Hungary’s Emerging Role as a European Hub for Chinese Chemicals

According to the documents, the decision to set up the Chinese chemical hubs in Hungary was taken in March this year, and a formal agreement is due to be signed in China in September 2023. Within the Hungarian government, the project is being handled by the Prime Minister’s Cabinet Office, led by Antal Rogán, while Direkt36’s research suggests that a company linked to his inner circle has financial interest in the project.

According to leaked documents, the project, called the “Europe-China Chemical Trade and Dual HUB System”, is about establishing a chemical trade hub in China and Europe, and linking them by rail. The European hub would be located in Hungary, from where the chemicals would be distributed to other destinations on the continent. The plans envisage two locations in Hungary as hubs: a rail transhipment site in Záhony on the eastern border of the country, and BILK terminal (Budapest Intermodal Logistics Center), a long-established logistics facility in Budapest.

Direkt36 visited the site of the planned chemical trade hub in the suburbs of Soroksár, Budapest’s 23rd district, where the planned hub’s railway tracks run in some places only a few tens of meters from residential buildings. According to the documents, China could send up to two million so-called unit containers (TEU) of chemicals to Europe per year by 24,000 trains – many times the current capacity and traffic of the BILK terminal.

It is not clear from the documents – which are preparatory materials for heads of the Prime Minister’s Cabinet Office – exactly what materials would be transported to Hungary and how they would be stored here. However, one of the documents states that “one of the most important industries to be supplied is battery factories and electric car factories, thus the Chinese counterpart would establish the first route to serve lithium battery manufacturers (such as CATL)”. These battery factories, for example, use lithium compounds and various organic solvents that are harmful to both human health and the environment, according to Greenpeace Hungary.

Ministry documents state the Hungarian chemical trade hub would be set up by an Austrian state-owned railway company, Rail Cargo Hungaria Ltd, and a newly created company, Acemil Plc. As the latter company is owned by a private equity fund whose ownership structure is hidden, it is not possible to know who exactly owns the company. However, Direkt36 has found indications that Acemil is linked to Antal Rogán’s entourage. The company’s headquarter in Aulich Street, downtown Budapest, is owned by the consulting firm of the minister’s confidant, lawyer Balázs Kertész, who, according to a Chinese news site, personally attended one of the official meetings on the project.  According to the leaked documents, the Chinese side had already agreed to cooperate with these two Hungary-registered companies last year, and it was only later the Hungarian government started backing the project. Neither Acemil, nor Balázs Kertész reacted to our comment requests.

The documents summarising the Chinese project and its background for the leaders of the Prime Minister’s Cabinet Office, illustrated with pictures and maps, were written with many spelling mistakes, sometimes without Hungarian accentuation (we have corrected grammatical errors in the quotes used in the Hungarian version of this article). This is presumably because some parts of the Hungarian documents were included as poor quality translations of Chinese documents. Several details mentioned in the documents have been confirmed by other sources, including Chinese online reports.

The Prime Minister’s Cabinet Office has not responded to our detailed questions sent more than a week ago.

In its reply, Rail Cargo Hungaria stressed that they will only have a role in transportation once this project is up and running.

“Our company […] will only organize rail freight transport between China and Central and Eastern Europe on the routes currently possible, if the Hungarian and Chinese governments conclude an agreement on this project. We are not involved in the investment [part],”

the company said. They added that they will indeed heavily rely on the BILK terminal “as it plays a key role in container traffic between the two countries”.

Liberal Momentum party MP Márton Tompos, who is scrutinizing Chinese influence in Hungary, has also obtained information about the chemical trade hub project. In his view, the project carries long-term risks to national security, as it would tie Hungary’s economy and infrastructure to China even further, and would also make the Hungarian governing elite even more dependent on Chinese money. Tompos told Direkt36 that he believes the transport and transhipment of such a large amount of chemicals to Budapest would be difficult to be accepted by the local population, and the local opposition in the 23rd district is already considering various options for protest.

