Orbanomics Geared by Russian Nuclear Power

By Mykhailo Gonchar

The geopolitical ambitions of the Budapests Trianon revanchism require extraordinary resources. Since the premiership of Viktor Orban, the Hungarian economy in Europe has been called ‘Orbanomics’, while the model of political governance introduced by him – ‘Viktatorship’, that is the dictatorship of Viktor.

Over the past five years, Hungary has evolved into a state in a split between Brussels and Moscow, with an economy drifting towards Putin's kleptocracy under the authoritarian and pseudo-democratic domestic policy, with a foreign policy that is not only increasingly committed to the Kremlin but goes in the wake of its strategy of breaking the EU and NATO from within and restoring its domination in Eastern Europe.

The Russian revanchism, Orban and expansionism are fed by the raw materials, while Hungary does not have them. The know-how of Putin and Orban lies in the fact that Russia is ready to provide “cheap” energy for the affined regime in exchange for a certain set of "services" in Europe that Moscow needs in the framework of its anti-European and anti-Ukrainian stance. The Orban's evolution towards the service model began earlier in 2009.


Geopolitical escort service

The current Ambassador of Hungary to Ukraine (for now) Keskeny Ernő, in the past – Ambassador of Hungary to the Russian Federation, and before – the consul general in St. Petersburg in the period of dashing 90s, became a strategy builder for the Hungarian policy towards Russia, Ukraine and post-Soviet states. It was Keskeny, who not only accompanied the leader of the Hungarian opposition Orban during his trip to the United Russia Party Congress in 2009, but also organized his meeting with Putin.

The significance of this meeting was repeatedly noted by both Hungarian and foreign experts, as after it Orban turned from Putin's opponent to his adherent. 

Later, E. Keskeny expressed his opinion concerning this meeting: “The Russian leaders saw that a government would change in Hungary, and for purely pragmatic reasons Viktor Orban had been accepted as the leader of an opposition party. During the meeting, which I managed to attend, the principles that the government followed during the first year of its governance were formulated. And I think these principles reflect mainstream of the Russian-Hungarian relations.” He was also a special representative on the Hungarian-Russian relations from FIDESZ.

Either Ambassador Keskeny, nor the Foreign Minister Szijjarto, nor the Prime Minister Orban do not detail these principles. Everyone only talks about so-called pragmatism. However, it is known that Putin's regime in Russia is based on three foundations – clannism, kleptocracy and corruption. The massive propaganda presents it as a model of sovereign democracy, which protects the interests of citizens within the country and their fellow-believers abroad. The Orban regime has borrowed these foundations and successfully implemented them in modern Hungary and abroad where Hungarians live.

Putin's regime is quite skilled in transforming of the European politicians into clones of its own kind, and not only in the countries of the former socialist camp, using the principle of “do what I do.” To understand the Hungarian case, it worth to look carefully at the projects declared by the parties as the strategic ones of mutual interest. Such projects are an indicator of invisible for public ties between two regimes. The consequence is implementation by the Hungarian Prime Minister of a geopolitical escort service for the Kremlin in Europe in exchange for "energy doping" for Hungary.

This doping is a nutrient source for Viktatorship, affected by the Trianon syndrome like the Putin regime was affected by the “the greatest geopolitical catastrophe" of the 20th century – fall of the Soviet Union. This source allows Orban not only to maintain its position in Hungarian society, but also to pursue an increasingly aggressive policy towards its neighbors that is in line with the Russian strategy of cluttering the European space and opening of the Western Front against Ukraine.

Remarkably, the ‘energy doping’ was used by the Orban regime to win the 2014 fateful election under a new constitution transformed by him in 2012.

In advance, from January 1, 2013 gas and electricity tariffs for households by government decisions were reduced by 10%, and from November 1 by 11.1%, including tariffs for district heating. Before the election itself, from April 1, 2014, the government has lowered the tariff for gas for the population by another 6.5%. After the triumphant April election, the electorate was not abandoned – from August 1 the tariff had been lowered for centralized heat supply by 3.3%, and from September 1 for electricity by 5.7%.

