EC to Renew Investigation of Hungary‘۪s Award of the Paks Nuclear Power Plant to Rosatom

On November 19, 2015, the European Commission (EC) launched an infringement procedure against Hungary for alleged non-compliance with EC procurement rules relating to the Paks Nuclear Power Plant, which was awarded in a “back room” arrangement that many have viewed as symbolic of Hungary’s broader relationship with Russia.

The EC is citing the lack of a tendering process and transparency as the reason for the investigation saying, ‘‘‘The Commission considers [that] the direct award of the Paks II nuclear power plant project (to Rosatom) does not comply with EU legislation on public procurement‘‘_‘ Thus far, the EC had only issued a ‘‘‘letter of formal notice‘ requesting information from the Hungarian government, and a suspension in its preparations to expand the plant.

The Hungarian government has expressed their confidence that the EC will fail in their efforts to suspend work on the plant or force a new tendering process.  Hungarian Prime Minister Victor Orban defended the Paks project accusing the EC of using ‘‘‘double standards,‘ saying that other European nuclear energy projects have not called for a tender procedure (a statement of questionable validity as the Czech Republic held a public tender for its Temelin nuclear power plant in 2014).  He went further to say that the EC is purely defending the interests of European companies who were looking to get involved in the $14f billion project.  The project, and the inclusion of Rosatom, was previously approved by the EC in January 2014, which gave early momentum project.

These latest actions will likely further strain EU-Hungary relations, especially as Hungary would be forced to pay back Russian loans with nothing to show for it if the project is scrapped.  These actions are also likely to tease out further the strategic importance assigned to these kinds of arrangements by Russia, in general — including, specifically, with regard to Moscow’s relationship with Victor Obran.  It is unclear at this time how aggressive the EC is likely to be in its efforts to discipline this undertaking, but the infringement procedure, at minimum, helps to highlight what has clearly been an improper, strategically-motivated agreement reached between Hungary and Russia and the role that Rosatom plays in Moscow‘s agenda in the region.