Commission notes cast doubt over approval of Russian-backed nuclear project

Günther Oettinger

[European Commission]

EXCLUSIVE/ The European Commission was prepared to spoon-feed Hungary arguments to close an investigation into the controversial €12 billion Paks II nuclear plant project, according to documents obtained by EurActiv.com

Internal Commission memos indicate that Director General for Energy, Dominique Ristori, told Hungary’s Secretary of State Balazs Sonkodi that the arguments used to justify the absence of a public tender were invalid.

Rosatom and the Hungarian Government reached a deal in January 2014 to directly grant the construction to the Russian company. In return, Russia financed an estimated 80% of the project (€10 billion).

Brussels blocks Hungary’s nuclear deal with Russia

The European Commission has objected to Hungary’s €10 billion plan to expand its Soviet-era Paks nuclear power plant in a deal with Russia, and may force Budapest to revise the terms of the agreement, EU sources said yesterday (12 March). Hungarian officials strongly denied the reports.

The Commission decided to launch an infringement procedure in November 2015 given that Budapest breached the public procurement rules, as it did not call for a public and transparent tender.

But in his meeting with Sonkodi, Ristori was prepared to recall that the Commission accepted the lack of a public procurement in a similar case.

Technical exclusivity

The Commission closed the investigation into the Flamanville project in north-western France, where the contract was directly granted to Areva after the French government used the “technical exclusivity” exemption included in the Public Procurement Directive.

The technical exclusivity clause permits granting a contract directly to a company when, for technical reasons, the project can be executed only by one firm.

This exemption was used by the Hungarian government after it failed to win the Commission’s approval.

Oettinger’s trip

The Ristori-Sonkodi meeting took place on 19 February. Three months later, German Commissioner Günter Oettinger, in charge of the Energy portfolio between 2010 and 2014, travelled to Budapest in the private jet of a lobbyist working as a consultant for the Hungarian government on this specific dossier.

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The Hungarian government yesterday (17 November) explained that EU Commissioner Günther Oettinger’s controversial flight to Budapest on board a Kremlin lobbyist’s private jet took place as part of Hungary’s contacts with the businessman.

Oettinger, currently in charge of Digital affairs, will appear before the MEPs today (9 January) as part of the process to take over the Budget and Human Resources portfolio.

According to the notes seen by EurActiv, the Commission believed that Hungary could not escape from the EU public procurement rules by arguing that the deal was an international agreement.

Initially, the member state argued that the contract was an international agreement between Budapest and Rosatom, allowing for a different treatment under the Utilities Directive.

But the executive excluded this possibility because it did not respect the principles of non-discrimination and transparency.

The Commission also dismissed the alternative argument put forward by Budapest days before the February meeting.

The Hungarian government argued that the nuclear fuel approved by Euratom Supply Agency specified the use of the reactor provided by the Russians. But the Commission responded that it is the technology that determines the fuel.

In August, the European Commission informed Hungarian Green MEP Benedek Jávor, one of the complainants, that the executive was going to close the investigation given that the technical exclusivity clause invoked by Budapest was valid.

A Commission spokesperson refused to clarify when Budapest included the technical exclusivity as a new argument given that discussions related to infringement procedures are confidential.

More than one

The use of this technical exclusivity exemption conflicted with Hungary’s initial plan to consider more than one model for the reactor.

The consultation documentation of November 2012 included five different types for the enlargement of the Paks nuclear site.

The only technical requirement was to use a fresh water cooling system.

Asked if the executive was in touch with other companies to see whether they could have met Hungary’s demands, a European Commission spokesperson confirmed that the private sector was not consulted, as this is not the standard procedure in these cases.

Westinghouse, a firm that builds nuclear plants and was initially considered by Budapest, criticised the closure of the investigation, as the American company could have provided a reactor to meet the technical requirements.

“Nuclear power plants are not ready-made goods, they are always customised to fit the given venue requirements and the specific regulatory frameworks. Therefore using the technical exclusivity argument means that the European Commission gave (in) to a false argument by the Hungarian government, and accepted that without negotiations with the relevant market actors,” said Jávor.