For the next 2018 elections in Hungary, in the summer of 2016 Putin had thrown to Orban an additional portion of "doping" via Gazprom – a discount to gas price for the period until 2020 – and promised that the second branch of the TurkStream could pass through Bulgaria-Serbia-Hungary. But the largest portion of "doping" occurred to be a nuclear energy.

Nuclear component of Orbanomics

Hungary is well-known in Ukraine not only as a country of Gulyás and Csárdás but also as a springboard, where in the early 2000's the opaque and corrupt schemes of gas business such as Eural Trans Gaz appeared. In Slovakia, the Hungarians, using their local networks, for a long time has controlled the state oil transportation company Transpetrol, acting in the interests of Russians. Dependent on Russian supplies, the Hungarian oil and gas company practically monopolized oil refining in neighboring Slovakia and Croatia.

The supply of oil and natural gas from Russia to Hungary is traditional business. According to the International Energy Agency, 95% of imported gas and 78% of oil are supplied from Russia. 100% of nuclear fuel comes exclusively from Russia, although in the EU from 2015 mandatory diversification of sources of fuel supply to nuclear power plants is foreseen.

Starting from 2014, the project for construction of two new energy units of Paks NPP, which will exceed the capacity of four units in operation, became a mega-project of Russian-Hungarian cooperation. In recent years, the Hungarian and European experts focused on it.

The first feature was that in 2014, the Orban government, without competitive bidding, selected Rosatom as the executor of the NPP capacity expansion. The Russians immediately promised to provide a loan of € 10 billion with a maturity of 21 years, which covered 80% of the estimated cost of the project.

It is noteworthy that the loan will be partially covered at the expense of the EU that may only give rise to negative reaction in Brussels, as well as a non-competitive selection of the Russian company for the project. The second feature was the establishment of the high-level post ­– Minister without Portfolio responsible for the planning, construction and commissioning of the two new blocks at the Paks Nuclear Power Plant. This project becomes a symbol of the complete corruption of the Hungarian ruling elite. Opponents of the Orban regime state that the Russian-Hungarian project is a mega-scheme for enriching the Hungarian Prime Minister and his clan. The third feature -- a number of articles of the Russian-Hungarian nuclear deal classified for 30 years! 

According to the Paks II agreement, 40% of work is carried out by local companies. This means that 5 from 12.5 billion euro of total estimated cost will reach Hungarian contractors. The government of Orban is proud of the high percentage of engagement of Hungarian business to the nuclear project. In practice this entails dubious schemes through front firms, because in Hungary, unlike for example the Czech Republic or Ukraine, large companies that specialize in atomic engineering or service, do not exist.  

The organization of dubious schemes may be seen on the example of Energetikai Divizio company established by two other companies — Mészáros és Mészáros Kft and West Hungaria Bau. Mészáros és Mészáros Kft is controlled by Orban through a proxy, Mészáros Lőrinc, former mayor of Felcsút village native for Orban. Today, Mr Mészáros is officially one of the ten wealthiest people in Hungary, and unofficially he has become already the richest Hungarian. The other member of the business tandem, West Hungaria Bau, is registered on Orban's son-in-law, István Tiborcz. On October 5, 2018 it became known: Energetikai Divizio won the tender for the construction of a backup control room at Paks II. It seems that examples of the Rotenbergs, the Kovalchuks, the Shalamovs from Putin's circle provided a role model for Orban.

It is noteworthy that these companies do not have any experience in the construction of specific technical facilities. The quality of their previous construction works caused complaints. In particular, the historical complex in Buda Castle already needs to be refurbished, although only two years ago, West Hungaria Bau has undergone an expensive renovation.  

