Hungary faces an unprecedented water crisis. There are several causes, among them the years-long campaign by Viktor Orbán’s government to lure heavily polluting and water-hungry Chinese battery factories to the country.
During Orbán’s 16 years in power, he guaranteed to Chinese investors vast amounts of water necessary for the production of batteries at Chinese-owned factories in the city of Debrecen and elsewhere.
Climate-driven droughts and soaring industrial water demands have made those promises impossible to keep without imposing unacceptable consequences on the population. That means difficult decisions have been dumped firmly in the lap of the country’s new leader, Péter Magyar.
Magyar is facing an immediate environmental emergency characterized by a severe nationwide drought and critically low water levels in rivers and groundwater. Following his victory in the April election, Magyar is also charting a path starkly different from the acquiescence of the Orbán government, and Chinese investors are falling in line.
Hungary is drying out rapidly. April weather brought devastating conditions for domestic food production. Total rainfall over a recent 90-day period fell 20 mm-70 mm (0.8”-2.75”) below average.
The agricultural sector serves as a main pillar of the Hungarian economy. Crop production has reached a critical tipping point. Last year, drought destroyed 550,000 hectares (1.4m acres) of farmland. Current projections show this year will be significantly worse. Over 90% of Hungary’s total land area is at immediate risk of severe drought damage. Farmers cannot sustain crop yields without radical intervention.
The agricultural crisis is worsened by foreign factories with significant water requirements. Hungary has positioned itself as a European hub for the electric vehicle (EV) supply chain. Heavy investments come primarily from Chinese manufacturers, which the Orbán government said totaled $16bn.
Battery manufacturing is an incredibly water-intensive process. Refineries and cooling systems require millions of cubic meters of fresh water daily. This industrial consumption drains local aquifers. It directly competes with the irrigation needs of local farmers. The state faces a hard choice: fuel industrial growth or protect domestic food security.
The intersection of Hungary’s water crisis and Magyar’s election has major implications for these multi-billion dollar investments, not least the new government’s pledges of support against dirty and intrusive foreign industry.
These include:
- The future of accelerated permits: Under Orban, EV battery projects had their environmental impact assessments fast-tracked. Magyar’s Tisza Party has vowed to force factories to undergo standard, lengthy regulatory tracks.
- Review: Magyar has promised a comprehensive review of the ongoing projects, including the 546-acre CATL flagship gigafactory in Debrecen.
- Supply prioritization: The government will prioritize regional drinking water and agricultural irrigation over heavy industrial utility.
- Forced infrastructure costs: To continue construction or operations, factories will likely be legally forced to fund and build their own gray-water recycling systems.
- Regulation: Magyar is establishing an independent body to monitor heavily polluting industries, with a special focus on battery facilities.
- Fines: The era of minor, token fines for environmental leaks is over. The new administration will implement heavy fines or outright operational suspensions for repeated water, air, or toxic materials contamination by the industrial solvent, NMP.
In recent weeks, the Chinese electric vehicle giant BYD has (rather tellingly) ordered contractors building its Hungarian factory to comply with the country’s labor laws. The move comes as CATL said its multi-billion-euro factory near Debrecen started battery cell production on May 6, reportedly after obtaining all the necessary permits. CATL said it was in compliance with current regulations and would adhere to any new legislation, including on recruitment.
The water emergency is now at the heart of domestic politics. Prime Minister Magyar has started the clock ticking on mitigations for systemic damage. His Tisza government backs Chinese investment but has also issued an immediate water management master plan built on two main pillars:
- Community Involvement: Engaging citizens and local farmers directly in regional water conservation programs.
- Ecological Restructuring: Shifting away from heavy industrial water consumption to prioritize environmental restoration.
Strict regulations on manufacturing plants are being considered, while Hungary faces a shift from water drainage to water retention to aid agriculture. For decades, engineering focused on channeling excess water out of the country via the Danube and Tisza rivers. Now, the country must build large-scale reservoirs to trap seasonal floodwaters.
While Magyar has stated he will not halt or uproot the factories completely to protect Hungary’s sluggish economy, the “free pass” era has ended. Chinese firms will need to prepare for increased compliance costs, public transparency audits, and legal accountability for local pollution. How they respond will mark a defining challenge for the Chinese industry and, by extension, the Chinese political influence that comes with major investment.
David J. Kostelancik is a Nonresident Senior Fellow at the Center for European Policy Analysis (CEPA). He was a career member of the US Senior Foreign Service, holding the rank of Minister Counselor, and served as a deputy coordinator for terrorism prevention and detention in the State Department’s Bureau of Counterterrorism. He was a foreign policy adviser to the chairman of the Joint Chiefs of Staff and deputy chief of mission and chargé d’affaires at the US Embassy in Hungary and in two postings to Russia.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
