Hungary Signs Up for South Stream

APGyurcsany greeting Putin on Thursday at the Kremlin, where Hungary agreed to route the pipeline through its territory.
A triumphant President Vladimir Putin praised Hungary for joining the South Stream pipeline on Thursday and poured scorn on the rival Western-backed Nabucco project.

Putin and Hungarian Prime Minister Ferenc Gyurcsany oversaw the signing of an agreement in the Kremlin that will see a stretch of the $10 billion pipeline running across the southeastern European country.

It came after First Deputy Prime Minister Dmitry Medvedev, Putin's chosen successor in Sunday's presidential vote, struck an initial agreement with Hungary in Budapest on Monday.

Under the deal, Gazprom and a Hungarian state company to be named later will set up a 50-50 joint venture to build the link connecting Russian gas with Central European consumers.

It was also agreed to build a 1-billion-cubic-meter storage facility in Hungary.

Gyurcsany said, "Hungary [has] realized that it had no alternative to cooperation with Russia," and added that Nabucco, a project to supply Europe with Central Asian and Caspian gas, had yet to make Hungary a firm offer.

Referring to Nabucco indirectly, Putin was derisive about alternatives to South Stream, saying that while it was possible to join another project, "it is worse than working with Russia. ... You can build two, three or five gas pipelines. The question is what products you pump through them and where you get them."

In an even blunter put-down, Putin also said: "If someone wants to poke the ground to bury iron there in the form of pipes, please do, we don't mind."

Nabucco, the project favored by the European Union and the United States, has stalled because of a lack of commitments from key producing countries, including Turkmenistan.

Nabucco is widely seen as a potential rival to South Stream because both pipelines will transit almost the same European countries, have identical capacity and plan to come on stream in 2013.

Europe's projected explosive growth in gas demand will eventually leave enough space for both pipelines, said a spokesperson for Nabucco at Austrian gas firm OMV, which is leading the project. "I do not see a competition between these two projects," Christian Dolezal said. "Europe needs much more energy for a growing economy in the future."

On Thursday, Gyurcsany said he continued to hope that Nabucco would provide more diversity in the future.

The Hungarian leg of South Stream will cost $2 billion to build, Gyurcsany said earlier this week.

Hungary's decision to back the Russian pipeline comes as it gathers an impressive head of steam. Serbia signed up to the project in Belgrade on Monday, while Bulgaria did so last month.

Starting on the Russian Black Sea coast, a subsea section of the pipeline will reach Bulgaria. From there, the pipeline will diverge, branching north through Serbia to Hungary and south through Greece to Italy.

Gazprom had considered an alternative route for the northern branch, through Romania, but dropped the option because Romania showed no interest, company spokesman Sergei Kupriyanov said by telephone Thursday.

Talks with Greece on the southern branch of the pipeline are ongoing, Kupriyanov said.

Italy's Eni is Gazprom's partner in building the undersea sections of the pipeline.