Russia’s Gazprom and Hungarian bank sign deal to develop South Stream gas pipeline in Hungary

Gazprom, Hungarian bank sign South Stream deal

BUDAPEST, Hungary — Russian gas monopoly Gazprom and the state-owned Hungarian Development Bank signed a deal Friday setting up a company to develop Hungary’s part of the South Stream gas pipeline project.

The agreement is considered another step in Russia’s efforts to consolidate its position as Europe’s primary gas supplier and undermine the alternative Nabucco pipeline plan backed by the European Union.

Greece, Bulgaria, Serbia and Slovenia have also signed up for South Stream, while press reports in Russia say Austria is expected to enter the deal soon.

South Stream would exit Russia under the Black Sea and enter the EU through Bulgaria. A northwest route would supply Serbia, Hungary and Austria, while another would ship gas west through Greece and into southern Italy.

Hungary joined the Russian-led project in Feb. 2008 and agreed to set up a joint venture with Russia to finance, build and operate the pipeline in Hungary.

Friday’s agreement was signed by Gazprom’s deputy chief executive Alexander Medvedev and MFB development bank chief executive Janos Eros.

“We have no doubt that South Stream will become an extra safeguard for the reliability and flexibility for Russian gas supply to European markets,” Medvedev said in a statement posted on the company’s Web site.

South Stream’s construction — funded chiefly by Gazprom and Italy’s Eni — is planned to start this year and to be completed by 2015, carrying natural gas to Central and Western Europe while bypassing Ukraine.

Pricing disputes between Russia and Ukraine, a key transit country, caused gas shortages in Europe last winter.

Despite its role in South Stream, Hungary has also repeatedly insisted on its commitment to the Nabucco plan, which would deliver gas from the Caspian Sea region westward via the Caucasus, bypassing Russia, and into Bulgaria via Turkey.

Friday’s deal was completed during a visit to Hungary by Russian Deputy Prime Minister Viktor Zubkov, who took part in a session of a committee promoting economic cooperation between the two countries.