Danube Drought Puts Hungary’s €10bn Rosatom Nuclear Deal on the Brink

Paks I, which normally produces about a third of Hungary’s electricity, has at times been operating at little more than 10% capacity, with only one of its eight turbines running. Romania has shut down its second and last operating reactor at Cernavodă because there was not enough cooling water. Across Hungary, Romania and Slovenia, constraints on the Danube have compromised about 42% of Southeast Europe’s nuclear capacity.

For Hungary, the episode is more than a summer energy shock. It has turned a dispute over a Russian nuclear contract into a question of whether the infrastructure being planned today can survive the environmental conditions of tomorrow.

A river has become part of the Paks II audit

Magyar’s government is conducting a financial, technical, safety and regulatory review of Paks II, the project agreed with Russia in 2014 under former prime minister Viktor Orbán. The contract envisaged two VVER-1200 reactors, Units 5 and 6, built by Rosatom and backed by up to €10bn in Russian state credit, covering 80% of the project’s costs.

The original timetable envisaged the plant becoming fully operational in 2024.

By August 2026, Hungary has spent about 1,000bn forints, or €2.8bn, while Magyar describes the physical site as little more than storage depots and two large concrete pits. His government has not yet decided whether to terminate the contract, renegotiate it or replace the general contractor. But preliminary audit findings, according to Magyar, are unsatisfactory.

The Danube has given that examination an unusually concrete dimension.

Paks I and the proposed Paks II design use once-through cooling, drawing water directly from the river and discharging it back after cooling the plant. When river flow falls, or water temperatures rise, generation can be curtailed to prevent environmental damage and excessive thermal loading.

That vulnerability is no longer theoretical.

Hungarian authorities have resorted to emergency engineering measures to maintain water levels around Paks, including temporary riverbed barriers and preparations to flood two barges. A system designed around the availability of a large river has suddenly required intervention to keep the river usable for an operating nuclear plant.

Magyar’s argument is therefore broader than a claim that Paks II is late or expensive. He has questioned whether a new nuclear facility should be built around a cooling system so exposed to hydrological volatility, arguing that plants using such open-circuit systems are no longer being built globally.

That turns climate stress into a procurement issue.

The problem for Rosatom is bigger than a delayed reactor

Rosatom disputes the Hungarian government's assessment. Its chief executive, Alexei Likhachev, says the project remains on schedule despite the change of government. He has said preparation for Unit 5 is more than 80% complete, work on Unit 6 is advancing and reactor components are being manufactured. He also maintains that the design complies with international, EU and national safety standards.

Magyar has rejected Rosatom’s account of the timetable and progress.

The disagreement matters because Paks II is not simply another infrastructure contract. The 2014 agreement became one of the most important economic and strategic links between Budapest and Moscow inside the EU. Orbán presented it as the “deal of the century”, and his government maintained the project even after Russia’s full-scale invasion of Ukraine.

A reversal would therefore carry consequences well beyond the construction site.

For Moscow, Paks II represents a long-term industrial and financial foothold in an EU member state. For Budapest, the project has tied a strategically important part of its future electricity system to Russia's capital and a Russian contractor.

Magyar’s audit puts that arrangement under institutional scrutiny for the first time since the government change in April.

The political mandate is important, but the Danube has strengthened the government's case in a way that a purely geopolitical argument could not. Rejecting a Russian-backed project on foreign-policy grounds can be contested as political repositioning. Questioning the resilience of its cooling system after an existing nuclear plant has been forced to curtail output because of low river levels is a different proposition.

The environmental evidence gives the new government a technical basis for reopening a strategic decision made more than a decade ago.

Europe’s nuclear dilemma is moving downstream

The Paks dispute also exposes a problem that extends beyond Hungary and Russia.

Nuclear power is attractive to European governments because it provides large volumes of continuous electricity. Yet conventional nuclear plants can be dependent on the same water systems that are becoming increasingly vulnerable to extreme heat and drought.

The Danube crisis has shown how quickly that dependence can become regional rather than national. Hungary’s production has fallen while Romania has lost an operating reactor, with river constraints affecting nuclear capacity across several countries simultaneously.

That creates an uncomfortable contradiction for European energy planning. Nuclear power is being relied upon as a source of stable, low-carbon generation, while the physical systems supporting that generation may themselves be exposed to increasingly unstable environmental conditions.

The choice of cooling technology consequently becomes part of energy security.

Magyar’s criticism of once-through cooling points towards a wider shift in infrastructure planning: new generation capacity has to be designed around the availability of water under stressed conditions, rather than historical assumptions about river flows.

For Paks II, that raises questions not only about whether the project can be completed, but whether completing it in its present form would lock Hungary into a vulnerability that the current crisis has already exposed at Paks I.

The €2.8bn question

The most politically potent figure in Budapest may ultimately be the money already spent.

Hungary has committed about €2.8bn to a project whose original operational deadline has passed and whose construction progress remains contested. The government is now examining costs, schedules, subcontractors and cooling arrangements alongside safety and regulatory questions.

That creates a difficult choice.

Abandoning or radically restructuring Paks II would risk turning billions already spent into the cost of a failed model. Continuing without major changes could mean committing Hungary to a project whose economic and technical assumptions the new government is questioning.

The audit therefore has to reconcile two different risks: the cost of walking away from a Russian-backed project and the cost of proceeding with one that may be poorly adapted to future hydrological conditions.

The briefing provides no final assessment of the contractual or financial penalties Hungary could face if it terminates the agreement, and the government has not yet chosen that route. Its immediate options remain termination, renegotiation or a change of general contractor.

That uncertainty is itself significant. The audit is not simply deciding whether Paks II should proceed. It is testing whether the assumptions behind the project remain defensible.

For Rosatom, a renegotiation could preserve a role but weaken its control. A change in contractor could reduce Moscow’s institutional footprint. Termination would go further, potentially removing one of Russia’s most consequential long-term energy positions inside the EU.

For Hungary, meanwhile, the alternatives are constrained by the same energy system that has made the audit politically urgent. Paks I is already demonstrating what happens when a river-dependent nuclear fleet meets extreme hydrological stress.