The Budapest Mayor’s Office claimed it had not received any information about the planned project. “The mayor [opposition politician Gergely Karácsony] requests the government to provide official information and documents on the matter with immediate effect,” his office wrote. They added that “the mayor is ready to use all possible legal and political means to ensure that the planned chemical trade hub cannot be built” in Budapest.

“Environmentally friendly” chemical shipments to Budapest

On the morning of March 7, 2023, an unusual group of people walked through the freight yard of the BILK cargo terminal on the border of Budapest’s Soroksár district and the suburban city of Dunaharaszti. Although they wore safety helmets and neon green visibility vests, they were wearing suits, ties and women’s suits under their safety clothing. This group of Hungarians and Chinese waited in the shade of stacked cargo containers for a freight train carrying Chinese goods to run into the station. The freight train was decorated with the flags of the People’s Republic of China and Hungary.

“Hungary attaches great importance to the long-term development of the two countries’ trade in goods, to increase China’s rail transport capacity to Europe through our country, and to offer us as an investment destination for Chinese companies,”

Bence Tuzson, State Secretary of the Prime Minister’s Cabinet Office wrote on his Facebook page about the train’s arrival. “Railways offer an environmentally friendly and sustainable solution for transporting large volumes of goods,” he added.

In addition to the small celebration of a Chinese train’s arrival, confidential talks were also held that day at the BILK terminal on the Sino-Hungarian chemical trade hub project, according to a ministry document obtained by Direkt36.

“At the meeting, the two sides formally announced behind closed doors that the project will be established between Záhony (+BILK) and Bazhou in China. (…) At the meeting, both sides expressed that they are looking forward to working together and have high expectations for the materialization of the project,” the document writes. It also outlines the further schedule. In April, negotiations were scheduled to take place in China (a report in Chinese was already published on it), while in May, talks and a site visit were planned in Hungary. The document states as a fact that “the two parties will conclude the cooperation agreement in China in September 2023.”

Photos published by Tuzson of the March 7 event also show that the meeting was attended by Rail Cargo Hungaria CEO Imre Kovács, and there were unnamed online participants from China too. According to an internal document, they were, among others, members of the Standing Committee of the Chinese Communist Party’s local branch (Xinjiang Province, Bazhou County), as well as the local vice-governor. In other words, political representatives of the planned Chinese chemical trade hub’s site attended the meeting.

According to the Hungarian ministry documents obtained, China wants to transport the chemicals by rail for two reasons. Firstly, sea transport is time-consuming and often unpredictable due to congestion in ports – rail transportation is a good alternative. The second reason is that, in China, chemicals have been transported domestically by trucks until now, but “the regulation is now changing, and the Chinese state is establishing the legal and infrastructure environment for rail transport”. Chemicals sent to Hungary would be loaded onto trains in the western Chinese Xinjiang Uygur Autonomous Region, in the town of Korla, Bazhou county.

According to the attached maps, the chemicals would be transported to Hungary via Central Asia, mainly via the Russia-Ukraine route, entering Hungary at the Záhony border crossing. As the railway gauge – the distance between the rails of a pair of rails – used in the post-Soviet area is about ten centimeters wider than the European standard, rail shipments from the East would first have to be loaded onto standard gauge at Záhony.

The documents do not specify the exact location of the transhipment and chemical trade hub in Záhony, at the Ukrainian border. However, the situation is fundamentally affected by the fact that the Russian-Ukrainian railway crossings were blown up at the very beginning of the Russian invasion last year.

“This whole Chinese project will only work for Záhony if Russia and Ukraine can be interconnected by rail again in the same way as they were in 2021,”

an expert on rail development with close ties to the government told Direkt36. “The New Silk Road no longer works here, Záhony has become a dead end,” the expert added.

