Moscow - Russia and Hungary agreed to set up a joint venture to build the Hungarian stretch of the South Stream pipeline, Russian Premier Vladimir Putin said Tuesday after talks with his Hungarian counterpart Ferenc Gyurcsany in Moscow.

Russian gas export monopolist Gazprom and Hungary's energy firm MOL also plan to build new underground storage facilities in the agreement inked Tuesday, Putin was cited by news agency Interfax as saying.

The South Stream pipeline has gained impetus as a guarantor of energy security in eastern Europe along with expanding domestic reserves and renewable energy after a contractual row between Kiev and Moscow severed gas deliveries for near two weeks in January.

Over 80 per cent of gas supplies to Europe travels through Ukraine.

The South Stream pipeline aims to bypass Ukraine by pumping Russian gas under the Black Sea through Bulgaria and branching off towards Greece and Hungary. (dpa)