Medvedev Welcomes Hungary on Board

APMiller shaking hands with Ilic after signing a pipeline deal Monday in Belgrade as Medvedev, left, and Kostunica clap.
On his first official visit to European capitals since being named the Kremlin's favored presidential successor, First Deputy Prime Minister Dmitry Medvedev was in Belgrade and Budapest on Monday, announcing Hungary's participation in the South Stream pipeline and pledging significant economic and political aid to Serbia.

After talks with Ferenc Gyurcsany on Monday evening, Medvedev said the Hungarian prime minister had agreed to the signing of a deal for his country's participation in the multibillion-dollar pipeline project.

The construction of the South Stream pipeline, which critics say is being pursued by Moscow to disrupt the European Union's attempts to form a common energy policy, was also a central part of the visit to Serbia.

Medvedev and Serbian Prime Minister Voislav Kostunica were present for the signing of the contract by Gazprom CEO Alexei Miller and Sasha Ilic, head of Srbijagas, Gazprom said in a statement. Medvedev is chairman of the board at the state-controlled energy giant, which gained a controlling stake in Srbijagas on Jan. 25.

The deal calls for South Stream to transport at least 10 billion cubic meters of natural gas per year through Serbia. The 400-kilometer pipeline, scheduled to go into operation by 2013, is said to be worth as much as $1.5 billion.

The project is widely seen as competition for the EU's Nabucco pipeline project, which was conceived as a means to reduce Europe's energy dependency on Russia by delivering Caspian gas via the Black Sea and the Balkans.

But Moscow has recently rushed through deals on South Stream with a number of countries, including Italy, Austria and Greece.

"Today's signing is a logical development from the agreement reached January in Moscow," Gazprom spokesman Sergey Kupriyanov said Monday by telephone from Belgrade.

On Jan. 25, President Vladimir Putin was on hand for the signing of an agreement handing the majority stake in Serbian oil major NIS to a joint company controlled by Gazprom Neft. A week earlier in Sofia, Putin won Bulgaria's support for the pipeline.

In Belgrade, Medvedev made some strong gestures about his country's special relationship with Serbia, something that has been highlighted since a number of Western countries last week rushed to recognize Kosovo's unilateral declaration of independence.

Srdjan Ilic / AP
A Kosovo Serb woman rallying against Kosovo's independence on Saturday.
"That recognition complicates the situation not only in Kosovo and Serbia, but in all of southeastern Europe," Medvedev said in televised comments, adding Belgrade and Moscow would coordinate efforts to solve the crisis.

During a visit to the capital's St. Sava cathedral with President Boris Tadic, he offered some comfort to his hosts: "Today it is vital that Serbia feels both economic and moral support from Russia," Medvedev said, Interfax reported.

Kosovo's recognition by the U.S. and major European powers last week has further soured Moscow's relations with the West. In his sharpest comments so far, Putin last Friday said Kosovo's declaration represented "a terrifying precedent" and warned the West that the decision would "come back to knock them on the head."

Also on Friday, Russia's envoy to NATO, Dmitry Rogozin, warned the alliance against overstepping its mandate in Kosovo and said Moscow might be forced to use "brute military force."

Rogozin's comments sparked a war of words between Washington and Moscow.

Nicholas Burns, the U.S. State Department's third-ranking official, lambasted Rogozin's statement. "This cynical and ahistorical comment by the Russian ambassador should be repudiated by his own government," Burns said in an online discussion, The Associated Press reported.

The Foreign Ministry retorted accordingly. "Is it not cynical to humiliate the Serbian people openly and tie Belgrade's Euro-Atlantic prospects to their agreeing to Serbia's dismemberment?" the ministry said in a statement posted on its web site Sunday.

In Budapest, Medvedev and Prime Minister Gyurcsany told reporters that Hungary would also join South Stream. Gyurcsany will sign a deal on Thursday in Moscow, Interfax reported.

Gazprom CEO Miller said Hungary was not the pipeline's final destination. "In the near future you will learn about negotiations on the further development of this project," Miller said, Interfax reported.

Analysts said Monday that Russia's moves on South Stream would not necessarily sound a death knell to Nabucco.

"Basically it is neither positive nor negative," said Alfred Reisenberger, of UniCredit.

Reisenberger argued that, while South Stream might indeed have been conceived to derail Nabucco, the EU-sponsored project would probably not be stopped.

"Nabucco has become too big to fail," he said by telephone from Vienna.

The United States has thrown its weight behind it. "The Nabucco pipeline will be built, I am convinced, because it makes commercial sense," Deputy Assistant Secretary of State Matthew Bryza was quoted as saying Friday in Brussels.

Reisenberger said that, apart from Washington, German energy giant RWE was another heavyweight behind the pipeline.

RWE CEO Jurgen Grossmann told reporters Friday that his company was bent on delivering gas from Nabucco in 2012 or 2013.

Critics have cast doubt on the project worth $7.4 billion because of a lack of commitment from major producing countries.