However, Hungarian and Chinese documents obtained by Direkt36 do not mention the changed geopolitical situation due to the war and still count on Záhony’s participation. For example, a Chinese-language summary of the Asia-Pacific Economic Cooperation’s (APEC) E-Commerce Business Alliance (ECBA) – an organization overseen by China’s Ministry of Commerce – continues to refer to Záhony as an important hub for East-West rail transport and a port of entry and gauge-changing to the EU. This document was written in the spring of 2023.

“If such a [large-scale] investment will indeed take place, I suspect that it will be given the status of a ‘project of major national economic importance’, hence the local municipality will have minimal involvement,”

mayor of Záhony László Helmeczi wrote us. (Hungary’s government frequently designates larger investments as ‘projects of major national economic importance’, establishing direct governmental oversight to prevent local municipalities from interfering with – and benefiting from – them.) The mayor has not yet received any request or information about the chemical trade hub project. According to him, several Chinese investors have visited the area in the last decade, and there have been rumors of a major rail infrastructure investment for years, but “these inquiries have not yet resulted in anything tangible”.

If Záhony’s situation does not change, it will strengthen the role of the other potential chemical trade hub site, the BILK terminal in Budapest. The war in itself does not prevent freight trains from China entering Europe – either via Russia, crossing the Belarusian-Polish border into the EU, or bypassing Russian territory from the south via the Caucasus and Turkey.

Moreover, a Hungarian ministry document mentions the combination of sea and rail transport of Chinese goods, and even says that “trade and transport should not be limited to chemicals only, but all kinds of goods from China could be served by the BILK terminal”. According to the document, Chinese goods depart from Qingdao and other major Chinese ports, are loaded onto trains in the ports of Piraeus, Koper or Rijeka, and arrive at the BILK terminal from the south.

“Supported by Minister Antal Rogán”

Preparations for the establishment of the chemical trade hub in Hungary have been going on behind the scenes for at least a year and a half. According to the documents, the project is being coordinated from the Chinese side by the Chinese Ministry of Commerce and its subordinate institutions, including the APEC-ECBA’s working group on China-Hungary digital trade cooperation. The meetings officially started in January 2022, to which the two Hungarian companies, Rail Cargo Hungaria Ltd. and Acemil Plc, were already invited.

Rail Cargo Hungaria is owned by Austrian State Railways, and has long been a major player in Hungarian rail freight transport. It was created through the privatization of the Hungarian State Railways’ (MÁV) freight transport business in the late 2000s. The company is also the majority owner of the BILK cargo terminal in Budapest.

Acemil – full name originally Asian-Central Europan Intermodular Logistics – is not a company with such a strong track record. Although they were also invited to the January 2022 meeting, the company was only founded on February 7, 2022 according to company registry data. The founder and managers of Acemil do not seem to have any experience in rail freight transport according to publicly available information. In addition, according to their recent company accounts, they had neither employees nor revenue last year, and made a loss of HUF 400,000 (€1,000). At the end of May 2023, when we visited their official address, the company name was not displayed either on the gate of the building where it was registered or on the third floor door of their office. They have no website either.

The founder of Acemil, Dr. Péter Laky-Takács, had previously served as Hungarian consul in Cluj-Napoca (Romania) and Toronto, and had also worked as chief of staff to Kristóf Altusz, then-Deputy State Secretary for Foreign Affairs and the Prime Minister’s envoy negotiating the Central European University’s legal status (Altusz is currently the diplomatic director of President Katalin Novák. The Central European University was forced to leave Hungary and has since relocated to Vienna). A social media profile of Laky-Takács reveals that he is an old friend of one of the key figures in the Rogán-led Hungarian government communications team, government spokesman István Hollik. They appear together in pictures, for example, while sailing on Lake Balaton, or standing in shallow water wearing swimming trunks.

Laky-Takács sold Acemil to a private equity fund called Tibidabo in June 2022, four months after the company was founded. As Direkt36 wrote in an earlier investigative article, private equity is a scheme that pro-government business circles prefer to use to hide the identity of the real owners.

