Hungary opens the way for South Stream pipeline

Energy Trade

In approving work on the South Stream Pipeline, the Hungarian government was conducting authorization procedures for building and operating pipelines that are not in line with EU regulations, a European Commission spokesperson announced yesterday.

Hungary’s Parliament on Monday approved a law that would open the way for construction of the Russian-backed South Stream natural gas pipeline. The bill proposed by Antal Rogán, the head of the ruling Fidesz party’s parliamentary group, makes it possible for any gas company that is not a certified transmission system operator, to build a gas pipeline. The law states that the only requirement that the pipeline construction company would need is approval of the Hungarian Energy Office. In this case, international coordination bodies, including the EU, would have no jurisdiction, the legislators say.

The EC said it was in contact with Budapest for further clarifications. EC spokesperson Anna-Kaisa Itkonen said yesterday that such authorizations need to be based on objective and non-discriminative criteria and published transparently.

Hungary is seeking to start construction of the pipeline aimed at circumventing Ukraine within six months, Csaba Baji, head of state-owned MVM Zrt, which set up a joint venture with Gazprom to build and operate the pipeline, said in an October 27 interview with the Napi Gazdaság daily newspaper.

The new company doesn’t have an operating permit, according to a report from Bloomberg. South Stream is “extraordinarily important” for Hungary because it enhances the security of gas supplies to the country, János Lázár, the minister in Charge of the Prime Minister’s Office, told reporters on October 22. The South Stream gas pipeline was projected to deliver gas to south and central Europe via the Black Sea and the Balkans, bypassing Ukraine.

The Commission has been pressuring member states to stop the building of the pipeline. Last year it started an investigation claiming the project contradicted the European Union’s Third Energy Package regulations. Essentially, to receive EU permission, the Russian energy giant Gazprom would have to agree to let other suppliers use the system, but Gazprom thus far refuses to do so.

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