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Satan’s hand: Russian meddling behind Budapest’s metro chaos

The head of Budapest’s public transport was in the way of a Russian metro company’s business with more than 200 million euros at stake. A KGB-style provokatsiya was utilised to get him fired and force the Hungarian capital to buy malfunctioning and expensive Russian metro cars.

March 8, 2018 - Szabolcs Panyi - Stories and ideas

Image by Index.hu

The mayor of Budapest couldn’t hide his frustration anymore. “This is some kind of Murphy’s law or a game of devilish powers”, István Tarlós told reporters at his weekly press conference in March 2017. He was laughing in disappointment: “Although I’m a believer, I’m absolutely sure Satan’s hand is in this M3 metro line case”. Tarlós was referring to the newly arrived and constantly malfunctioning Russian metro cars, which kept breaking down since their first full day in service.

The mayor was right when he suspected clandestine operations behind Budapest’s metro saga. By that time, he likely knew he had been fooled by the Russians four years prior.

A successful smear campaign

In 2013, the old-school conservative mayor of Budapest became increasingly hostile towards Dávid Vitézy, the CEO in charge of running the capital’s public transportation company, BKK (Budapesti Közlekedési Központ). Vitézy was the exact opposite of Tarlós with his progressive views. The public enjoyed their fight until it ended with the dismissal of the CEO, who was quite popular in Budapest’s intellectual scene. Everyone, including both the mayor and the CEO, thought their clash was purely about political ambitions, clashing worldviews and genuine personal hatred between the two of them.

What no one else knew about was a third party secretly involved in the story.

Tarlós and Vitézy were working together since 2010, when Viktor Orbán’s party, Fidesz, won not only the parliamentary elections but the municipal elections as well. When Tarlós became the mayor of Budapest, Vitézy, the 28-year-old young traffic expert who grew up as a tram and bus enthusiast, was an obvious choice to head the company coordinating public transport in the capital. Vitézy not only had a vision how to modernise Budapest’s public transportation system but also had very strong family ties to the Fidesz establishment. Vitézy’s mother is a Fidesz MEP in Brussels, and more importantly, his half-sister is Viktor Orbán’s cousin.

But all of a sudden, the young CEO’s political support started to evaporate. VSquare found out about a Russian smear campaign that took place in 2013, aimed at removing Vitézy, who was in their way of winning the tender for the refurbishment of the old Budapest M3 metro line. Both the mayor and the CEO were victims of the manipulation.

VSquare discovered that in May 2013, a Russian delegation met with Vitézy, who made a big mistake by forgetting to take official notes of his negotiation with the Russians. Soon, false stories based on this meeting were deliberately spread. The head of Budapest’s public transport was accused in the prime minister’s increasingly pro-Kremlin inner circles as being anti-Russian and threatening business deals with Moscow. He got fired. This way, the Russians had a clear path to more than 200 million euros in Hungarian public money. The mayor of Budapest admitted to VSquare that it was not his own initiative to get rid of the head of Budapest’s public transportation.

The mayor got surrounded by Russian lobbyists

István Tarlós, the maverick-type right-wing mayor who has been in charge of Budapest since 2010, has undertaken a number of political conflicts with prime minister Viktor Orbán’s powerful ministers and oligarchs. The latter constantly sought to drain Budapest’s budget and EU development funds through various corruption schemes and channels. Tarlós, whose integrity is rarely questioned, tried to fight back these attempts.

For example, he clashed with Lajos Simicska, the notorious oligarch in charge of the economic hinterland of Fidesz. Tarlós succeeded keeping him out of Budapest, at least to some extent. This is remarkable, because Simicska, Orbán’s best friend since college, was the master of life and death within the Fidesz government between 2010 and 2014. Simicska was so powerful that he actually picked and dismissed some of Orbán’s cabinet members.