Other company registry data clearly link Acemil to Antal Rogán’s entourage. Dr. Veronika Antal, CEO of Acemil, holds a similar position in a real estate company registered at Aulich Street 3. This is the former office of Balázs Kertész, a lawyer and long-time confidant of Antal Rogán. The office is still owned by Monavis Consulting Ltd, Kertész’s consulting firm. Acemil was originally registered in a property on Vörösmarty Square owned by a business interest of pro-government businessman István Száraz. In May 2023, however, Acemil relocated to the same Aulich Street property where an earlier investigation by Index.hu revealed that Antal Rogán and Balázs Kertész regularly held meetings, sometimes together with Árpád Habony, PM Viktor Orbán’s spin doctor and political advisor.

According to ministry documents obtained by Direkt36, in July 2022, the working group preparing the Sino-Hungarian rail project held a second online meeting, where a strategic cooperation agreement was signed with Rail Cargo Hungaria and Acemil. Although not mentioned in official documents, a report on the meeting found on a Chinese news site also mentions the name of Dr. Balázs Kertész as an “internationally renowned lawyer” who also attended the meeting. This Chinese article also claims that

“Acemil Plc has a vast railway network in Eurasian countries and is committed to being a key partner of the Belt and Road countries.”

This article appeared on the long-established Chinese news site China.com, which claims to adhere to official government policy and publishes “reliable” and “central” material. A Chinese source, at the request of Direkt36, checked the Chinese company registry of the site’s publisher and found that one of its owners is a Chinese state media outlet. We contacted the site to find out exactly what the source of the article about Kertész and Acemil was, but did not receive a reply.

China’s State Railways University also published a report on the online meeting with pictures, including Imre Kovács, who heads Rail Cargo Hungaria, and Péter Laky-Takács, who founded Acemil, but the face of Balázs Kertész is not clearly recognizable, and he is not named in the text. According to the Chinese university, the meeting was initiated and organized by the Hungarian Ministry of Technology and Industry, and the topics officially discussed were “opening up new routes for China-Europe railways in Europe” and “the possibilities and mode of operation of overseas warehouse construction along China-Europe railways”. On behalf of the Hungarian ministry, Deputy State Secretary Ferenc Hizó was present at the meeting. (The head of the ministry, László Palkovics, resigned shortly afterwards and the ministry was abolished.)

According to the leaked documents, at this July 2022 meeting it was agreed that “the APEC-ECBA Digital Trade Innovation Committee would be responsible for the Chinese part of the project, while Acemil Plc and Rail Cargo Operator Hungaria Ltd would provide transport and other logistics services outside China, and China State Railways would provide the transport and other logistics services inside China”. According to the document, it was at this “meeting that the idea of rail transport for chemical trade between Europe and China was first raised and discussed in public for the first time”.

In September 2022, a third meeting was held, in which the leadership of Bazhou County from China took part. “The timetable for the implementation of the project was set and the plan for the establishment of the European hub was agreed. The APEC-ECBA Digital Trade Innovation Committee has recommended the location of the European hub and has already started lobbying for the location in Hungary at this meeting, due to its good relations with the country,” a document from the Prime Minister’s Cabinet Office writes.

According to the document, Hungarian lobbying for the chemical trade hub to be located in Hungary was carried out with the support of the Prime Minister’s Cabinet Office, including the participation of an unnamed state secretary in one of the meetings. Initially, Germany (Duisburg) and Poland (Małaszewicze and Łódź) were competing for the project, but the Chinese, according to the document,

“in view of the good relations between us, officially notified Hungary first so that we could gain a competitive advantage and the project would not be carried out in Poland or Germany.”

The documents state, that the project also needed the support of the Hungarian government, which, they said, required a letter of intent with the specific argument that the establishment of a European chemical trade hub in Hungary “will support the supply chain security and help the electric car and battery industries, in which Hungary is a world leader. […] Our country wants to become a gate to Europe [for China], which has already been recognized by many Chinese companies.” The document also highlights that it must be stressed in the letter of intent that the Hungarian government is supporting the project and that it specifically “recommends Záhony and the BILK terminal, as well as Acemil Plc and Rail Cargo Operator Hungaria Ltd for the implementation of the project – both companies are in advanced negotiations with the Chinese side.”

