Saturday, March 17, 2007

Hungary Decries EU Pipeline Proposal, Supports Russian Proposal

Source: Hungary Breaks Ranks with the EU and Its Neighbors on the Nabucco Project-Eurasia Daily Monitor

Wary of dependence on Russia for its energy demands, the EU last week reconfirmed its commitment to the high priority Nabucco pipeline that would provide gas to the EU from the Caspian region. The European Bank for Reconstruction and Development is prepared to finance seventy percent of the pipeline costs, and the US has played an important role in securing commitments from Azerbaijan and Kazakhstan to supply gas for the pipeline’s initial phase.

Despite the EU’s emphasis on the Nabucco pipeline, actions by Hungary—a critical country to the Nabucco pipeline—might kill the project. Hungarian Prime Minister Ferenc Gyurcsany announced this week that his country supports a competing Russian pipeline proposal that would extend Russian supplies into Central Europe through Hungary. Russia is promising that Hungary would become a hub country for gas distribution, and the Prime Minister suggested that the Russian proposal would provide greater volumes of gas and could come online more quickly than the Nabucco pipeline. The proposed extension of the Russian pipeline into Central Europe would jeopardize the feasibility of the Nabucco pipeline, scaring off potential investors.


Considering recent aggressive tactics by Russia regarding energy exports (Prime Minister Gyurcsany conceded that reliance on Russia for gas supplies is risky), should Hungary be more reluctant to support expansion of the Russian pipeline? If Hungary would be economically better off as a hub country for Russian gas than as a transit country for the Nabucco pipeline, should it be allowed to pursue its best interest ahead of EU interests?

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