Russian gas monopoly Gazprom and the state-owned Hungarian Development Bank signed a deal Friday setting up a company to develop Hungary's part of the South Stream gas pipeline project.
The agreement is considered another step in Russia's efforts to consolidate its position as Europe's primary gas supplier and undermine the alternative Nabucco pipeline plan backed by the European Union.
Hungary joined the Russian-led project in Feb. 2008 and agreed to set up a joint venture with Russia to finance, build and operate the pipeline in Hungary.
South Stream's construction _ funded chiefly by Gazprom and Italy's Eni _ is planned to start this year and to be completed by 2015, carrying natural gas to Central and Western Europe while bypassing Ukraine.
Disputes between Russia and Ukraine caused gas shortages in Europe last winter.
Friday's deal _ signed by Gazprom's deputy chief executive Alexander Medvedev and MFB development bank chief executive Janos Eros _ was completed during a visit to Hungary by Russian Deputy Prime Minister Viktor Zubkov, who took part in a session of a committee promoting economic cooperation between the two countries.