Russia, Hungary sign "South stream" pipeline deal
Russia scored another victory Thursday in its push to tighten domination of European energy supplies, signing a landmark deal with Hungary for a new natural gas pipeline.
President Vladimir Putin, who was joined by Hungarian Prime Minister Ferenc Gyurcsany for a signing ceremony at the Kremlin, said the South Stream project was a "joint contribution by Russia and Hungary to Europe`s energy security."
The 10 billion euros ($15 billion) pipeline will go through Hungary after crossing Bulgaria and Serbia, and it further undercuts an alternative project -- the Nabucco pipeline, which has been backed by the United States and the European Union as a way to ease Europe`s reliance on Russia for energy.
"If the project is implemented, the role and significance of Hungary as an energy supplier to Europe will grow and its own energy security will be guaranteed," Putin told Gyurcsany before the signing.
Gyurcsany told Putin the Russian pipeline was advancing faster than its EU-backed alternative, "You were faster than Nabucco," he said.
The deal also envisaged a major gas storage facility in the Hungary, turning the EU member into a major hub for Russian energy supplies.
The European Union and the United States are strong supporters of the alternative Nabucco pipeline, which would deliver gas from the Caspian region, and potentially Central Asia, westward through Bulgaria, bypassing Russia. The project, however, has been slowed by high costs and uncertainty over sources of supply.
Moscow dealt a heavy blow to Nabucco last fall after reaching a deal with Turkmenistan and Kazakhstan for those countries` Caspian Sea gas supplies to flow through Russia, draining the main potential source for the EU-backed pipeline.
Russia`s state-controlled OAO Gazprom gas monopoly has since moved to secure pipeline-related deals with Bulgaria and Serbia in an effort to win over potential Nabucco customers and pre-empt Nabucco in prospective markets.
The United States weighed in publicly on the struggle, with an article published Thursday in the Hungarian daily Nepszabadsag by U.S. Deputy Secretary of State Daniel Fried.
"Now is not the time for our attention to be diverted by South Stream, a pipeline that will be at least three times more expensive than Nabucco, and that is designed by a monopolist to stifle competition," Fried said.
Putin said that South Stream -- with an annual capacity of 30 billion cubic meters (1.15 trillion cubic feet) -- was "clearly feasible and backed by resources." "We wouldn`t complain if they want to dig up soil and bury their metal pipes," Putin said in a sarcastic reference to Nabucco.
Gyurcsany said Hungary, which is a participant in the nascent Nabucco effort, would welcome alternate sources of energy, saying it was better to have two pipelines instead of one.
Putin, however, dismissed the alternative as unfeasible.
"It`s possible to build two or three or even five pipelines," he quipped. "The main thing is what to fill them with."
Experts said that Gazprom had now gained the upper hand against Nabucco.
"The momentum is really with the South Stream pipeline now," said Andrew Neff, an energy analyst with Global Insight in Ankara, Turkey.
"The onus is really going to be on the EU, because we may see some of the commercial support for Nabucco evaporate," he said.
EU efforts on Nabucco have been slowed by having to deal simultaneously with the many countries and interests in the 27-member union -- a complication Russia and Gazprom do not have.
Gergely Boszormenyi Nagy, an analyst with Budapest`s Perspective Institute, said Gazprom was trying to get bilateral agreements with each individual country.
"This is one of the most important obstacles to the development of a common EU energy policy, which Russia is knowingly using," he said.
Gyurcsany`s support for South Stream has drawn criticism from his Hungarian coalition partners and the main center-right opposition party, Fidesz, which called on Gyurcsany to not sign the agreement.
Russia currently now supplies up to 40 percent of Europe`s gas imports and a quarter of its oil.
Associated Press Writer Pablo Gorondi contributed to this report from Budapest.
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