Prague, March 25, 2021 – For the time being, Deputy Prime Minister Karel Havlíček refuses to agree to the demands of Czech security institutions to not invite the Russian agency Rosatom to a tender for Dukovany 2. Havlíček’s actions have long shown that he consciously and proactively promotes Russia’s participation in the Czech nuclear project, despite the explicit warning of the six main security institutions of the Czech state. A warning example of what threatens if a Russian player builds Dukovany is the project of the Hungarian Paks II power plant. From the beginning, the Hungarian project has been accompanied by non-transparency, conditions, which are significantly unfavorable for the Hungarian side and a huge blackmail potential for Moscow towards Hungary. In the case of Dukovany, we are already seeing a similar development in a number of instances as in the Hungarian project – a new study by the Security Center of European Value describes six similarities that security experts warn against.
European Values Center for Security Policy publishes a study entitled “Russian Influence in Hungary – The Case of Paks 2 and Russian Influence Efforts through Nuclear Energy,” by Hungarian analyst Dominik Istrate of the Political Capital Institute think tank in Budapest. The publication summarizes the basic facts, context and findings about what preceded and accompanied the Hungarian decision to build new units in Paks and entrust the implementation of the project directly to the Russian agency Rosatom, as well as the current development of the entire project. Study makes it clear that the Paks II and Dukovany II power plant projects are similar in a number of respects, and if the MPO allows Rosatom to participate in the tender, the Czech Republic faces similar geopolitical risks. European Values Center for Security Policy refuted Deputy Prime Minister Havlíček’s Pro-Russian manipulations in its recent analysis “Lex Rosatom”.
In 2014, after visiting Russia and the meeting between Prime Minister Viktor Orbán and Russian Foreign Minister Lavrov, the Hungarian government unexpectedly and quickly decided to build new units at the Paks power plant and awarded the contract to Russia’s Rosatom without announcing a tender. At the same time, it secured a loan of 250 billion crowns from the Russian Sberbank. The project has been accompanied by a number of non-transparent decisions from the beginning, and suspicions of widespread corruption have gradually surfaced. In the same year, Hungary became a strong advocate of Russian foreign policy. This coordinated approach, in which Hungary serves as the loudest ally of Russian interests in the EU, is agreed by both countries at the annual Orbán-Putin summit.
Jakub Janda, director of the European Values Center for Security Policy, comments: ,,The alliance between Hungary and Russia serves as a warning and deterrent to how hard we pay if we disobey Czech security institutions’ recommendations on state sovereignty. The nuclear project is not the only reason for parking Hungary in the Russian Allied camp, but it is a very important building block, as it is a geostrategically important, long-term and expensive project for the Hungarian state. Although security institutions in the Czech Republic clearly warn against this scenario, Deputy Prime Minister Havlíček acts in the interests of the Russian Federation and pushes the Czech state into a one-way street, which will result in an increasing commitment of the Czech Republic to Russia. “
Dominik Istrate, author of the study “Russian Influence in Hungary – The Case of Paks 2 and Russian Influence Efforts Through Nuclear Energy”, and an analyst at the Hungarian think tank Political Capital Institute, notes: ,,Russian influence in Hungary has grown to unprecedented proportions. Economic cooperation with the Kremlin on strategic projects such as the Paks II nuclear power plant leads to a justification for maintaining political ties with the Kremlin at the highest possible level, especially at a time when EU-Russia relations are in disarray and Moscow is looking for ways to how to influence the Euro-Atlantic community. In addition to undermining Hungary’s orientation to the West, the Paks II project also has major consequences for every European country that is considering doing business with the Russian state. When we consider the practice of the Putin regime, we must always be aware of the political value of such an investment, the highest level of corruption risk and, in the case of nuclear projects, whether the investment will pay off at all and its benefits for the state’s economy. “
Energy safety expert Martin Jirušek from Masaryk University in Brno adds: ,,The construction of such a very complex, long-term and expensive project as a nuclear power plant is far from just a technical problem. Energy security does not only apply to the technical implementation of the project. The problem does not end with the often-mentioned protection of control systems, for example. Risks can also be financial, political or personnel related. For a project of this type, it is necessary to consider in the context of the current international situation. Large-scale projects, especially in the energy sector, establish a number of different dependencies. “The Hungarian Road” indicates the dangers that may arise if the project is subordinated to particular interests. “
