EU Rejects Hungary’s Nuclear Deal with Russia over Fuel Supply Provision

The European Union has rejected a nuclear fuel supply deal between Hungary and Russia, a piece of a broader transaction that has been widely criticized for its lack of transparency, governance and strategic recklessness.  Indeed, the deal has come to symbolize the inordinately close relationship between Hungary’s Prime Minister Victor Orban and Russia’s President Putin, which is of growing concern to Hungary’s fellow member states within both the EU and NATO.

The fuel supply agreement is related to Hungary’s ‘‘‘12 billion deal with state-owned Rosatom, signed last year, to build two 1,200 megawatt nuclear reactors in the Hungarian city of Paks.  Euratom, the organization that governs the EU‘s nuclear safety and supply arrangements, has reportedly blocked a fuel supply agreement that was part of this contract.  The European Commission (EC), which oversees Euratom operations, supported the group’s decision. All nuclear fuel supply contracts signed by EU member states must be approved by Euratom.  An EC spokesperson, said, ‘‘‘We are not blocking the construction of Paks, this is just the fuel supply agreement.”

Although the terms and details of the Rosatom Paks agreement have been closely guarded (and, indeed, suspiciously established as a 30-year state secret in a recent vote by the Hungarian parliament), the deal reportedly requires that only Russian fuel be used in the plant.  This dimension of the transaction has been ruled as a violation of EU principles of diversification in fuel supply contracts.  A Hungarian member of the European Parliament, told the Financial Times, ‘‘‘If the Russians now refuse to modify the original contracts, this will be the end of the road for the project.‘

This Rosatom beachhead in Hungary, however, serves a number of other purposes for the Kremlin (several of them troubling) that could still persuade Moscow to proceed with the deal, even with the required contract modification for this dimension of the transaction.  Moreover, even if Hungary is not contractually committed to purchasing Russian nuclear fuel in the future, they could still voluntarily choose to do so anyway — as many of Rosatom’s other clients do via tender processes that are often not fair competitions.