Hungary joins Gazprom pipeline, as Trump touts U.S. LNG

BUDAPEST (Reuters) - Hungary signed a deal with Russia's Gazprom GAZP.MM to link the country with the Turkish Stream pipeline by end-2019 on Wednesday, a day ahead of President Donald Trump's trip to Poland, where he is expected to promote U.S. LNG exports.

A general view shows the headquarters of Gazprom on the day of the annual general meeting of the company's shareholders in Moscow, Russia, June 26, 2015. REUTERS/Sergei Karpukhin

“This will improve Hungary’s energy security a great deal, so it is in our strategic interest for this cooperation to start,” state news agency MTI quoted Foreign Minister Peter Szijjarto as saying.

Natural gas supplies to eastern Europe have been a major area of competition between incumbent pipeline power Russia and the United States, which is touting its liquefied natural gas (LNG) potential in the region via onshore LNG terminals.

Trump is expected to use fast-growing U.S. LNG supplies as a political tool when he meets in Poland on Thursday with leaders of a dozen countries, including Hungary, that are captive to Russia for their energy needs.

Szijjarto, who is in Moscow, told MTI by phone that he had agreed with Gazprom CEO Alexei Miller to join Turkish Stream with a link that could enable Hungary to import 8 billion cubic meters of gas a year, close to the country’s total consumption.

Hungary, which relies on Russian imports via Ukraine for nearly all of its gas use, has sought to diversify its imports geographically as well as by supplier for years.

Asked by Reuters how the American LNG potential and Russian gas square up in Hungary’s energy plans, a Foreign Ministry spokesman could not immediately comment. Hungary’s ambassador to Washington told a business forum in Budapest earlier this week that he would be keen to import American LNG as well.

A southern link to Russian pipelines has long been planned, with a previous project, South Stream, canceled by Russia in 2014 in the wake of the Ukrainian conflict and EU sanctions.

The EU said it wanted to separate the owner of the pipeline from the owner of the gas, but analysts also said it wanted to prevent Russia from shipping gas to Europe bypassing Ukraine, downgrading its geopolitical significance.

International interconnectors between Hungary and possible trade partners Romania and Croatia also remain to be built, while Szijjarto said Croatia is not expected to complete a long-planned LNG import terminal any time soon.

That terminal, planned for the Adriatic island of Krk, would be capable of bringing U.S. gas to Hungary.

Szijjarto noted Bulgaria and Serbia had already signed agreements with Gazprom, which stipulate financing to be cleared by the end of 2017, permits secured by end-2018, for the gas link to reach Hungary by 2019.

“It is also a serious business opportunity for Hungary because despite all the communication hypocrisy European need for Russian gas is growing at an extraordinary rate,” he said.

Reporting by Marton Dunai, editing by David Evans