During his battles, however, Tarlós needed influential allies to survive the attacks of greedy oligarchs and Fidesz politicians. He gave an increasingly important, but informal role to István Kocsis, a well-known Russophile who used to be the chief executive officer of BKK’s predecessor, BKV, and MVM, the Hungarian state energy company. He was also the former CEO of the Paks Nuclear Power Plant, originally built by the Soviets. Kocsis, one of the decisive economic figures of the former Socialist-Liberal government between 2002 and 2010, was involved in multiple corruption scandals, hence he was forced to keep a low profile after 2010.

Tarlós also relied on a longtime ally, an ex-Socialist politician and Communist-era security officer, György Pető, who worked for the Americas department of the Hungarian counter-intelligence in the 1980s. Later, András Tombor, a former national security adviser to Orbán also appeared on the scene, or, to be exact, behind the scenes. He informally offered Budapest’s leadership to help soothe ties with some of Tarlós’s dangerous adversaries in Orbán’s cabinet.

Both Kocsis and Tombor were seen as lobbyists with ties to various Russian businessmen, while Pető was known for starting his career at the Hungarian Ministry of Interior’s III/II department, which practically had been the local affiliate of the KGB, sometimes taking orders from Moscow. According to sources familiar with the case, Russian influence in Budapest became visible when various actors tried to convince the capital’s leaders to give the lucrative renovation project of the M3 metro line to Metrowagonmash, a Russian company selling metro cars.

Hungarian politicians were frightened

The construction of the third metro line of Budapest – known as the blue metro – started in 1970, and the line has been operating since 1976. Although more than half a million people use it every day, it had not seen the renovation in the last three decades. After a series of severe technical problems involving scary scenes of fire and smoke created a public outcry in 2011-12, the capital’s leadership realised that renovation and the purchase of new metro cars was inevitable. The type of Soviet metro cars used in Budapest since the 1970s, the construction technology of the tunnels and the ventilation system were almost the same as in Baku, Azerbaijan, where an electric fire left 289 people dead and 270 injured in 1995.

Russian lobbyists instantly spotted an opportunity.

 Years ago, well before the winner of this metro tender was announced, we had a background conversation with one of the informal lobbyist advocating for Metrowagonmash’s victory. He declined to be called a Russian lobbyist, arguing he was just trying to convey the parties in order to avoid a major metro accident.

“No one wants to be responsible for the death of passengers, right?”, said the lobbyist, who claimed that Hungarian politicians were frightened and would opt for the speediest solution instead of a cost-effective one. Since both the metro cars and the tunnel were built by Russians, they were also the most qualified to refurbish it, the lobbyist argued. The essence of his reasoning was that a tragedy should be avoided at all costs. This argument is misleading, of course. For example, it was the Czech engineering company Škoda Transportation, not Metrowagonmash, that successfully refurbished Prague’s old Soviet metro carriages in 2011. No tragedy occurred.

Tarlós, however, reiterated the same argument in an email when asked by VSquare: “I still uphold my opinion that it seems logical to me that the most qualified to refurbish something, are the ones who produced it”, the mayor argued. “But I’m honestly saying I did not assist the Russians during the public procurement, nor did I intervene at any point. The only important thing for me was to get the refurbishment started”, he continued.

The mayor tried to downplay the role of both Kocsis and Tombor. “No one asked – at least not from me – Metrowagonmash to win. Neither István Kocsis nor Mr Tombor. I questioned Kocsis on the phone once whether the rumour I heard that he is lobbying for Russian interests was true. Although he admitted he has different kinds of Russian contacts but firmly denied this lobbying effort without hesitation. I very seldom ask Kocsis on some past issues (…), but I don’t ask for Mr Tombor’s opinion on anything at all”, the mayor claimed.

From the Russian army to Budapest

There were two big obstacles in Metrowagonmash’s way.

