The Russian president’s visit now may be sparked by a desire to speed up the upgrade of the nuclear power plant and smooth the way for a long-term gas contract between Russia and Hungary. The complexity of these deals and the top-down nature of both countries’ leadership, require frequent, high-level interactions.
The largest-ever development project in Hungary, which will add two new reactors to an existing Soviet-era nuclear power plant for 12.5 billion euros, is largely financed by a Russian loan. Although the European Commission cleared the investment, its implementation has been slow.
Last year, Hungarian officials even hinted at replacing the Russian loan because the contract is much more favorable to Russia than to Hungary. But Budapest decided to utilize it nonetheless to kick-start construction. The main obstacle however seems that while local companies are supposed to do 40 percent of the construction work, there aren’t any nuclear-certified companies in Hungary.
Putin’s honorary degree is connected to an agreement between the Debrecen University and Russia’s nuclear agency, Rosatom, to develop specialized nuclear related education.
Gas relations is another key issue for both sides. Lately, Gazprom has had to fight hard for its market share in Europe. Under pressure from the EU, 65 of its European contracts have reportedly been revisited since 2015.
But Budapest is also bargaining hard. In 2015, Hungary postponed signing a long-term contract with Gazprom citing “nervous markets” and “international market pricing.” At the same time, it recently signed an agreement with Gazprom over the Turkish Stream pipeline, describing it as the “only realistic” step toward energy diversification.
Compared to Poland or Lithuania, which are willing to pay a premium for independence from Russia, Budapest’s key objective is cost. Reducing household energy bills contributed to Orban’s victory in 2014. The gas bills delivered to homes still specify total savings so Hungarians remember to be grateful for the government price cuts.
Gazprom is also interested in storing gas in Hungary’s commercial storage facilities toward the 2019 elections seasons in Ukraine, a key transit country for Russia’s gas to Europe. This would mitigate the risk of a potential transit blockade in Ukraine for Russian gas.
