May 19, 2020 / 2:26 PM / 14 days ago

Hungary classifies Budapest-Belgrade Chinese rail project

BUDAPEST, May 19 (Reuters) - Hungary’s Parliament on Tuesday classified the details of the construction of a Chinese-backed railway link between Budapest and Belgrade, a giant project that was relaunched and pushed through with extra government aid despite mounting criticism.

The venture kick-starts Beijing’s effort to open new foreign trade links inside the European Union. It wants to ship Chinese goods from Greece to western Europe, but key sections in the Balkans are missing.

Hungary and China signed a 20-year, $1.9 billion loan deal for the project late last month, with a 2.5% interest rate.

The classification bill argued that secrecy was necessary to help secure a loan from the Chinese Export-Import Bank to finance the project.

Some 85% of the financing comes from China.

Hungary’s government late last week earmarked 82 billion forints ($256 million) from its 2020 budget - already strained by a likely recession in the wake of the novel coronavirus pandemic - to finance the rail link.

The project is the country’s second most expensive project after the Russian-led expansion of the Paks nuclear power plant in central Hungary.

The 150-km (93-mile) Hungarian stretch of the railway will be built by CRE Consortium, which includes holding company Opus Global, controlled by Lorinc Meszaros, an associate of Prime Minister Viktor Orban.

The project has suffered significant delays. China, Serbia and Hungary signed the original memorandum on the rail route in 2014. Construction in Serbia started in 2018.

A Hungarian expert in Chinese relations, who wished to remain unidentified, told Reuters China had a political motivation to build the railway, which he said was pointless until it reaches the sea in Greece.

Opposition groups also said the project would never turn a profit, while European politicians have raised concerns over China buying influence amid the crisis. ($1 = 320.8300 forints) (Reporting by Marton Dunai; Editing by Alex Richardson)

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