The winner of the tender, Energetikai Divizio, is still known only for its efforts in external insulation of student dormitories and panel houses owned by the local government. Nothing else was done by the company. An experience in energy sector had been the precondition for subcontractors to participate in the Paks II tender, that is catching an eye. The rhetorical question is how this company could manage to accomplish substantially more complex technical task.

In expert circles in Hungary the fears exist that the involvement of such contractors may result in low quality of works at the plant’s backup control room, which is designed for taking control of the reactor in case of emergency. Concerns are expressed that, given the geographical location of Hungary and the NPP, in the event of an emergency, this may have catastrophic consequences for the whole Europe. Moreover, the Paks NPP had already an emergency in 2003, which, according to the INES seven-point international scale, received point three – a serious case.

Another peculiarity is the "joint activity" of Hungarian and Russian companies. As already noted in agreement with Rosatom, 40% of works must be performed by a Hungarian firm. That is, applications for participation in tenders are submitted by the Hungarian companies. However, immediately after the victory in tender, the Russian capital entered these companies, and they become common, the Hungarian-Russian.

Here is one of the very typical examples. At the beginning of October 2018, the winner of the tender for the delivery of company cars for Paks and Rosatom executives was announced in the Hungarian project. Mercarius Flottakezelő Kft company was a winner of the tender. The firm was the only one allowed to participate in the bidding. It is associated with Orban’s circle, in particular with László Zagyi, the owner of the Hungarian OTP bank (previously worked at MET - a joint Russian-Hungarian gas sales company), György Nagy, Orban's personal friend, and Garancsi István.

Immediately after concluding of contract between Paks II and Mercarius, its owner, SCF Partners Hungary, concluded an agreement with Russian Sberbank for an amount of 470 million forints (approximately 1.7 million dollars) with a mortgage of Mercarius assets worth 1.5 billion forints (about 5.5 million dollars). The agreement stipulates that, until the time of repayment of the loan, Sberbank has the control over both companies Mercarius and SCF Partners Hungary. If the loan is not repaid, Sberbank will get possession of the both companies.

In general, since the beginning of 2017 in Hungary, 90 tenders for the construction of Paks II have been conducted. 50 of them have already been completed by signing the relevant contracts. Currently, there are two tenders for $ 145 million, with the participation of only one company - Duna Aszfalt, its owner is László Szíjj a business partner of L. Mészáros and, therefore V. Orban. Practically, all the winning companies are owned by certain front men, who are somehow associated with V. Orban, his relatives or the immediate сircle. Isn’t it an analogue of the Putin’s Ozero housing cooperative?

Hungarian media indicate that in the business empire of L. Mészáros two new companies appear within a week. An exception is the Paks II project, where the last word on the Russian executor, was specifically made for the largest tender for the delivery of turbines worth $ 890 million. This tender is deliberately given to the Hungarian affiliated company of the General Electric Hungary Kft consortium.

Thus, the above examples confirm the assumption that the motive behind the implementation of the Paks II project in Hungary is to receive profits for the Orban clan through opaque schemes using the administrative resource. What was done with contracts for the development of tourist and recreational infrastructure around Balaton Lake is now repeated in the nuclear project, albeit with Russian bait in the form of a multibillion loan that will have to be returned, or worked out through "services" for the Kremlin to write off a part of the loan, the probability of which is indicated by the presence of classified articles of the Putin-Orban deal.


Ambitions of Hungarian Prime Minister

The main technology for involving the public support by the Viktatorship was a game with tariffs on energy resources and utilities. On the eve of the election, it always works, as already shown above. Hungary has quite high tariffs for electricity and gas for the population. Now the bid is being made to get new additional generating capacities, which, according to Orban's plan, should make Hungary not only energy self-sufficient, but an electricity exporter. The cheap nuclear generation for the Hungarians from the Russians, and the revenues from the export of its surplus, should create a prerequisite for repeating Orban’s and FIDESZ’s electoral success in the future.