The two projects are connected by a total of six main points:
- promotion of the project for the benefit of the Russian Federation from the highest state officials (in the Czech Republic, President Zeman and Deputy Prime Minister Havlíček, in Hungary, Prime Minister Orbán),
- significant and unjustifiable non-transparency on the part of the state organizing the project
- a technical requirement for the installed capacity of the power plant, which clearly favors the Russian Rosatom and practically disadvantages other bidders
- strong pressure from business groups with direct Russian ties to the domestic political environment
- the crucial involvement of the influential lobby group Rothschild & Co in negotiations with the European Commission
- using argumentation about a new nuclear source, without having a sufficient assessment of other possible alternatives, either in terms of energy potential or their economic cost
Both the Hungarian and the Czech project have been accompanied by fundamental non-transparency from the very beginning. In the case of Paks II, the government opposition, led by former Hungarian MEP Benedek Jávor, attacked the government in court and only on the basis of a court decision did it manage to demand the publication of key agreements. The tender for Dukovany II began to be discussed in the first quarter of 2020, when the interest and attention of the media and society was focused on an unprecedented pandemic situation. The Czech branch of Transparency International has repeatedly pointed out the non-transparency of tender preparation and negotiations between ČEZ and the Ministry of Industry and Trade. Martin Jirušek, an energy security expert from Masaryk University in Brno, points out ”The Paks II NPP case shows how crucial transparency is. Especially in the case of such a long-term and large-scale project. “The Hungarian way” is not good, and from it you can learn, how not to do things. In projects of this type and in the situation of the nuclear sector, each step in the project should be duly justified and argued, even towards those interested in construction. Negotiations behind closed doors and non-transparent agreements are undesirable. “
When granting the Hungarian exemption from European legislation, the European Commission finally decided by taking a specific technical requirement for the nominal output of the required reactors into consideration. Only the Russian Rosatom was able to secure it. CEZ also demands the same requirement for the specific output of the supplied reactor.
Another common feature of both projects is a significant increase in the volume of Russian orders in the country. Along with the implementation of the new nuclear unit and an unfavorable loan from the Russian Sberbank to finance the project, the Russian Federation will also carry out other strategic contracts, such as the construction of new metro stations in Budapest. At the same time, Russia has secured an increase in the share of Russian gas in Hungary.
For both Paks II and Dukovan II, the influential German lobbyist Klaus Mangold and the financial and lobbying group Rothschild & Co, whose participation was crucial in negotiating an exception to European legislation with the European Commission, play a key role. Klaus Mangold is the Chairman of the Supervisory Board of the Russian Branch and the Vice-Chairman of the German Branch of the consulting and lobbying company Rothschild & Co. Klaus Mangold has close ties and a network of contacts to high-ranking European politicians. Rothschild & Co also has a contract with the Czech MPO in connection with the preparation of Dukovan II. The amount on the contract is 43.5 million crowns.
In both the Hungarian and Czech cases, the argument for the decarbonisation of energy is given as the main justification for the construction of new units. However, both countries lack key background studies that would compare the potential of individual sources and energy savings, including price costs. As some analysts point out, the current State Energy Concept from 2015 inaccurately predicted an increase in electricity consumption in the Czech economy; domestic electricity consumption in the Czech Republic stagnated in recent years despite a record economic boom and subsequently even declined. According to another study, it is possible to build emission-free sources with the same production potential even five years before the official completion date of Dukovany II, and with one hundred to a thousand times lower costs.
The study “Russian Influence in Hungary – The Case of Paks 2 and Russian Influence Efforts through Nuclear Energy” is currently freely available in English on the website of the European Center for Security. Its Czech translation should be available during the first half of April.
Jakub Janda, European Values Center for Security Policy
Martin Jirušek, Energy Security Specialist, Department of Energy Security, Faculty of Social Studies, Masaryk University Brno
737 30 17 71, [email protected]