BUDAPEST — To much of the West, he is the Machiavellian strongman of a newly belligerent Russia. But inside the Gothic Revival parliament building in this elegant capital, Russian President Vladimir Putin will be welcomed Tuesday as a generous benefactor of the Hungarian state.
Every time Hungarians flip on the lights, their prime minister recently reminded them, they have Russia to thank. About 80 percent of Hungary’s natural gas flows from Russia. More significantly, the Kremlin is offering Budapest a sweetheart deal that will make this strategic nation even more reliant on Moscow. The offer: a nuclear power plant largely financed, built and supplied by Russian state companies.
The Hungarians call it strictly business. But in Moscow’s power play for influence in Europe, it is hard to separate business from politics. Two Russian companies involved in the nuclear deal have ties to close Putin confidants who were sanctioned last year by Western governments for their links to the crisis in Ukraine.
Hungary is counting on the new plant to generate one-third of its electricity by 2025, lighting the nation from its rural farm towns to the Belle Epoque buildings of central Budapest for decades to come.
“You cannot afford in this part of the world not to have a pragmatic cooperation with Russia,” said Peter Szijjarto, Hungary’s foreign minister.
The Russian economy has been stung by Western sanctions and lower prices for its chief exports — oil and gas — testing Moscow’s ability to shape a broader sphere of financial influence. Citing opposition in Europe, Russia recently scrapped plans for a new pipeline to the region that would circumvent Ukraine.
But Moscow appears to be lurching toward a new tug of war with the West for allies in strategic quarters of Europe. In recent weeks, Russia has wooed the new Greek government, dangling the prospect of aid should near-bankrupt Athens reach an impasse with its Western lenders. To Cyprus — another financially troubled member of the European Union — Russia is offering a new economic cooperation deal set to be signed this month.
All that pales in comparison with Hungary. In this former Soviet satellite, now a member of the European Union, the Russians are offering to invest billions to win back loyalty and leverage. To an extent, they appear to be succeeding, with the Hungarians seeming to offer Moscow a string of political and diplomatic favors in return — but also pushing hard for a favorable price on Russian natural gas.
“The Russians are looking for ways to break the unity of Europe, and they are targeting the weaker states,” said a senior Western diplomat involved in policy toward Hungary. “Hungary and Bulgaria have energy needs. Greece has financial needs. It is all part of the Russian design.”
Few nations would seem a better fit for a new Russian design than Hungary. Long at the crossroads of East and West, the nation is led by Prime Minister Viktor Orban, who, as a shaggy-haired dissident in the 1980s, dramatically called for a pullout of Soviet troops. Even in the 2000s, he sounded notes of caution on Russia before making a gradual shift that became most pronounced last year.
In July — and despite the crisis in neighboring Ukraine — Orban cited Russia as a model for what he described as his plan to build an “illiberal democracy” in Hungary. Now in his third term, he stands accused of mirroring Putin’s own rule — moving to curtail press freedom, interfere with the judiciary and harass his critics.
“He is siding with Putin because he knows the Russians won’t talk about the anti-democratic changes in Hungary,” said Zoltan Sz. Bira, a Budapest-based expert on Hungarian-Russian relations. “This is economic help from a mute friend.”
On Jan. 14, 2014, only days before anti-government demonstrations in Ukraine began to turn deadly, Orban landed in Moscow. The arch-conservative prime minister and longtime Russia skeptic shocked many in this nation by announcing a surprise energy deal.
Hungary had been casting about for ways to renovate and expand its Soviet-era nuclear power plant, a complex of drab olive and red block buildings surrounding four aging reactors in the eastern city of Paks that produce nearly a third of Hungary’s electricity. The last of its reactors were set to be decommissioned by 2037, leaving Hungary facing an energy gap that some hoped to fill with renewable sources such as solar and biomass. But for a country hit hard by the global financial crisis of the late 2000s, the question was how to pay for new energy, no matter what type.
Russia provided the answer. Its state-owned companies would finance 80 percent of a new nuclear plant at Paks if Hungary agreed to Russian terms. The fuel rods powering the new reactors would be exclusively supplied by Russia for at least two decades. The major contract for the project would go to the Russians. In addition, a mountain of documents related to the deal would be shielded from public scrutiny through provisions in a new Hungarian law.
On Dec. 9 — a day when rebels in Ukraine were breaking a cease-fire deal by shelling the airport in Donetsk — Budapest formalized its agreement with the Russians. While European leaders are calling for a new energy union, including new pipeline networks and liquefied natural gas terminals to shift away from energy reliance on Russia, the deal, critics say, does just the opposite.
“What are we doing?” said Ada Amon, director of Energiaklub, a Hungarian think tank critical of the nuclear deal. “We are shifting out all other energy options in favor of more dependence on Russia.”
In return, critics here say, Moscow has bought the best kind of friend — one with influence in the European Union.
At a moment when the West is seeking to isolate Putin, the Hungarian government is offering him an important grandstand this week: an official trip to an E.U. capital, where the cameras will flash as he lays wreaths at Heroes’ Square and is feted under the sweeping archways of one of Europe’s oldest parliaments.
Putin was preceded in September by Alexei Miller, chief executive of the Russian energy giant Gazprom. Only a few days later, Hungary stopped reselling the gas it buys from Russia to the desperate government in Ukraine.
Officially, Budapest said it simply decided the time was right to restock its own energy reserves. But Western diplomats and critics in Budapest made a different judgment: Orban was doing Moscow’s bidding, putting pressure on Ukraine’s energy supplies during a critical juncture in talks with Moscow.
In return, Hungary, like other European countries, is pressing to renegotiate its contract with Gazprom in light of the dramatic fall in world prices for natural gas.
Although sometimes criticizing E.U. sanctions against Russia, Hungary has nevertheless voted in favor of them every time — something observers say it had little choice but to do, given pressure from the larger European powers.
Meanwhile, observers say Hungary’s state-run and pro-government media — often deeply critical of political opponents and foreign powers, including the United States — has adopted a moderate tone toward Russia.
The nuclear deal also finds Hungary doing business with entities linked to Russian officials targeted by the West. Dmitry Kozak, a Russian deputy prime minister and a close associate of Putin who was sanctioned by the United States and the European Union in April, is a member of the supervisory board at the investment bank involved in the deal. Boris Gryzlov, a permanent member of Russia’s Security Council who was added to the E.U. blacklist in July, is chairman of the supervisory board of Rosatom, the Russian state-owned nuclear company spearheading the new nuclear project.
Attila Aszodi, the Hungarian government’s commissioner responsible for nuclear expansion, said he was not aware of the two men’s connection to the project until he was informed by The Washington Post. But he insisted that the deal had been worked out at lower levels and that in such agreements “the role of politicians is very small.”
On Tuesday, Hungarian officials say, aides to Orban and Putin will seek to come to a new agreement on terms for future shipments of Russian gas. Such a deal is considered key to one of Orban’s most popular policies in Hungary: a state-mandated reduction in utility prices.
“There are always questions of whether we are making Russian-friendly politics, European-friendly politics, American-friendly politics, and we say that we just don’t have this dimension or approach in our mind,” said Szijjarto, the foreign minister.
“In our mind, we make politics which make sense from our perspective. If you want to say, it’s a Hungarian-friendly policy.”
Gergo Saling in Budapest and Michael Birnbaum in Moscow contributed to this report.