Orbán’s government accepted these recommendations. According to a later document, “on February 3, 2023, Minister Antal Rogán sent a letter of support to the Chinese counterparts”. The Chinese side then “made its official recommendation in Hungary’s favor” and held talks with the leaders of Bazhou County, the site of the planned Chinese chemical trade hub. This was followed up by the meeting at the BILK terminal in Budapest on March 7, where it was announced behind closed doors in the presence of Bence Tuzson that China’s European chemical trade hub would indeed be established in Hungary.

The documents do not give details of the total cost and financing of the project in Hungary, but repeated references are made to Hungarian government support and to the fact that the Sino-Hungarian chemical trade hub project is part of the “Belt and Road Initiative”.

Chinese projects of this type follow a similar pattern everywhere, and the documents also mention a similar project for the Budapest-Belgrade railway line, which is being financed 85 percent by Chinese loans and 15 percent by Hungarian co-financing. Similarly, the Fudan University Budapest campus project is also part of the “Belt and Road Initiative”, which project, according to government documents obtained earlier by Direkt36, would be financed with roughly similar proportions of Chinese loans and Hungarian co-financing. In the case of such projects, this means that Hungarian taxpayers will ultimately foot the bill, as the Chinese loan and interest will have to be repaid.

Millions of containers of chemicals to the Budapest suburbs

According to its website, the BILK terminal currently has more than 184,000 square meters of warehouse space and 23,000 square meters of office space, making it one of the most important logistics centers not only in Hungary but also in the region. The word ’intermodal’ in the terminal’s name refers to the fact that it operates with combined transport solutions, i.e. it is here that goods are transferred from rail to truck and vice versa.

Warehouses for various large companies are scattered across the terminal’s vast area. Because of the long distances, very few people are seen walking between the containers, parking lots and warehouses. Those who work there prefer to drive inside the area. BILK terminal is bordered to the south by the M0 motorway and a wooded grove, and this is also where a giant concrete block with the BILK sign marks the main entrance of the logistics facility.

The nearby Orbánhegy, Millenniumtelep and Farkashegy appear to be neat and developing suburban neighborhoods, the calm being broken only by the huge crane of the freight rail terminal and the constant lifting of containers. The freight rail terminal’s traffic is gradually increasing, and the rail tracks are practically separated from the properties of nearby residents by just a few bushes and a dirt road. Some houses, such as those in Dél Street and Elvira Street, are only a few tens of meters from the rail tracks.

Earlier press releases state that BILK terminal has been operating at near full capacity in recent years and has steadily increased its storage capacity. According to ministry documents obtained by Direkt36, the terminal would need further major development and expansion to serve the chemical trade and distribution between China and the EU.

“In 2022, the value of chemical trade between the EU and China exceeded €60 Billion [more than HUF 22,000 billion]. This trade is currently by sea, which could be steadily shifted to rail. The potential, according to experts, could reach 2,000,000 TEU of goods and 24,000 trains per year,” says the Hungarian ministry document (TEU – twenty-foot freight container, the unit used in transport). According to publicly available information, the total capacity of the BILK terminal in 2021 was 230,000 unit containers.

BILK terminal is also connected to the other “Belt and Road Initiative” project, the Budapest-Belgrade railway line, and as part of that project, the renovation of the freight rail tracks at the terminal is proceeding at a fast pace, local opposition Momentum politician Róbert Koncz told Direkt36.

“Even the Budapest-Belgrade line is a burden for Soroksár that people will not be able to bear,”

he added. As the BILK terminal operates based on commercial contracts, “very few people know what is going on inside, the local government hardly sees anything”.

