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Hungary joins Russia's South Stream gas pipeline

Hungary formally signed on Thursday a deal to join Russian gas export monopoly Gazprom's €10 billion South Stream gas pipeline.

The pipeline, which will be jointly built by Gazprom and Italy's ENI, will take 30 billion cubic meters (bcm) of Russian gas to southern Europe a year.

“Stable cooperation in the oil and gas sectors is a joint contribution by Russia and Hungary into Europe's energy security,” Russian President Vladimir Putin said after the signing ceremony in the Kremlin.

The deal was first agreed earlier this week in Budapest by Hungarian Prime Minister Ferenc Gyurcsány and Russian First Deputy Prime Minister and chairman of Gazprom Dmitry Medvedev.

Putin's protégé and Russia's likely next leader, Medvedev is widely expected to win in this Sunday's presidential election.

“I'm convinced that these agreements serve the interests of Hungary, the EU and Russia... I found First Deputy Prime Minister Medvedev a tough but constructive negotiating partner,” Gyurcsány said in the Kremlin.

Last month Russia agreed to route the South Stream through Bulgaria and Serbia, marking major victories in a 'pipeline war' with the European Union.

Analysts see the South Stream project as posing a challenge to the rival US and EU-backed Nabucco pipeline scheme.

Under Nabucco, gas would come from ex-Soviet Azerbaijan to south Europe via Turkey in an EU effort to diversify energy sources away from reliance on Russia.

Thursday's deal with Hungary sent yet another blow.

“Hungary has realized that there is no alternative to cooperating with Russia,” Gyurcsány said.

Under the South Stream scheme, Russian gas will go from the Novorossiisk port, travel 900 kilometers under the Black Sea, re-emerge on the Bulgarian coast and then continue through one of two onshore routes.

If it goes south, it would then pass Greece and reach Italy's southern Puglia region.

Going north, which is now looking more likely, gas would pass through Serbia, Hungary, Romania, the Czech Republic and Austria before arriving in Italy. (Reuters)