The first obstacle was Dávid Vitézy, the young CEO leading BKK, whose loyalty to the governing party was never questioned and his position seemed solid. Vitézy showed no interest at all in foreign policy and had nothing against Russia as a political actor. “Maybe Vitézy did not sympathise with the Russians, but as far as I remember he did not explicate to me, he did not advertise it”, the mayor said.

But as a traffic expert, Vitézy opposed the idea of simply refurbishing the rusty, outdated Soviet metro cars. The head of BKK would have preferred a fair and competitive bidding process, where Budapest would buy new cars, not just face-lift the existing old ones. Despite their different backgrounds, Vitézy and Tarlós were on the same page this time, both preferring brand new metro cars for the cheapest price possible, with financial help from the EU. That was the second obstacle in front of the Russians because Metrowagonmash knew that in the case of purchasing new cars, their inferior technology could not stand up to the competition.

Therefore, the Russians needed to accomplish two things to win the public procurement. The first thing was to get Vitézy out of the picture, the second to make sure Budapest would buy refurbished cars, not new ones. Luckily for them, the Russians had a very experienced representative placed in Budapest. For more than a decade, Metrowagonmash has been represented in Hungary by a man called Béla Juhász.

Despite his Hungarian name, Juhász was born as a Soviet citizen in Transcarpathia (Zakarpattia, now a part of Ukraine), and he advanced Russian state-linked interest throughout a very long period of his life. This was told to VSquare by a source who used to work for a Hungarian national security agency.

In the late 1980s, shortly before the regime change and the fall of the Soviet rule, Juhász resettled to Hungary, where, contrary to the vast majority of Transcarpathians, he quickly amassed his fortune, our source continued. Juhász started an export-import and consulting company in 1990, working with, among others, Russian clients. One notable client is Metrowagonmash, a Mytishchi-based company producing metro cars and rail buses. Metrowagonmash also produced armoured vehicles for the Russian Army, like the chassis of Buk, Tunguska and Tor, the tracked self-propelled anti-aircraft weapons. Besides having partly been a military-industrial company for a long period of time, Metrowagonmash is a subsidiary company of CJSC Transmashholding, a company of national strategic importance to Moscow, since the latter is the largest manufacturer of locomotives and rail equipment in the country.

In Russia, companies like these work closely with national security services.

VSquare’s source did not go into details about Juhász’s Soviet past. We are unsure why his background caught the attention of Hungarian national security services, but we know for sure it did. This spring, former senior counter-intelligence officer Ferenc Katrein hinted in an interview that Hungarian spy catchers are usually looking for possible Russian agents not only among diplomats but around Russian state-owned and state-backed companies as well. “Besides traditional positions, offering diplomatic immunity, it is worth to map individuals connected to different state-owned or state-backed companies, airlines, travel agencies, cultural centres, educational institutions, and state-owned media, based on professional counter-intelligence considerations”, Katrein said.

Hungarian national security services have been aware of Metrowagonmash’s ties to Russian intelligence for a long time. Moreover, they even tried to utilize the company’s connection in the past. Back in the mid-1990s, Hungary’s ex-communist, the socialist government had plans to buy Russian intelligence gathering device from Metrowagonmash, investigative site Atlatszo.hu wrote last year. “To keep the deal confidential, they created an intermediary company, Nádor 95′ Rt., which was to buy metro carriages from Metrowagonmash as a financial and administrative cover for the acquisition of the reconnaissance gear”, Atlatszo.hu wrote. That deal, however, never came to fruition (the Nádor 95′ story was originally reported by ÉS, a Hungarian weekly).

Ten years ago, in 2006, Juhász’s name appeared in the news for the first time when he legally challenged Alstom, the French company that topped Metrowagonmash in the contest of supplying metro cars to Budapest’s fourth metro line. His attempt, however, failed. Not least because Alstom might have bribed former Hungarian decision-makers, according to an investigation by OLAF, the European Anti-Fraud Office, whose report on fraud, corruption and misappropriation of EU funds was released earlier this year. The report lists Péter Medgyessy, former prime minister of the Socialist-Liberal Coalition (2002-2004), the Socialist-Liberal led Budapest Municipality, and Alstom Transport S.A. as persons concerned. Both Medgyessy – a well-known Francophonic – and the former mayor of Budapest denied these allegations.