The documents summarizing the project do not specify which chemicals would be shipped from China to Hungary, only the industries that would use them. It is therefore difficult to assess exactly how dangerous these chemicals are and what risks are involved in their transport and transhipment. But there is still plenty of cause for concern, according to experts and politicians.

Márton Tompos, MP of the opposition Momentum party, said that the problem with the Chinese rail chemical trade hub in Budapest is that, based on past experiences, Hungarian authorities are not enforcing environmental regulations with sufficient rigor.

“In Soroksár, for example, the memory of an earlier house explosion caused by forgotten chemicals buried under a house is still vivid. Locals also have a very bad experience with the way the authorities handle such cases,”

said Tompos, recalling a 2010 case that led to a decade of unsuccessful litigation to compensate the families involved. Another example from the South Pest region is the long-running case of the toxic chemical pollution on Illatos Road in Ferencváros, 9th district, which Tompos said also shows that the Hungarian state does not particularly care about the risks posed by chemicals.

However, a Hungarian businessman who is also involved in international rail transport says that rail transport is in itself much safer than road transport. “The only problem is if there is an accident, which is very rare,” he said, adding that in the case of rail, the risk of accidents is not so much during transport but during transhipment. At the BILK terminal, accidents were rare in the past decade, but there were some. For example, in 2013, two injured people had to be hospitalized when a dangerous substance leaked from a tanker rail car at BILK. In 2019 a shunting machine derailed, then, in 2020, there was a leaking of vaporous hydrochloric acid at the container terminal. According to the source who is also involved in international rail transport, the risks associated with shipments from China could be increased if, as the leaked documents claim, China is only just switching to transporting chemicals domestically by rail and their regulations are completely fresh.

Gergely Simon, a chemical expert at Greenpeace Hungary, told Direkt36 that, in general, Chinese regulations and practices on chemical storage differ from those in Europe. The problem was illustrated by a 2015 incident in Tianjin, China, the world’s tenth busiest port at the time, when a chemical warehouse exploded, devastating an entire city block, killing 173 people and injuring nearly 800 others. A subsequent investigation revealed that some 3,000 tonnes of 40 types of toxic chemicals were in storage, including 700 tonnes of highly toxic sodium cyanide. It also turned out that the Chinese transport company involved in the accident did not have proper licenses for a long time to store and handle the dangerous substances.

While documents obtained by Direkt36 did not reveal what chemicals were planned to be brought to Hungary, it seems that the project would first serve lithium-ion battery manufacturers and “traditional large chemical factories”, including the ones run by CATL, Wanhua, as well as Germany’s BASF and Covestro. According to the documents, the Sino-Hungarian chemical trade hub will offer “a marketplace for chemicals, a database and digital services” in addition to logistics services.

However, the Hungarian businessman involved in international rail transport says the real risk is not environmental, but rather national security-related, and would mainly arise if China were to gain majority ownership and control of the basic railway infrastructure being built in Hungary.

“When COSCO [China Ocean Shipping Company, one of the world’s largest Chinese-owned transport companies] wanted to buy into the company running the port of Hamburg, it became a big national security investigation and controversy, and they ended up selling them a stake of less than 25 percent,”

the businessman said. “How much of a stake would the Chinese get here? What nationality would the CEO be? How much would the Hungarian authorities allow them to get away with?” – he listed the questions.

China’s COSCO already owns 15 percent of Rail Cargo Terminal – BILK Plc, the company behind BILK terminal. COSCO has long been the majority owner of the port of Piraeus in Greece, where a lot of Chinese goods arrive in Europe. If there were to be a national security investigation in Hungary into further Chinese ownership, it would have to be conducted by the national security agencies that Orbán’s chief of staff Antal Rogán oversees.

We used the Opten service to obtain company registration data.

Cover photo: Chinese President Xi Jinping welcomes Hungarian Prime Minister Viktor Orban in Shanghai, Nov. 5, 2018. Source: Li Tao / Zuma Press / Forum