Hungary says Russia-Ukraine gas spat justifies South Stream project

The Hungarian government Wednesday said that the latest gas pricing dispute between Russia and Ukraine, which has raised fears of European gas shortages, justified its recent controversial decision to sign on to Russia’s South Stream pipeline.

The state-owned Gazprom announced Tuesday that exports to Ukraine would be cut by 50 per cent and Ukrainian officials confirmed the reductions had taken place.

A similar cut-off in late 2005-early 2006 reduced volumes of fuel delivered to Europe for two days.

Hungary, which receives around 80 per cent of its gas from the Ukrainian pipeline, its only source of foreign gas, was amongst the worst affected.

Since then, it has been attempting to diversify its supplies, and last Thursday Prime Minister Ferenc Gyurcsany flew to Moscow to sign up to Gazprom’s South Stream pipeline.

The pipeline is expected to bring around 30 billion cubic metres of gas annually under the Black Sea and through Bulgaria and Serbia to Hungary, Italy and Austria.

While so far Hungary’s gas supplies have not been affected by the latest row, the government said that the dispute showed it had made the right decision.

“The Russia-Ukraine pricing dispute again draws attention to the risks, which can only be moderated by responsible government policies,” government spokesman David Daroczi said in a statement.

Gyurcsany, of the senior coalition Hungarian Socialist Party, came under fire from opposition parties and US officials when he signed up to South Stream, which is seen as a rival to the European Union- backed Nabucco gas pipeline.

The decision was seen as a blow to the Nabucco project, which aims to reduce Europe’s reliance on Russian gas by bringing in Central Asian and Middle Eastern gas through Turkey.

It was also particularly unpopular domestically, as many fear that the Socialists, the natural successors of the communist regime that ruled until 1989, are getting too close to their former overlords.

Gyurcsany says that there is room enough for both the South Stream and Nabucco pipelines, but most analysts believe that this is not necessarily the case.

With Hungary, Serbia and Bulgaria all signed up to South Stream, analysts believe that the Russians are slowly creeping ahead of Nabucco, which has still to prove it can source enough gas to attain its mooted capacity of around 30 billion cubic metres annually.

The Hungarian arm of the South Stream pipeline is expected to supply around 10 billion cubic metres per year – roughly two-thirds of Hungary’s current needs.

The fact that Gyurcsany has already called Nabucco “a dream” and dithered for months before backing it have also raised fears that Hungary is less than committed to the project.

However, Daroczi reiterated that Budapest stood firmly behind the project: “It is our priority to reduce the risks. This is why the government committed itself to the building of the Nabucco pipeline.”

Source: Trend CapitalNews Agency

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