The report, however, supports what many already believe: that in Hungary, to win a public procurement involving the Budapest public transport system, it is business as usual that one needs to assure first the goodwill and active support of those in power. For this reason, when Viktor Orbán announced his new pro-Russian and pro-Chinese foreign policy doctrine called “Eastern Opening” in 2011, Russian companies could reasonably feel that their time had come.

Fake stories of a meeting

In May 2013, the deputy trade representative of Russia to Hungary (Rustrade), Victor Sorokin requested an official meeting with the leadership of BKK. Sorokin seemed to be emboldened by Orbán’s Eastern Opening strategy and hinted that he wants to lobby for Russian companies.

The following story has been confirmed by anonymous sources with knowledge of the meeting between Vitézy, his people, and the Russian delegation. Additionally, an internal written report on this meeting exists, but it is important to note that it was produced only weeks after the event. The report was received by the mayor’s office, VSquare has learned.

The meeting took place at BKK’s headquarters in the 7th district of Budapest on 24 May 2013. Sorokin was accompanied by two people, including an interpreter. Vitézy also had multiple staffers in the room. The main topic of the discussion was supplying Budapest with new trolley buses, and to a lesser extent, the future public procurement regarding the M3 metro cars.

VSquare’s sources recall that Vitézy only gave a general overview of these processes. He did not disclose any sensitive information that could have resulted in a competitive edge for Metrowagonmash. He made it clear that Budapest Municipality wanted an open competition and public procurement since this was the only way the European Union could fund or co-fund these projects. Vitézy also noted that the capital preferred buying brand new metro cars instead of renovating the old ones. According to our sources, the atmosphere of the meeting was calm and friendly, but the Russian delegation could have noticed that the CEO and his team forgot to take official notes of the discussion or to record it. Which turned out to be a huge mistake.

Weeks later, the leadership of BKK was surprised to hear about an alleged confrontation they had with representatives of the Russian Federation. They were questioned on a political level about a mysterious negotiation of Vitézy and the Russian ambassador at the Russian embassy in Budapest, a meeting that was intentionally kept secret from the mayor, and everyone else. Vitezy was basically accused of going rogue behind the mayor’s back and picking a fight with the Russians to prevent Budapest Municipality from making business with Metrowagonmash. BKK had to face allegations of not being in cooperation with Russian diplomats, obstructing the refurbishment project in general, as well as being hostile or disrespectful to the Russian ambassador, Aleksandr Tolkach.

Multiple sources claimed that none of these rumours was true, Vitézy’s mysterious visit to the Russian embassy never happened. According to the report received later by the mayor’s office, the CEO had no talks at the embassy and the Russian ambassador wasn’t involved in meeting with Vitézy at all.

None of these did matter. The fake story of Vitézy’s confrontation with Tolkach continued to grow while BKK initially had no official notes or recordings to support their refutation. Tarlós also acknowledged remembering there was whispering about Vitézy’s allegedly controversial meeting with Russians. “I remember a ‘Vitézy versus the Russian embassy’ hallway rumour, but it seemed quite surreal to me that Vitézy had sneaked to the embassy in secret, so I didn’t deal with it. I’m not totally sure, but I might have brought this up to Dávid, who refuted the story”, the mayor told VSquare.

It also became obvious that someone reported Vitézy to Hungarian government circles for risking their mutually beneficial agreements with Russia. While trying to investigate the details of the Russians’ objections about Vitézy, VSquare approached a former high-ranking official at Hungary’s foreign ministry. If the Russians contacted the Hungarian government on a diplomatic level, this high-ranking source of ours must have been informed. Unsurprisingly, the source claimed not having heard anything about this story. “By that time, the bureaucracy of the foreign ministry had already been left out of managing Russia-related businesses, from which only a narrow circle of Fidesz strongmen benefited”, another source familiar with the Russian lobby commented to VSquare.

