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Questions arise over Russiaʼs support for Paks deal

A report that Russia could suspend loans to foreign countries due to budget constraints caused by the countryʼs economic recession, and news of yesterdayʼs meeting between government officials and General Electric, fueled speculation that the line of credit for the upgrade of Hungary’s nuclear plant at Paks might be in danger.

“The budget is strained, more than strained. I think we are in a situation where we are forced to take a break from issuing new loans,” Deputy Finance Minister Sergei Storchak was quoted by Russian news agency Interfax as saying on Monday.

This statement, coupled with the recent announcement that Hungary’s Prime Minister Viktor Orbán has been invited to meet Russia’s President Vladimir Putin in Moscow next month, and the news that American firm GE was asked yesterday if it could be involved in the project, led some to suggest that the current plan may be in jeopardy.

Under a deal announced about two years ago, while Orbán was in Moscow, Russian nuclear firm Rosatom would build two new reactors at the Paks plant for €12.5 billion, with €10 billion in financing provided by the Russian state. That deal was awarded without a competitive bidding process.

The deal with Rosatom is currently being investigated by the European Commission because of questions about its competitiveness. EC officials have said that, since it might not be profitable from a market standpoint, the Paks deal could amount to state aid. Hungarian officials have denied this charge.