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The mayor of Budapest couldn’t hide his frustration anymore. “This is some kind of a Murphy’s law or a game of devilish powers,” Istvan Tarlos told reporters at his weekly press conference in March 2017. His laugh was filled with disappointment: “Although I’m a believer, I’m absolutely sure Satan’s hand is in this M3 metro line case.” Tarlos was referring to the newly arrived and constantly malfunctioning Russian metro cars, which have 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 earlier.
A Successful Smear Campaign
In 2013, the old-school conservative mayor of Budapest became increasingly hostile toward David Vitezy, the CEO in charge of running the capital’s public transportation company, BKK (Budapesti Közlekedési Központ). Vitezy was the exact opposite of Tarlos 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 a genuinely personal hatred between the two of them. What no one else knew was that a third party was secretly involved in the story.
Tarlos and Vitezy had been working together since 2010, when Prime Minister Viktor Orban’s party, Fidesz, won not only the parliamentary elections, but the municipal elections as well. When Tarlos became the mayor of Budapest, Vitezy, then a young, 28-year-old traffic expert, who was a tram and bus enthusiast growing up, became an obvious choice to head the company coordinating public transport in the capital. Vitezy had both a vision of how to modernize Budapest’s public transportation system and very strong family ties to the Fidesz establishment. Vitezy’s mother is a Fidesz European parliamentary member in Brussels, and more importantly, his half-sister is Orban’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 Vitezy, who stood in the way of the Russians’ plans for winning the tender for the renovation of the old Budapest M3 metro line. Both the mayor and the CEO fell victim to manipulation.
VSquare discovered that in May 2013, a Russian delegation met with Vitezy, who made a big mistake by forgetting to take official notes of his negotiation with the Russians. Soon, false stories about this meeting were deliberately spread. The prime minister’s increasingly pro-Kremlin inner circles accused the head of Budapest’s public transport system of being anti-Russian and of threatening business deals with Moscow. Vitezy was then fired. This way, the Russians had a clear path to more than 200 million euros ($247 million), a sum coming from Hungarian public money. The mayor of Budapest admitted to VSquare that it was not his own initiative to get rid of the head of Vitezy.
The Mayor Surrounded by Russian Lobbyists
Istvan Tarlos, the maverick, right-wing mayor who has been in charge of Budapest since 2010, has been involved in a number of political conflicts with Orban’s powerful ministers and oligarchs. The latter have constantly sought to drain Budapest’s budget and EU development funds through various corruption schemes and channels. Tarlos, whose integrity is rarely called into question, tried to fight back against these attempts.
For example, he clashed with Lajos Simicska, the notorious oligarch in charge of the economic hinterland of Fidesz. Tarlos succeeded in keeping him out of Budapest, at least to some extent. This is remarkable, because Simicska, Orban’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 handpicked and dismissed some of Orban’s cabinet members.
During his battles, however, Tarlos needed influential allies to survive the attacks of greedy oligarchs and Fidesz politicians. He gave an increasingly important, but informal role to Istvan 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 most prominent business 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.
Both Kocsis and Tombor were seen as lobbyists with ties to various Russian businessmen, while Peto was known for starting his career at the Hungarian Ministry of Interior’s III/II department, which was practically 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.
The 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 any 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 realized that the renovation and the purchase of new metro cars was inevitable. The type of Soviet metro cars used in Budapest since the 1970s and 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 conversation on background with one of the informal lobbyists advocating for Metrowagonmash’s victory.
He refused to be called a Russian lobbyist, arguing he was just trying to discuss things with the parties in order to avoid a major metro accident.
“No one wants to be responsible for the death of passengers, right?” asked 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, he argued. The essence of his reasoning was that a tragedy should be avoided at all costs. This argument is misleading, of course. For example, the Czech engineering company Skoda Transportation, and not Metrowagonmash, was the one that successfully refurbished Prague’s old Soviet metro carriages in 2011. No tragedy has happened in the Czech capital’s metro system since then.
Tarlos, however, used the same argument in an email to 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 – for Metrowagonmash to win. Neither Istvan Kocsis nor Mr. Tombor. I questioned Kocsis on the phone once whether the rumor I heard about him lobbying for Russian interests was true. Although he admitted he has different kinds of Russian contacts, he firmly denied this lobbying effort without hesitation. I very seldom ask Kocsis about 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 David Vitezy, the young CEO leading BKK, whose loyalty to the governing party was never questioned, and whose position seemed solid. Vitezy showed no interest at all in foreign policy and had nothing against Russia as a political actor. “Maybe Vitezy did not sympathize with the Russians, but as far as I remember he did not explain (things) to me – he did not advertise it,” the mayor said.
