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Budapest defends South Stream move



By Upstream staff 

Hungary's government was on the defensive today over its decision to sign up to Gazprom's South Stream gas pipeline, a project which some observers fear will scupper plans for the EU-backed Nabucco link.

Nabucco will help reduce the EU's dependence on Russian energy supplies. Hungarian player MOL is part of the Nabucco consortium.

Hungarian Prime Minister Ferenc Gyurcsany will go to Moscow tomorrow to sign up for South Stream, the rival to the EU's Nabucco project. Serbia and Bulgaria have also joined the South Stream project.

Zsolt Nemeth, chairman of parliament's Foreign Affairs Committee and the opposition Fidesz party's foreign affairs spokesman told a committee hearing today that Gyurcsany should not be allowed to sign up without a parliamentary vote.

"The fundamental problem of Fidesz with the South Stream pipeline is that it increases the unilateral dependence of Hungary on Russia (for gas supplies)," Reuters quoted Nemeth, head of foreign policy for the main opposition Fidesz party, as saying.

Gyurcsany has frequently been criticised for his closeness to Russia. Hungary sources 80% of its gas needs from Russia.

Hungary is a key transit point for Russian gas piped from Ukraine and Gyurcsany agreed to join the €10 billion ($14.82 billion) South Stream project during a visit by Dmitry Medvedev, President Vladimir Putin's protege, earlier this week.

The US has been pushing the European Union to ensure that Nabucco, a 3300 kilometre, $6 billion pipeline across Turkey to central Europe, gets built and warned last week that South Stream could end up costing between $20 billion and $30 billion.

The South Stream deal will see Gazprom and Eni lead a project to pipe gas through the Balkans to Italy, Under the deal to be signed tomorrow, a spur would be built to connect Hungary to the trunkline.

Work on the Nabucco link is expected to start in 2010. Nabucco is backed by a six-company consortium led by Austria's OMV and also including Hungarian oil company MOL.

Gyurcsany's Socialist-led government said it remained committed to Nabucco and that it expected rising energy demand in both Hungary and Europe to support both projects.

Some analysts say that South Stream will soak up demand if it is built and make it harder for Nabucco to sign up customers which will place the financing of the project in jeopardy, thus increasing Gazprom's stranglehold on Europe.

"The planned capacity of Nabucco would be 30 billion cubic metres. We are aware that this pipeline alone would not solve the supply problems of either Hungary, nor Europe," Reuters quoted Economy Minister Csaba Kakosy as telling the committee meeting.

He said after talks with EU Energy Commissioner Andris Piebalgs yesterday, the bloc's energy chief said Hungary's participation in the South Stream project was not a problem as long as it also remained committed to Nabucco.

Russia's Gazprom supplies Europe with about a quarter of its gas needs, and consumption in the 27-member bloc is projected to rise by up to 30% in the next 20 years.

"There is big demand for Nabucco ... however, this does not run counter to the fact that the European Union will also need the capacity provided by the South Stream project," Foreign Minister Kinga Goncz said.


Wednesday, 27 February, 2008, 11:16 GMT  | last updated: Wednesday, 27 February, 2008, 11:16 GMT

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