However, Russia does not have intention to be just a philanthropist of Orbanomics and Viktatorhip. Moscow requires counter service in exchange for cheap energy. Moscow needs from Budapest not only praiseworthy words about Putin, the demonization of Soros and Brussels. The Kremlin demands from Orban a more active position on the issue of lifting EU sanctions on the Russian Federation, countering the European and Euro-Atlantic integration of Ukraine. Therefore, the Orban regime has intensified the blocking of Ukraine-NATO contacts under the pretext of the Ukrainian education law. In fact, the thing is not at all in the law. It is just an occasion, a ‘hook’ for processing of orders of the Kremlin and its own far-reaching plans.

Russia counts on the policy that may be called georesonant decomposition of the current European order. Copying of the Russian geopolitical behavior by the other stakeholders provokes an effect of georesonance. The Kremlin has abolished the rules of international law, unleashed the war and violated the territorial integrity of neighboring countries Georgia and Ukraine. The calculation is based on the above-mentioned principle - "do as I do", that is Russian behavior should give rise to a chain reaction of similar steps from other players, especially those who consider themselves to be distressed.

Letters by Zhirinovsky of March 2014 to the leadership of Poland, Hungary and Romania are the confirmation of this assumption. Many people consider this action to be a clownery of the scandalous Russian politician. In particular, there was a mention of the Ukrainian Transcarpathia as a region that “ethnically and historically belonged to Hungary” in the letter, and idea to hold a referendum on return of the Ukrainian oblast to Hungary.

Under the influence of the Russian view on the events in Ukraine ("coup d'état", "civil war"), Budapest expects a collapse of Ukrainian statehood, loss of Kyiv’s control over the region and general chaos. Such a situation may serve as a justification for "protection" of the Hungarian minority, and in practice the annexation of Transcarpathia, which will be presented as a restoration of historical justice and partial overcoming of the consequences of Trianon.

With the approaching the centenary of the Trianon Treaty of June 4, 1920, which is considered a catastrophe for Hungary, as a result of which it lost 2/3 of the territory and 1/3 of the population, the revanchist rhetoric of Budapest will be warmed up against neighbors first of all Ukraine. But in Transcarpathia in Budapest they look not only as a region with areas of compact living of the Hungarians.

Control over Transcarpathia means control over gas and oil transit through Ukraine to the EU, supplies of gas to Ukraine from the EU, significant share of Ukraine's foreign trade with the EU, rail and road freight flows through Ukraine to the EU, seizure a commanding position over Ukraine, Slovakia, Romania and even bargain with Russia, whose energy resources can be supplied to Central Europe only via the Ukrainian route through Transcarpathia. This explains the ulterior motives of the Orban regime in its grasp of Transcarpathia. It is no accident that Orban during a meeting with Putin in February 2017 spoke about the unreliability of gas transit through Ukraine.

In his time, Admiral Horthy, trying to solve the problem of Trianon, went to rapprochement with Hitler's Germany that turned into Hungary's retraction of the Second World War and a new catastrophe for the country after its defeat. It seems that Orban does not take into account the lessons of history, that is typical for arrogant and self-assured autocrats.

Having formed a rather complete clan-kleptocratic regime in the center of Europe, he has far-reaching intentions, in conjunction with Russian kleptocracy, to redefine the geopolitical map of the continent. In exchange for the opening of the "western front" against Ukraine and the consent of Moscow for the annexation of the Ukrainian Transcarpathia, he receives "nuclear doping", with the help of which the Viktatorship intends to extend its political longevity for a long-term perspective. But the trap for Budapest in the Kremlin has already been prepared.

The Paks II project will be delayed in time, and each year of delay means the arithmetic progression of the cost increase of the project and, accordingly, increase in the cost of electricity for the Hungarians. (Finland has already felt similar Russian technology of delay in the similar project Rosatom and recently took control over it). The additional requirements of Russia for "escort service" appear. The credit crunch of the Kremlin is already on the neck of Orban. But the thirst for power, money, revenge and territories is mounting over the instincts of self-preservation on the banks of the Danube.


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