Russia-Hungary Nuclear Deal: Confusion Abounds As EU Examines Exclusive Supply Contract

Hungary and Russia hope to finalize a deal to expand the Hungarian Paks nuclear power plant and supply it with Russian nuclear fuel, but the European Commission doesn’t appear ready to let the deal go through just yet. Hungarian and Russian officials contend that the European Union is not blocking the deal, but a Brussels diplomat said the EU’s nuclear energy agency and the European Commission objected to a part of the Russia-Hungary deal that meant Hungary would only buy nuclear material from Russia.

Per its founding treaty in 1957, the European Atomic Energy Community (Euratom) must ensure nuclear supplies are diversified for energy security purposes. Russia’s exclusive supply contract with Hungary runs contrary to that policy, and all nuclear supply deals made by EU member states must be signed off by Euratom and the European Commission.

Negotiations are being conducted behind closed doors, because the Russia-Hungary documents they are working on were initially made classified by the Hungarian government. Hungary gave the European Commission the go-ahead to reveal parts of the deal Friday, and the European Commission’s “intention is to publish the decision as extensively as possible,” according to Anna-Kaisa Itkonen, its spokeswoman for climate action and energy. Until then, the European Commission will not comment on the matter.

A Financial Times report published Thursday suggested that if Hungary did not agree to Euratom’s fuel-supply demands, the block could nix the entire deal, including the planned construction of two new nuclear reactors worth $13.3 billion. Hungarian and Russian officials downplayed the intensity of negotiations this week and said the expansion of Paks was not at all in danger and is instead separate from the negotiations regarding supply.

A spokesman with the Hungarian prime minister’s office, Zoltán Kovács, said Friday “following intensive negotiations, the fuel-supply contract will be finalized and in line with Euratom requirements in a matter of weeks,” according to the Wall Street Journal. Russian officials echoed Kovács' comments, saying the EU backed the deal.

Paks currently operates four Russian-built nuclear reactors that produce about 1,889 megawatts of electrical power, or half of the country's energy needs, according to the World Nuclear Association. Part of the deal was that Russia would pay for 80 percent of the costs for the expansion at Paks if Hungary bought fuel exclusively from Russia, but that exclusive deal is now unlikely to get past Euratom. It's unclear how that would affect Russia's funding for the expansion. Hungary could take legal action against the European Commission if it disapproves of the outcome of negotiations.

Euratom wants to diversify energy supplies in Hungary so that it does not become fully dependent on Russia for fuel. Europe’s reliance on Russia for gas and oil has been questioned in the EU since the crisis in Ukraine prompted Russia to threaten gas supplies there, which would affect Europe’s supply further down the pipeline.

Jonathan Cobb, a spokesman for the World Nuclear Association in London, said that from what his office gathered, the construction of the new reactors didn’t appear to be in danger. The deal should be done in a “timely manner” and shouldn’t delay any construction of the new reactors, which his office was happy to hear, as it “would be a key addition to Hungary’s energy complex,” he said.

The deal was criticized by opposition leaders ahead of the parliamentary elections last year. The opposition called on Hungarian Prime Minister Viktor Orbán to give the full details of the agreement to the public and promised they would review the project if elected to lead Hungary, but Orbán’s Fidesz party won nearly 53 percent of the vote and details will likely remain scarce until the European Commission declassifies some of that material.