Russian Energy Projects and Hungarian Politics

Hungary’s Fidesz-led government under Viktor Orban, conservative and Europe-oriented in a traditionalist sense, and strongly anti-communist ever since Fidesz’s formative years, has turned toward Russia for solutions to some of Hungary’s main economic problems, especially in the energy sector.

This government seems convinced, for example, that Russia’s South Stream gas pipeline project would serve Hungary’s interests well. Hungary’s MVM state-owned electricity company is a shareholder alongside Gazprom in South Stream. During a recent visit to Moscow, Orban and Russia’s president, Vladimir Putin, discussed a possible rescue of the ailing steelworks Dunaferr, owned by Russia’s foreign trade bank (Vneshekonombank) in Hungary (Budapest Business Journal, January 17, 23). On February 6, the Fidesz-led two-thirds majority in the Hungarian parliament approved the Russian-Hungarian agreement for cooperation on nuclear energy. Under this agreement, Rosatom shall build two power blocs for Hungary’s Paks nuclear power plant, to be financed by massive Russian state credits (see EDM, February 7).

Orban visited Putin in Moscow in January 2013 and January 2014; and according to the Fidesz newspaper Magyar Nemzet (January 15, 2014), Orban concluded that “Hungary can only win” from close economic relations with Russia and friendship with Putin personally. This should be taken with a grain of salt however, as Magyar Nemzet seems more tantalized by Putin’s brand of “conservatism” than the party mainstream and Orban could ever have reason to be.

The government sped the Russian-Hungarian nuclear energy agreement through the relevant parliamentary commissions with only perfunctory debate, directly before the February 6 vote. The left-liberal opposition offered no more than symbolic, if vocal resistance. The opposition, led in part by politicians of the Socialist-Liberal former government (2002–2009), missed the chance to debate the agreement seriously in parliament, but is denouncing it in the political arena as part of the opposition’s ongoing electoral campaign (MTI, February 4–7).

In this respect, the present political alignment marks a reversal of roles. The Socialist-Liberal former government had welcomed the penetration of Russian capital—including the shadowy kind—in key sectors of Hungary’s economy. It even highlighted that choice by hosting an official Russian visit to Hungary in the run-up to the 2006 parliamentary elections. The Fidesz party, unequivocally pro-Western and in the opposition at that time, had criticized the leftist government’s relations with Russian business interests and its sometimes fawning attitude toward Moscow. The current Fidesz-led government, seemingly shifting gears, has chosen to conclude the nuclear energy agreement with Russia in the run-up to the April 2014 parliamentary elections.

The deep partisan divisions tend to obscure an undeclared, basic consensus in practical terms about economic relations with Russia. Both the Socialist-led cabinet of Ferenc Gyurcsany (2004–2009) and Orban’s Fidesz government (2010 to date, and likely to win again) decided that Hungary should join Russia’s South Stream gas project in Hungary’s interest, as both governments saw that interest. A broad consensus also exists (hard to recognize in the current, inflamed atmosphere) about the nuclear energy agreement with Russia. In 2009, the parliament had adopted a resolution with a big majority across left-right party lines, including Fidesz, authorizing the left-leaning government of that time to initiate the modernization of the Paks nuclear power plant. That resolution did not identify a foreign partner for the project; but the unspoken assumption in the body politic all along was that Russia would be the most likely or even sole real candidate.

The reliance on VVER technology already in place at Paks, and minimal Western interest, presaged Russia’s success. As Foreign Affairs Minister Janos Martonyi observed, “once the decision to build reactors in Paks had been made, nobody else could really have built them but the Russians, since they guarantee full safety [nuclear waste removal] and acceptable conditions for financing” (Gazdasagi Radio, January 28); and “the deal with Russia is good for both sides […] because we could never have financed [this project] on the conditions of financial markets (Frankfurter Allgemeine Zeitung, February 5).

If Hungary finds it in its interest to participate in South Stream and to invite Russia back to Paks, it is at least partly due to the failure of the European Union–backed Nabucco project (South Stream’s defunct rival) and the uncertainties surrounding the nuclear energy industry in Europe. “We cannot wait for the EU to find solutions to these issues, we must move now. If we wait for the EU to take steps, I’ll be in retirement by that time,” Orban told a joint news conference with Polish Prime Minister Donald Tusk (Budapest Business Journal, January 29).

Orban is now positioning himself as an advocate of closer EU relations with Russia for energy supplies: “The EU has to rebuild its ties with Russia in a pragmatic manner because the EU needs [that] energy. If Europe fails to do its utmost to secure Russian energy, I am not sure how the EU would sustain its economy,” the prime minister told a conference of central bankers in Budapest. The Fidesz government is convinced that Europe, including Hungary, needs nuclear energy to maintain economic competitiveness (MTI, January 31; Budapest Business Journal, February 3).

The Fidesz government is certainly not turning around from the West and toward Russia politically. The government seems confident that it can sustain Hungary’s full political identification with the West, despite Hungary’s heavy—and reluctantly accepted—dependence on Russian energy supplies. For its part, the European Union might draw conclusions from the Nabucco failure and the Paks case. The EU Commission can act preventively against Gazprom’s South Stream project as well as Rosatom projects in the Czech Republic or Bulgaria.