Budapest is seeking to modify the terms of a loan it must repay to Russia for building two new VVER-1200 type reactors that will eventually replace Hungary’s Paks nuclear power plant, according to a report from Reuters.

The reactors, which will constitute a plant called Paks II, will be built by Rosatom, Russia’s state nuclear power company, at a cost of 10 billion euro ($12 billion), and will replace the older Soviet-built nuclear plant that supplies half of the country’s electricity.

Rosatom’s construction contract, which includes the loan for Paks II, was the subject of a hotly-debated probe by the EU’s Organization for Economic Co-Operation and Development, which investigated whether the Russian bid violated European competition statutes.

At the time, EU officials and commentators viewed the deal as a Trojan Horse to help cement Moscow’s influence over the right-leaning, rabidly anti-globalist government of Hungarian Prime Minister Viktor Orban.

The EU eventually dropped its investigation in 2017 and granted Hungary permission to build the reactors – partly in an effort to entice Orban, who was insistent about contracting Rosatom, back into the democratic fold. Now Budapest is citing the delay caused by the competition review as reason to renegotiate when it begins paying Rosatom back.

Hungarian financial authorities plan to ask Moscow to postpone collecting on the debt until after the new reactors begin to generate electricity – but it is as yet unclear whether Rosatom will accept new terms. The plant’s construction, meanwhile, is running late. The build was supposed to begin last year.

The Reuters report quotes Janos Suli, the Hungarian government minister who is overseeing the project, as describing the request to extend the loan as a routine matter.

“We will begin repaying installments once the blocks begin production,” he said. “There is no damage, no extra payment involved, only a rescheduling of the financial payments,” he told the newswire.

The control room at the Paks nuclear power plant in Hungary. Credit: ChNPP

Whether or not those comments have any basis in reality, however, is hard to tell. Hungary’s parliament, which is dominated by members of Orban’s party, voted to keep the conditions of the country’s deal with Rosatom secret for the 30-year-term of the loan, dubiously citing national security. It’s not even known whether Hungary would still be obligated to pay back the full amount if the new nuclear reactors never become operational.

While the terms of the Paks II loan remain in the shadows, other financing arrangements Moscow has made for building nuclear reactors in other countries suggest that the interest alone could prove to be very expensive for Budapest.

An $11.4 billion, 30-year agreement Rosatom signed with Bangladesh to build the Roopur nuclear plant will net Moscow $8 billion in interest. A $25 billion deal Rosatom is pursuing with Egypt to build that country’s Dabaa plant could, over the 35-year term of that loan, swell to $71 billion.

Another enormous $76 billion deal between Rosatom and South Africa was eventually thwarted by environmentalists when it was revealed the project had been secretly negotiated. Had the deal held it would have siphoned off a quarter of South Africa’s gross domestic product before the reactors even began operation.

Terms like this could spell trouble for Hungary in light of Moscow’s tendency to be a kneecapping creditor when it comes to energy projects ­– especially when Russia sours on the politics of its debtors.

In 2014, at the height of East-West tensions over Russia’s annexation of Crimea, Kremlin officials threatened to cut nuclear fuel supplies to Ukraine’s Soviet built reactors – which would have interrupted their chain reactions and likely caused a catastrophic accident.

Rosatom eventually walked the threat back. But the lurid message in Moscow’s head-fake toward igniting a second Chernobyl was clear: Russian-built reactors are a useful new tool for political blackmail.

The EU has felt the chilly fallout of the Ukraine dispute as well. In 2006 and 2009, Moscow cut its natural gas supplies to Europe as tensions between Moscow and Kiev spiraled.

Many in Europe – Hungary included – subsequently sought to diversify their energy supply in favor of nuclear. Yet, in a devious twist, Rosatom has emerged as the most stable and eager nuclear builder on the international market.

For now, Rosatom can afford to offer risky loans thanks to the enormous state subsidies it receives. These subsidies can be funneled into more loans, and the loans then boost the company’s profits on paper. But for the past several years, it has become clear that these subsidies to the company will likely decrease or dry up altogether in 2020.

As a result, Rosatom is amassing so-called memorandums of understanding from any country vaguely interested in nuclear power. The company says is currently has dozens of these MOUs amounting to more than $130 billion in incoming business.

But that claim should be viewed skeptically, as many of the countries for which Rosatom is promising to build reactors – countries like Jordan, Algeria, Nigeria, the Republic of Congo and Bolivia – won’t have the infrastructure to support nuclear power for decades.

For now, it’s not difficult to imagine Moscow extending the terms of its loan to Hungary for as long as Budapest likes. It will, after all, remain profitable on paper. But in the end, Budapest will be left holding the bag for Rosatom’s over extended balance sheet. But so long as Orban’s government continues it rightward lurch, Moscow is unlikely to call in its marker.