paks nuclear power plant

Hungary offered Rothschild & Co 8.4 million EUR for consultancy during EU approval of a Russian nuclear power plant

According to an official document obtained by Átlátszó, János Süli, the Hungarian minister responsible for the Paks NPP expansion, prepared a contract worth €8.425 million in 2018 with the international consultancy firm Rothschild & Co for “strategic advice on energy policy and special infrastructure projects”. The exact content of the contract is not clear from the document, and no further information was received from the Prime Minister’s Office or the Rothschild press office. It seems clear, however, that the government wanted to commission Rothschild for a specific reason: although the value of the proposed contract was well above the HUF 15 million net threshold set by law, this procurement was exempted from the Public Procurement Act, so there was no need to call a public procurement procedure to select the most suitable company to provide the consultancy. The Rothschild group’s name has been mentioned before in connection with the Rosatom deal of the Orban government, and according to press reports, the Rothschild group was also involved in the Paks negotiations with Brussels.

The contract for the construction of the Paks2 nuclear power plant was signed in January 2014 in the presence of Vladimir Putin and Viktor Orban by the then Minister of National Development of Hungary and a representative of the Russian state energy company Rosatom. The European Union raised several objections to the deal at the time, one of which was that the project involved state aid prohibited in the EU. Energiaklub, a green NGO and MEP Benedek Jávor also complained to the European Commission at the time that without state support Paks II was unlikely to be viable, backed up by a study carried out in the summer of 2015.

However, at the end of 2015, another study prepared for the Hungarian government by the international consultancy Rothschild was published, concluding that the Paks2 project is economically viable, i.e. that it does not require state support. The latter study has been criticised by some, but the government has sent it to the EU Commissioner who was investigating the case. The EU investigation was concluded in 2017 and, although the Commission found that the Paks2 project involved state aid, the way in which it was granted was found to be compatible with EU law and the investment was approved.

According to press reports, the EU’s approval was in no small part due to the involvement of the Rothschild consultancy firm and its businessmen and lobbyists. The big question is: what was the purpose of the new cooperation of Hungary with Rothschild initiated by János Süli in 2018?

Secret contract for more than three billion forints for “strategic advice”

The National Security Committee of the Hungarian National Assembly held a partially closed session on 4 December 2018. According to our information, the resolution exempting from the Public Procurement Act the above-mentioned procurement of “strategic consultancy for energy policy and special infrastructure projects” was adopted at that time. The exempted procurement was requested to be reported on within a year by the minister responsible for the design, construction and commissioning of the two new units of the Paks nuclear power plant.

According to the publicly available minutes of the meeting, 4 Fidesz MPs, 1 Jobbik MP and 1 LMP MP were present in the open part of the meeting. It is not known, however, who attended the closed session, why the exception to the public procurement rules was necessary, or how anyone voted on the matter.

Decision of the National Security Committee in 2018

According to official documents we obtained, János Süli, the Hungarian minister responsible for the Paks NPP expansion, then initiated a contract between the Prime Minister’s Office and the Paris-based financial advisory firm Rothshild & Cie at the end of December 2018 for “the provision of financial advisory services related to and necessary for the performance of the tasks defined in the ministerial statute”.

The contract was intended to run from 1 January 2019 until 31 May 2022, with a total gross value of €7,810,500 plus €615,000 in fees, i.e. a total of €8,425,500 – approximately HUF 3.2 billion at current exchange rates. Süli’s initiative foresaw a monthly fee of €190,500 (HUF 72 million) and a reimbursement of €15,000 (HUF 5.7 million) for 41 months to the consultancy firm.

The minister responsible for the Paks expansion also stated that the conclusion of the contract was “absolutely necessary for the performance of the basic professional tasks of the Prime Minister’s Office as defined in its constitution and its organisational and operational rules” and that the „Prime Minister’s Office does not employ any person with the appropriate expertise, qualifications and experience or other appropriate specific professional skills and abilities to perform the tasks specified in the contract”. But what exactly this task is, is not mentioned at all in any of the documents obtained by Átlátszó.

Extract from the document initiating the conclusion of the contract, signed by minister János Süli

Hungary contracted Rothschild before, but the value was not disclosed

On 6 March 2017, the European Commission announced in a press release that it had approved the investment for the construction of the Paks II nuclear power plant. The reasoning was that the financial support provided by Hungary for the construction of the two new nuclear reactors at Paks does involve state aid, but it is compatible with EU law, so it has authorised the project subject to certain conditions.

The European Commission’s decision also cites, among other things, the 2015 Rothschild study commissioned by the Hungarian government, which qualified the expansion of the Paks nuclear power plant as a rational public investment. Exactly what and for how much the Hungarian government contracted with the prestigious international consultancy firm was not made public, only the financial study, which presented the investment in a positive light, was posted on the internet.