“It appears that Hungary’s decision to award the Paks contract to Rosatom was not taken due to technical or safety reasons, but because the Russian government was willing to support Rosatom via the offer of an intergovernmental loan,” said Greenpeace in a letter to the Commission in August 2016.

The Commission Press Officer for Climate Action and Energy, Anna-Kaisa Itkonen, confirmed the meeting between Ristori and Sonkodi, calling it a part of a “broader dialogue related to ensuring full compliance and the adequate transposition of EU legislation – including Euratom – in the Hungarian national legal order”.

A spokesperson of the Hungarian government in Brussels did not provide any detail about the information discussed during the meeting, saying that such contracts are confidential.

The Hungarian official added that during the meeting, only nuclear energy policy-related issues of the Paks II Project were debated.

No other projects or regulations covered by other directorate generals were mentioned, the official added.

The meeting took place before Oettinger travelled to Budapest last May in a lobbyist Klaus Mangold’s private jet, to meet with Hungarian Prime Minister Viktor Orbán.

Mangold assists the Hungarian government on Paks II. He also serves as Russia’s honorary consul in Stuttgart, the capital of Baden-Württemberg, for which Oettinger served as Minister President before coming to Brussels.

No questions asked

Despite its controversy, the closure of the infringement case did not raise any debate within the College of Commissioners when the decision was made last November.

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Meanwhile, senior figures in the European Parliament blocked attempts to shed light on the issue.

A few days after the closure of the investigation, Jávor tried to ask Oettinger about his trip during Parliament’s Industry, Research and Energy Committee meeting. But he was stopped by the chair of the committee, Polish Civic Platform MEP Jerzy Buzek.

Buzek, a former European Parliament president, is a member the European People’s Party, Oettinger’s political family.

“I am still amazed by the reactions of Jerzy Buzek, as it is more than relevant for the European Parliament to have a clear picture of the role Oettinger has played in the decision-making process for Paks II,” Javor said.

MEPs are expected to address this issue when Oettinger appears before a joint session of Budgets, Budgetary Control and Legal Affairs committees today, but only in a limited manner.

In the questionnaire submitted to Oettinger before the hearing, only one question addressed the controversial case and his trip to Budapest.

In his written answer, the German Commissioner insisted that his means of transport to Budapest were suggested by the Hungarian government.

“In general, apart from members of my staff I do not choose any travel companions whether they work in my area or not,” he said.

Outgoing European Parliament President, Martin Schulz, limited today’s grilling to an exchange of views on issues related to the budget portfolio.

Meanwhile, he proposed the Parliament’s conference of presidents to address the controversy by asking the Commission whether Oettinger breached any rule in regards to this case.

Parliament leaning towards exempting Oettinger from hearing

EXCLUSIVE/ Parliament President Martin Schulz proposed on Thursday (17 November) bypassing the hearing process by which Gunther Oettinger will have his new Commission portfolio confirmed, despite new concerns about his trip to Budapest with a lobbyist.

Parliament sources admitted that “it was not the right time” for Schulz to accept an interrogation of Oettinger, a member of Chancellor Angela Merkel’s Christian Democratic Union (CD), as he did not want to undermine his future political career in Germany.

A few days after his proposal to the conference of presidents, Schulz announced on 24 November that he was returning to Berlin to run for the 2017 general elections.

Schulz intends to become Merkel’s new foreign minister in her coalition government with his centre-left Social Democratic Party (SPD).

Background

On 19 November 2015, the European Commission launched an infringement procedure against Hungary concerning the implementation of the Paks II nuclear power plant project. The Commission was concerned regarding the compatibility of the project with EU public procurement rules.

The Hungarian government directly awarded the construction of two new reactors and the refurbishment of two additional reactors of the Paks II nuclear power plant without a transparent procedure.

In a related case, the European Commission opened an in-depth state aid investigation the following week into Hungary's plans to provide financing for the construction of two new nuclear reactors in Paks, using €10 billion provided by Russia.