“The Vitézy-affair reached the highest political level, meaning Viktor Orbán and his inner circle, who started to see Vitézy as a liability”, our source added.

Neither the Russian Federation’s embassy in Budapest nor Rustrade have replied to our questions regarding their (alleged) meetings with Vitézy. We also sent official questions to Metrowagonmash and Hungary’s Ministry of Foreign Affairs and Trade, but we have not received a response to date. Luckily, we managed to hear the story from a Russian angle by talking to a business source with ties to state-owned Russian companies. “Vitézy visited the ambassador. It is a true story. The news made it’s round first through the Russian government, then the Hungarian. That is all. I do not know what motivated Vitézy (in picking a fight with the ambassador), but I think it was the same as with the buses. I think they wanted to privatise the metro system too”, our source claimed.

Classic provokatsiya

When VSquare contacted Dávid Vitézy, currently general director of the Hungarian Museum of Science, Technology and Transport, Vitézy asked to send our inquiry via email. Instead of answering our questions, he replied with a short statement. “Currently, I’m focusing on the establishment of the new Museum of Transport on the highest possible quality, I don’t want to comment stories from years ago”, he wrote. The former CEO, however, did not deny any of our information.

Despite his political loyalty and family ties to Orbán’s relatives, Vitézy’s influence gradually faded throughout 2013 and 2014. He lost the government’s political support after being labelled as anti-Russian and the smear campaign irreparably damaged his bond of trust with Tarlós. “I do not believe to this day that Vitézy simply walked into the Russian embassy with an intent to prevent something unless he knew someone there. It doesn’t seem realistic, however, I never asked the embassy”, said Tarlós to VSquare, to some extent leaving us in doubt what he really believes.

In the end, the “divide and conquer” strategy of the Russians and their lobbyists worked. It was partly the result of smooth cooperation between the Russian diplomacy, a Russian company, their Hungarian proxies, and probably other branches of the Russian state too. Multiple national security experts suggested to VSquare that provokatsiya – staging a crisis, inventing a conflict – and spreading false stories like this, are longstanding trademarks of both the old KGB and contemporary Russian intelligence services.

Dávid Vitézy was eventually fired in late 2014.

The mayor of Budapest left some things unexplained while telling us his version of the story. Tarlós recalled to VSquare that he appointed Vitézy as CEO of BKK on the request of one of his deputies back in 2010. “After some time, it became gradually clear that Vitézy’s beliefs are not harmonising with mine on a lot of issues”, he continued. He said their relationship deteriorated, and confessed that he wanted to sideline Vitézy. “I did not like him, and I did not really want him to be the head of BKK anymore”, he added.

The mayor, however, surprisingly hinted that although he supported the decision, it was not him who initiated the firing of Vitézy. Tarlós refused to disclose the background story of that move and where it originated. “I don’t want to talk in details about the circumstances of this initiative, partly because not long after I would have likely initiated the same move, too.” He stressed that the dismissal had nothing to do with Russians.

“Or at least to my knowledge”, he added. What the mayor said exactly is that – in connection with the dismissal of Vitézy – “specifically the Russians” were not mentioned by neither “the Russians”, nor “the Hungarian government and its members”.

Even the match could have been fixed

After they achieved their first goal by sidelining Vitézy, the Russian lobbyists around Budapest’s leadership started to work on their second goal. The lobbyists tried to achieve the metro refurbishment to take place in a so-called extraordinary procedure, without public procurement or competition. If that had succeeded, Metrowagonmash could have won without having to compete against anyone.

VSquare obtained the official request – previously quoted by Népszabadság – for the extraordinary procedure, sent on August 23rd 2013, three months after Vitézy’s meeting with Sorokin. The request was signed by Tarlós and sent to Lászlóné Németh, head of the Ministry of National Development (Nemzeti Fejlesztési Minisztérium, NFM), the ministry deciding on development funds.