But as a traffic expert, Vitezy 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, instead of just giving a facelift to the existing old ones. Despite their different backgrounds, Vitezy and Tarlos were on the same page this time, both preferring brand new metro cars bought at the cheapest price possible, with financial help from the EU. That was the second obstacle for the Russians, because Metrowagonmash knew that if the purchase of new cars was approved, 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 Vitezy 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 in Budapest. For more than a decade, Metrowagonmash has been represented in Hungary by a man named Bela Juhasz.
Despite his Hungarian name, Juhasz was born a Soviet citizen in Transcarpathia (or Zakarpattia, a region that used to be part of Hungary and is now part of Ukraine), and he advanced Russian state interests for a very long period of his life. This information reached VSquare from a person 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 Union, Juhasz resettled in Hungary, where, contrary to the vast majority of Transcarpathians, he quickly amassed a fortune, according to our source. Juhasz started an import-export and consulting company in 1990, working with, among others, Russian clients. One of the notable ones was Metrowagonmash, a company based in Russia producing metro cars and railbuses. The firm also produced armored vehicles for the Russian military, like the chassis of Buk, Tunguska, and Tor, tracked self-propelled anti-aircraft weapons. In addition to having partly been a company in the military industry for a long period of time, Metrowagonmash is a subsidiary 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 the national security services. VSquare’s source did not go into details about Juhasz’s Soviet past. We are unsure why his background caught the attention of the Hungarian national security services, but we know for sure it did. This spring, Ferenc Katrein, a former senior counter-intelligence officer, hinted in an interview that Hungarian spycatchers 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 mapping individuals connected to different state-owned or state-backed companies, airlines, travel agencies, cultural centers, 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 connections in the past. Back in the mid-1990s, Hungary’s ex-communist, socialist government had plans to buy Russian intelligence gathering devices from Metrowagonmash, the Hungarian investigative site Atlatszo.hu wrote last year. “To keep the deal confidential, they created an intermediary company, Nador 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 ES, a Hungarian weekly).
Ten years ago, in 2006, Juhasz’s name appeared in the news for the first time when he legally challenged Alstom, the French company that defeated Metrowagonmash in the contest for 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 Peter Medgyessy, the former prime minister of the Socialist-liberal Coalition (between 2002 and 2004), the Socialist-liberal led Budapest Municipality, and the Alstom Transport company as persons involved in the case. Both Medgyessy – a well-known Francophone – and the former mayor of Budapest denied those 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, and one first needs to secure the goodwill and active support of those in power. For this reason, when Orban announced his new pro-Russian and pro-Chinese foreign policy doctrine called “Eastern Opening” in 2011, Russian companies had reasons to 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 emboldened by Orban’s Eastern Opening strategy and hinted that he wanted to lobby for Russian companies.
The following story has been confirmed by anonymous sources with knowledge of the meeting between Vitezy and 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. Vitezy 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 Vitezy only gave a general overview of these processes. He didn’t disclose any sensitive information that could have resulted in a competitive edge for Metrowagonmash. He made it clear that the Budapest municipality wanted an open competition and a public procurement, since this was the only way the European Union could fund or co-fund these projects. Vitezy 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 might have noticed that the BKK 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 mysterious negotiations between Vitezy 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 the Budapest municipality from doing business with Metrowagonmash. BKK had to face allegations of not cooperating with Russian diplomats and obstructing the refurbishment project in general, as well as being hostile or disrespectful toward the Russian ambassador, Aleksandr Tolkach.
Multiple sources claimed that none of these rumors were true, and that Vitezy’s mysterious visit to the Russian embassy never happened. According to the report later received by the mayor’s office, the CEO didn’t go for any talks at the embassy and the Russian ambassador wasn’t involved in the meeting with Vitezy at all.
None of this mattered. The fake story of Vitezy’s confrontation with Tolkach continued to grow, while BKK initially had no official notes or recordings to support their version. Tarlos also acknowledged remembering that there was whispering about Vitezy’s allegedly controversial meeting with some Russians. “I remember a ‘Vitezy versus the Russian embassy’ hallway rumor, but it seemed quite surreal to me that Vitezy had sneaked off 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 David, who refuted the story,” the mayor told VSquare.
It also became obvious that someone reported Vitezy to Hungarian government circles for risking their mutually beneficial agreements with Russia. While trying to investigate the details of the Russians’ objections about Vitezy, VSquare approached a former high-ranking official at the Hungarian foreign ministry. If the Russians contacted the Hungarian government on a diplomatic level, our high-ranking source must have been informed.
Unsurprisingly, the source claimed to not have heard anything about this story. “By that time, the bureaucracy of the foreign ministry had already been left out of managing Russia-related business, from which only a narrow circle of Fidesz strongmen benefited,” another source familiar with the Russian lobby commented to VSquare.
