Bloomberg News

Russia May Lend $14 Billion to Hungary to Build Nuclear Reactors

January 14, 2014

Russia agreed to build two new nuclear reactors in Hungary and may lend as much as 10 billion euros ($13.7 billion) to finance the project.

The expansion will almost double the capacity of Hungary’s Paks nuclear power plant, Russian President Vladimir Putin told reporters at his residence near Moscow today after meeting Hungarian Prime Minister Viktor Orban. The two governments are still discussing the terms of the loan, Russian Finance Minister Anton Siluanov said.

Putin is using Russia’s control over energy resources to extend his sway beyond the former Soviet Union. Last month he pledged a $15 billion bailout and a gas price cut to Ukraine and promised to lend as much as $2 billion to Belarus. Rosatom is building nuclear power plants from Bangladesh to Iran.

“Energy is being actively used by Russia as a component of economic diplomacy,” Lilit Gevorgyan, a senior economist at IHS Global Insight in London, said in a telephone interview today. “Moscow is quite successful in not only building pipelines toward the European market, but also making inroads into civilian nuclear development.”

Russia will finance 80 percent of the 10-year construction of two 1,200 megawatt blocks in the form of a 30-year loan at “below-market” rates, Janos Lazar, Orban’s chief of staff told reporters in Budapest today.

Hungary will foot the rest of the bill, which may reach as much as 12 billion euros, Lazar said. Hungary scrapped plans for an international tender after receiving the European Union’s approval to grant Russia the right to build the reactors, Lazar said.

‘Important, Strategic’

The Hungarian premier has made cheaper utilities a cornerstone of his campaign for re-election in about three months. The country’s economic co-operation with Russia is “important and strategic,” Orban said today.

Sergei Kiriyenko, chief executive officer of Rosatom Corp., the state-run Russian nuclear corporation, and Hungarian Development Minister Zsuzsanna Nemeth signed an accord on nuclear power usage.

To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net; Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net


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