Hungary to Build Russian Pipeline Over EU Objections

Prime Minister Viktor Orbán has no intention of withdrawing from the South Stream pipeline.

Hungarian prime minister Viktor Orbán said on Tuesday his country will go ahead with the construction of its part of Russia’s South Stream gas pipeline, despite objections from other European Union member states and the United States.

Orbán, an Hungarian nationalist, made his statement while visiting Serbia, a country close to Russia that will host part of the same pipeline.

South Stream, due to be completed in 2018, has divided Europe since Russia invaded and annexed the Crimea in March, a territory that was formerly governed by Ukraine.

The European Commission put the approval process for the pipeline on hold, saying it did not comply with its regulations on ownership and access. Bulgaria subsequently suspended its involvement in the project. Its likely future prime minister, Boyko Borisov, said last month he would scrap a tender awarded to a consortium led by the Russian construction company Stroytransgaz for the Bulgarian leg of the pipeline.

South Stream had divided Bulgaria internally as well with the suspension of the country’s involvement in its construction contributing to the collapse of the ruling coalition.

Austria, however, has signed a bilateral agreement with Russia to remain involved in the project. Its energy company OMV is a partner in South Stream together with Russia’s Gazprom

South Stream is designed to bypass Ukraine which currently pipes roughly half of Russia’s gas exports to Europe. The submarine part of the pipeline would pump Russian gas to Bulgaria’s Black Sea port of Varna before it extends overland through Serbia, Hungary and Slovenia.

The pipeline’s capacity should amount to more than sixty billion cubic meters. It is estimated Russia uses just 60 percent of its present pipeline capacity. At the same time, its European customers are actively looking for ways to reduce their dependence on Russian gas — especially after Russia shut off gas transits to Ukraine last month for the third time in six years.

South Stream, then, is not so much a commercial as a political project that would allow Russia to put pressure on its former satellite state Ukraine by denying it gas while continuing to service its European customers.

Hungary relies on Russia for most of the oil and natural gas it uses. It negotiated a $13.7 billion loan from Russia in January to help pay for the construction of a nuclear power plant that should cover about 40 percent of its electricity needs.