According to information published in January 2014 by the since-defunct Népszabadság daily paper, the Hungarian government has had a consultancy contract with the Rothschild Group and the international legal consultancy firm Hengeler Mueller since 2012. According to the newspaper, the financial negotiations for the expansion of the Paks nuclear power plant were and are being officially conducted with the “involvement” of the Rothschild Group, and the Hungarian government has hired a German law firm, Hengeler Mueller International Lawyers, also on the advice of the Rothschild Group. János Lázár, then Chancellery Minister, refused to confirm or deny this information.

Hungarian investigative journalism outlet Direkt36 published a story in 2017 detailing the role of the Rothschild banking house in the Paks NPP expansion. According to Direkt36’s research, Klaus Mangold, sometimes referred to in the German press as Mister Russland, or Mister Russia, an influential German businessman and co-chairman of the German investment bank Rothschild, introduced the Rothschild company to the Hungarian government.

Rothschild & Co is a large business advisory and financial services company with a global presence: in 2021, its pre-tax profit was €1,131 million (equivalent to around HUF 400 billion). The group appears to have been unscathed by the coronavirus epidemic, with annual revenues up 67% compared to 2020.

According to Direkt36’s investigation, Mangold was also instrumental in making the Paks project acceptable to the European Union and Western business circles. In Hungary, János Lázár, the minister who also played a key role in the Paks project and had good German business contacts, was Mangold’s closest contact and he was the one who introduced him to Prime Minister Viktor Orbán. The government then benefited greatly from the above-mentioned study by the internationally renowned Rothschild Group, which concluded that the Paks project could be expected to pay off under market conditions. However, no one answered journalists’ questions at the time about who commissioned the Rothschild study, and how much it cost.

According to Direkt36’s research, Klaus Mangold has a good relationship with Günther Oettinger, who was European Commissioner for Energy until autumn 2014. The DG overseen by Oettinger wrote the letter in December 2013 in which the European Commission gave its prior consent for the Russians to expand the Paks nuclear power plant. The relationship between Mangold and the German commissioner came to light when reported that Oettinger had arrived in Budapest in May 2016 in the German businessman’s private plane.  The private flight became a European scandal because EU commissioners are not allowed to accept gifts more expensive than €150.

Another EU procedure on the Paks expansion started in 2017, with a result this year

In autumn 2017, prior to the Rothschild 2018 agreement presented in this story, Austria announced its intention to challenge the EU decision to approve the Paks expansion in court, and in February 2018 it lodged an application to the European Court of Justice. The case was heard in the Luxembourg court in March this year, with a decision reportedly expected in early summer.

We wanted to find out whether there could be a connection between the new EU procedure and the Rothschild contract initiated by the Prime Minister’s Office in 2018, so we sent questions about the €8.4 million contract to the Prime Minister’s Office, the press department of Rotschild & Co and minister János Süli, but we did not receive any substantive response until now.

János Stummer, the current chairman of the National Security Committee of the Hungarian Parliament, replied that “I would neither confirm nor deny your information. The information you have requested concerns classified data, and I am not in a position to provide it.”

Neither the decision of the National Security Committee nor the Prime Minister’s Office document initiating the conclusion of the contract bears any classification marking, so they are not classified as state secrets under the Hungarian law. The Prime Minister’s Office document refers to the fact that the contract with the Rotschilds itself is classified as ‘restricted’. In order to review the classification, we are initiating a supervisory procedure at the Hungarian National Authority for Data Protection and Freedom of Information.

Benedek Jávor, former MEP and head of the Brussels representation of the Budapest municipality, said in response to our enquiries about the case that “the new Rothschild contract adds to the cloud of secrecy surrounding the Paks expansion and raises corruption concerns. For what purpose exactly is the Hungarian government seeking ‘financial advice’ from Rotschild for HUF 3.2 billion? According to government communications, the financing of the project is in place, it is secure, and it is based on an intergovernmental agreement, so it is hardly necessary to ask for advice worth millions of euros. However, Rothschild is also linked to Klaus Mangold, who played a key role in getting Paks2 accepted by the EU. As long as it is not known exactly what services the Rothshild company provided to János Süli, we can suspected that it is simply lobbying money that could be channelled through Rothschild and Klaus Mangold to the European target persons. In the light of the war in Ukraine, it is even more important that the financial links of all European projects with Russian interests are fully clarified. Through the Trojan Horse of Paks2, money could have been channelled to European actors to represent Russian interests, which today carries strategic risks.”

Written and translated by Tamás Bodoky and Orsolya Fülöp. The Hungarian version of this story is available here. Cover photo: Klaus Mangold (left) with Viktor Orbán (centre) and Günther Oettinger (right) in Budapest in May 2016. MTI /Szilárd Koszticsák.

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