“The risk associated with operating the old metro cars is unacceptable in our view”, the request claims, mentioning safety reasons and risks of various natures. The letter refers to national security interests when asking to skip public procurement for the sake of a quick refurbishment. Contrary to his earlier position, Tarlós is now explicitly arguing against the purchase of new cars and wants refurbished carriages.

The mayor even states they do not want the European Union to fund the project anymore. Tarlós does not specifically identify who they want to hire for the job, but writes in the letter that they will reach out to companies that are included in a non-public list run by Hungary’s Constitutional Protection Office, the security service also dealing with counter-espionage.

Back in those days, minister Lászlóné Németh and NFM were under the total control of Simicska, the powerful oligarch at odds with Tarlós, hence the request was rejected. (Tarlós claimed to VSquare he never felt any kind of pressure coming from Simicska.) But Simicska soon broke up with Orbán after the parliamentary elections of 2014. Simicska’s influence rapidly vanished and later Lászlóné Németh was sacked too. When all obstacles were gone, the Orbán government made a financial decision by accepting a government decree that basically eliminated all other possibilities but a refurbishment.

When asked by VSquare, Tarlós claimed that despite his earlier position he accepted the government’s decision, which left him no choice but conducting the refurbishment of the metro cars. The mayor did not mention at all that for some reason he had changed his mind in August 2013 – or at least to the extent of this letter – as his request for the extraordinary procedure shows.

Béla Juhász and Metrowagonmash finally won. Although there had to be a public procurement, the terms and requirements of this process were tailored to the Russians. Seven companies entered the competition, of which five made it into the second round: Alstom (France), CAF (Spain), Škoda Transportation (Czech Republic), Skinest Rail (Estonia) and Metrowagonmash. Before the results were announced, we met with a legal representative of one of the European engineering companies that participated in the competition. This representative told us that they saw exactly that the match was already fixed, but their sense of justice dictated they should compete anyway.

Alstom, CAF and Škoda, seeing their chances, soon dropped out of the race. Of the remaining competitors, the Estonians gave the better, more modern and cheaper offer (196 million euros), causing serious trouble to Budapest and the Hungarian government. Finally, citing unimportant technical reasons, Skinest Rail was disqualified. This was the way how Metrowagonmash won the competition with a more expensive (225 million euros) and less attractive offer. Their metro cars weren’t even equipped with air conditioning.

The first refurbished Russian metro cars – mocked as Moskvitch after the cheap Soviet automobile brand – arrived to Budapest in early 2017. It turned out that the Russians might have tricked everyone. Instead of refurbishing the old cars, they were suspected of selling completely new carriages, but outdated models which they could not get rid of. If they have had to compete with these models in a public procurement on brand new metro cars, this technology would not have had a chance against the Estonians, Spaniards and Czechs. The mayor of Budapest reacted to the scandal back then by saying “we should not be complaining that we got something nicer and better than expected”.

The new Moskvitches broke down almost instantly. Doors of the cars in motion were thrown open, but did not open when they should have had to, leaving hundreds of angry passengers trapped. Sometimes the emergency brakes got automatically activated. Weeks later, the National Transport Authority even ordered all refurbished Russian metro cars to be temporarily withdrawn from service.

This article first appeared at VSquare.org. It was shortlisted for the 2018 European Press Prize.

Szabolcs Panyi is a Hungarian journalist at Index.hu. Covers foreign policy, national security, Russian influence. Currently a Hubert H. Humphrey/Fulbright fellow at Arizona State University. Based in Phoenix.

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  • Evan

    So a 28 year old with minimal experience but strong family connections got the chief executive position of a major public utility! That the writer sees nothing wrong in this leads one to consider the all the rest of his piece as the scribblings of a likely propagandist.

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