to serve his country.

Speaking about the state of the Hungarian economy, he said it has been bled dry, investments have stalled, and EU funds have been frozen; moreover, the previous administration did not use those funds appropriately while they were available. According to Kapitány, the key to reviving the economy is restoring the confidence of investors and of the public. “Our task over the next four years will be to make this happen in Hungary.” He said the reason for the Hungarian economy slowing down is not that Hungarians are not working hard enough, but because the government and the country’s economic leaders have not been good stewards of the country.

With a view to restoring the economy, the incoming administration plans to first introduce predictable regulations by creating a level playing field, and they will also adopt a zero-tolerance policy on corruption, he said. In his view, some of the measures introduced by the previous government were sound, and they intend to keep those, but going forward, there must be transparency.

Kapitány then spoke about the energy sector: Hungary is an “export-oriented economy, so economic performance is closely linked to energy prices”. One of his first moves will be to review Paks II. Given that the contracts for this project were classified for 30 years by the Fidesz government in 2015, they haven’t been able to see the documents yet. He noted that estimates suggest that 800,000 Hungarian households currently live in energy poverty, with many relying on firewood for heating— for which no government subsidies have been available, which they intend to change and would also like to reduce the VAT on firewood.

To the question of where the money for all this will come from, he said that the funds will come from eliminating wastefulness and corruption, and from reviewing overpriced and unfavorable contracts.

On Russian oil: We don’t want to give anything up; we want to have options

The first question Kapitány received from a committee member came from Zita Bilisics (Tisza). She wanted to know what Kapitány considers the key to success, based on his international experience, as well as which sector he believes would benefit most from the EU funds if they were unfrozen. “There is no difference between continents and countries,” replied Kapitány, who believes that predictability will play a huge role in rebuilding the trust of the public and of investors. He believes this is good news because

“Hungary’s greatest resource is the ability of the Hungarian people.”

When EU funds arrive, they should first be spent on transportation, housing and energy, followed by a green and digital transition.

Piroska Szalai, the Fidesz vice-chair of the committee used nearly all of her allocated four minutes to offer a lengthy praise of the previous government’s policies, such as its energy policy; she then asked Kapitány about startups and which of the price caps they plan to retain or revise.

“An economy functions well when there is as little intervention from the state as possible", he said. As much as possible, we will leave the market processes to determine price levels and influence investments,” the ministerial nominee replied. If state intervention is necessary, it must be carried out effectively, but a strong economy cannot be built on state interventions. In his view, the price caps and special taxes will need to be reviewed, but the time to phase them out has not come yet, in part because the previous government signed a large number of classified contracts that the incoming Tisza government will need to review before it is able to act on such matters.

Áron Koncz, a representative of the Tisza Party, asked what the future minister plans to do to ensure that as many Hungarian innovations as possible achieve international success. Kapitány replied that they plan to develop a joint innovation strategy in cooperation with the Ministry of Innovation, in which artificial intelligence will feature prominently, since Hungary is still lagging behind in the area of digital transformation, making this an important issue in terms of economic development.

Sándor F. Kovács (Fidesz) asked what they plan to do with Mol, the country’s oil giant. It is not the state’s role to exert influence over Mol’s activities at any level; all decisions rest with the owners and shareholders, the ministerial nominee replied. Although the state does have a stake in the company, it is not a significant percentage. According to Kapitány, Mol is a major, well-functioning regional energy company, and the Tisza government's goal is to ensure it remains that way; Kapitány believes they will be able to cooperate effectively.

Miklós Seszták (Christian Democrats-KDNP) asked what Kapitány would do to promote tourism and what he thinks about bolstering the use of wind energy in Hungary. In his response, Kapitány spoke about the importance of diversifying the energy supply and emphasized that one must always choose the cheapest, most reliable, and most sustainable source. “It was not a good solution to increase the share of Russian oil from 65 percent to 90 percent between 2022 and 2025. This means that Hungary did not opt for a practical, diversified solution.” Regarding Russian oil, he said,

“We don’t want to give anything up; we just want to have options.”

He considers developments related to renewable energy important; wind power has not been a priority within the energy mix in Hungary so far, but it will play a prominent role in the new administration's energy policy.

At the end of the hearing, the committee supported the appointment of István Kapitány with 12 votes in favor and three abstentions.

When the hearing ended, the nominee held a brief press conference. He said that both the Hungarian and EU sides are taking the issue of bringing EU funds home very seriously. It has not yet been decided which projects will receive funding first; the structural framework for the projects is currently being developed, and discussions are ongoing. We are talking about 6.9 billion euros in non-repayable EU grants, with the remainder coming in the form of loans, he said.

Kapitány said that the first practical step towards curbing corruption will be the establishment of the Hungarian National Office for Asset Protection and Recovery, which will be tasked with handling corruption cases. This body will be completely independent of the government.

He said that there are a great many classified contracts in the economic sector, which is not conducive to the transparent functioning of the country; these will be reviewed during the first 100 days, and where necessary and possible, the agreements will be renegotiated. “If them being classified is not justified by reasons of national security, they must be made available to the press and to the public,” he said, explaining that they have no plans to unnecessarily classify contracts.