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Power Politics
Brussels Kills Hungary-Russia Nuclear Power Deal

The EU rejected a deal between Russia and Hungary to construct two nuclear reactors just south of Budapest over concerns that contracts for the proposed plant were given gift-wrapped to Russian nuclear firm Rosatom. The FT reports:

Contracts for designing, building and maintaining the plants were awarded to a subsidiary of Russia’s state-owned nuclear group Rosatom in December. […]

In the end, [the EU’s nuclear regulatory body] Euratom refused to approve Hungary’s plans to import nuclear fuel exclusively from Russia. Hungary appealed against the decision, but according to three people close to the talks, the European Commission has now thrown its weight behind Euratom’s rejection of the contract. […]

The result is to block the whole Paks II expansion. To revive it, Hungary would need to negotiate a new fuel contract or pursue legal action against the commission.

Brussels is using the fact that Hungary didn’t seem to allow for competitive bids to block this, but in effect this comes as a check against one of Putin’s favorite tactics in Europe: using energy contracts to divide and conquer the West. Taken together with the EU’s opposition to the proposed South Stream pipeline (that led Putin to call it quits on the project last December) and its construction of reverse flow gas pipeline infrastructure and it seems that Brussels is taking a stand against Russian efforts to control the EU’s energy supply and to use energy for political leverage inside the block.

This story is far from over, and the thing to do now will be to watch and see how Hungary and Russia react. Will they let this stand or will they punch back? Either way, we learn something about where Europe is headed.

UPDATE: Well that didn’t take long. The Hungarian prime minister’s office released a statement downplaying opposition to the projects in Brussels. “Ongoing talks about addressing these observations, however, do not block the project…our expectation is that, following intensive negotiations, the fuel supply contract will be finalised in line with Euratom requirements in a matter of weeks,” the statement said. Reuters reports that Rosatom believes the deal has gained EU approval, while a European Commission spokesperson clarified that “[n]o, we are not blocking the construction of Paks, this is just the fuel supply agreement that has been dealt with by the Commission.”

The fuel supply agreement is still being challenged by Euratom, but it seems like every interested party is playing down this hurdle. We’ll have to wait and see if Hungary and Russia can come up with contract terms more favorable to the regulatory agency.

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