Russia's President Vladimir Putin, accompanied by his Turkish counterpart Tayyip Erdogan (not pictured), attends a news conference in Ankara, December 1, 2014. Putin said on Monday Russia could not carry on with the South Stream gas pipeline project
Russia's President Vladimir Putin, accompanied by his Turkish counterpart Tayyip Erdogan (not pictured), attends a news conference in Ankara, December 1, 2014. Putin said on Monday Russia could not carry on with the South Stream gas pipeline project if the European Union was opposed to it. Reuters/Mikhail Klimentyev

Russia had been reported to have initiated talks with Serbia and Hungary on energy cooperation deals following the cancellation of the seaborne gas route South Stream pipeline project.

Sputnik News, citing a statement released by the Kremlin press on Sunday, said Russian President Vladimir Putin directly called through telephone Hungarian Prime Minister Viktor Orban and Serbian President Tomislav Nikolic to discuss possible energy cooperation opportunities among the three countries. Aleksandar Vucic, Serbia's Prime Minister, had earlier said the scrapping of the South Stream pipeline project was "bad news" for Serbia, since it had invested so much in the project "for seven years, but has to pay the price for the collision of the big ones [countries]."

Serbia had been looking forward to the range of benefits it stand to receive once the project gets operational, including improved domestic economy while still in the construction phase of the pipeline, better energy security to future revenues in transit fees. But all was lost when Mr Putin announced on Dec 1 the cancellation of the project, blaming the "non-constructive" stand of the European Commission on the project. Brussels, capital and largest city of Belgium and the de facto capital of the European Union, said the project violates the EU Third Energy Package.

Adopted on Sept 19, 2007, the EU Third Energy Package aims to liberalise European energy and electricity markets as well as prices. The South Stream pipeline project, it said, violates the mandate because Russia owns the pipeline while at the same time produces the natural gas that will flow through. Moscow, as expected, said the project does not contradict the regulations. In fact, in April 2014, it lodged a lawsuit with the World Trade Organization (WTO) over the crippling Third Energy Package mandate.

Even Hungary expressed dismay over the project's cancellation. But Peter Szijjarto, Hungarian Foreign Minister, said they respect the scrapping as "Russia had the right to make that decision."

In lieu of the cancellation of the South Stream project, Mr Putin said Russia will instead build a pipeline to Turkey. On the Turkish-Greek border, he said they could set up a gas hub to supply Europe with gas to compensate for the lost South Stream pipeline.