Hungary classifies $2 billion railroad deal with China for ten years

2020.05.19. 14:48

The Hungarian Parliament had passed a law on Tuesday that classifies details of the modernization of the Budapest-Belgrade railway for ten years.

The reconstruction will cost more than $2 billion, and it will be jointly financed by Hungary and the Chinese Eximbank with the Hungarian state paying 15% upfront and 85% loaned by China. The Hungarian side of the project will be carried out by business interests of Lőrinc Mészáros, a close friend of Hungarian Prime Minister Viktor Orbán, and it is considered a project of "overriding public interest."

According to the explanatory memorandum attached to the original bill, the rationale behind the classification of all documents related to the project is that as access to their contents would "threaten Hungary's ability to pursue its foreign policy and trade interests without undue external influence."

The project has been in the making for years: China, Serbia, and Hungary  signed a memorandum of understanding  on upgrading the rail route in December 2014, emphasizing that it will serve as “a corridor between China and Europe,” but the project is peculiar for a number of reasons:

  • It is shaping up to be the first major Chinese railway project within the European Union, a market as of yet untouched by emerging Chinese railway companies.
  • At an expected cost of 750 billion forints (2.3 billion euros), it is also the single most expensive infrastructure project ever to be undertaken by Hungary, even as the country has been spending billions of euros of EU structural and cohesion funds on public works in recent years.
  • And while the costs are extraordinary, the potential benefits appear to be meager: traffic between Budapest and Belgrade is scarce, the modernized rail route will have no connections to the European mainlines, and the government’s publicly stated reasons for the modernization do not make economic sense.

Tamás Schanda, a state secretary of the Hungarian Ministry of Innovation and Technology said that the project has significance in the fight against climate change as well, and added that the classification is nothing to be hung up about: both Hungary and China have foreign policy interests and demands.

The Hungarian opposition did not support the law in Parliament, Jobbik's MP Balázs Ander said that the project only serves the interests of China, as they will have a reference for future European railway projects and gain a route to flood European markets with cheap products, and also there are no guarantees that the development will not become a "bottomless pit for Hungarian people's money."  MSZP lawmaker László Szakács said that while the government takes pride in not wanting to take loans, the two greatest creditors of Hungary are Russia and China, which gives cause for concern in terms of the country's political and economic self-determination. DK's László Varju said the law is unacceptable, and added that the classification must be revised after an eventual change in government.

(Cover: Belgrade train station. Photo: Avalon/Universal Images Group via Getty Images)

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