“The Vitezy-affair reached the highest political level, meaning Viktor Orban and his inner circle, who started to see Vitezy as a liability,” our source added.
Neither the Russian embassy in Budapest, nor Rustrade have replied to our questions regarding their (alleged) meetings with Vitezy. 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 Russian state-owned companies. “Vitezy visited the ambassador. It is a true story. The news made its way around first through the Russian government, then the Hungarian one. That is all. I do not know what motivated Vitezy (in picking a fight with the ambassador), but I think it was the same as with the buses. I think they wanted to privatize the metro system, too,” our source claimed.
When VSquare contacted Vitezy, currently the general director of the Hungarian Museum of Science, Technology, and Transport, he asked us 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 a new Museum of Transport of the highest possible quality, and I don’t want to comment on stories from years ago,” he wrote. The former CEO, however, did not deny any of our information either.
Despite his political loyalty and family ties to Orban’s relatives, Vitezy’s influence gradually faded throughout 2013 and 2014. He lost the government’s political support after being labeled anti-Russian, and the smear campaign irreparably damaged his bond of trust with Tarlos. “I do not believe to this day that Vitezy simply walked into the Russian embassy with an intent to prevent something, unless he knew someone there. It doesn’t seem realistic. However, I have never asked the embassy,” Tarlos told VSquare, to some extent leaving us in doubt about 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 among Russian diplomats, 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 of the contemporary Russian intelligence services.
Vitezy was eventually fired in late 2014.
The mayor of Budapest left some things unexplained while telling us his version of the story. Tarlos recalled to VSquare that he appointed Vitezy as CEO of BKK at the request of one of his deputies back in 2010. “After some time, it became gradually clear that Vitezy’s beliefs did not harmonize with mine on a lot of issues,” he continued. He said their relationship deteriorated, and confessed that he wanted to sideline Vitezy. “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 he who initiated the firing of Vitezy. Tarlos 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 the Russians.
“Or at least to my knowledge,” Tarlos added. What the mayor said exactly is that – in connection with the dismissal of Vitezy – “specifically the Russians” weren’t mentioned by either “the Russians,” or “the Hungarian government and its members.”
Even the Match Could Have Been Fixed
After they achieved their first goal by sidelining Vitezy, the Russian lobbyists around
Budapest’s leadership started to work on their second aim. The lobbyists tried to push for a so-called extraordinary procedure for the metro refurbishment, without a public procurement or any competition. If that had succeeded, Metrowagonmash could have won without having to compete against anyone.
VSquare obtained the official request – previously quoted by Hungarian newspaper Nepszabadsag – for the extraordinary procedure, sent on 23 August 2013, three months after Vitezy’s meeting with Sorokin. The request was signed by Tarlos and sent to Laszlone Nemeth, head of the Ministry of National Development (Nemzeti Fejlesztesi Miniszterium, NFM), the ministry in charge of 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 as reasons to skip a public procurement for the sake of a quick refurbishment. Contrary to his earlier position, Tarlos is now explicitly arguing against the purchase of new cars and wants refurbished carriages.
The mayor even states that they do not want the European Union to fund the project anymore. Tarlos does not specifically say whom they want to hire for the job, but writes in the letter that they will reach out to companies that are included on a non-public list overseen by Hungary’s Constitutional Protection Office, the security service also dealing with counter-espionage.
Back in those days, Minister Laszlone Nemeth and the NFM were under the total control of Simicska, the powerful oligarch at odds with Tarlos – hence the request was rejected. (Tarlos claimed to VSquare that he never felt any kind of pressure coming from Simicska.) But Simicska had a falling-out soon after the parliamentary elections of 2014. Simicska’s influence rapidly vanished, and later on Nemeth was sacked, too. When all obstacles were gone, the Orban government made a financial decision by accepting a government decree that basically eliminated all other possibilities but a refurbishment.
When asked by VSquare, Tarlos claimed that despite his earlier stance he accepted the government’s decision, which left him no choice but 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 according to this letter – as his request for the extraordinary procedure shows.
Bela Juhasz 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), Skoda 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 Skoda, aware of their chances of winning, soon dropped out of the race. Out 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 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 in 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, but outdated models that they couldn’t otherwise get rid of. If they had to compete with these models in a public procurement on brand new metro cars, this technology would not stood a chance against the Estonians, Spaniards, and Czechs. The mayor of Budapest reacted to that scandal by saying “we should not be complaining that we got something nicer and better than expected.”
The new Moskvitches broke down almost instantly. The doors of the cars opened while they were moving, but did not open when they were supposed to, leaving hundreds of angry passengers trapped inside the carriages. The emergency brakes would sometimes get automatically activated out of nowhere. Weeks later, the National Transport Authority even ordered all refurbished Russian metro cars to be temporarily withdrawn from service.
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