Budapest: The United States is concerned by Hungarian legislation it sees as targeting the Central European University (CEU) founded by financier George Soros, Washington`s top diplomat for Central Eastern Europe said on Tuesday.


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Domestic opponents of the new law, which on Sunday triggered some of the largest demonstrations against Prime Minister Viktor Orban`s seven-year rule, view it as part of a wider crackdown on dissent and a drift towards Russia.


"The United States is concerned by this legislation ... because it targets (CEU) very clearly and threatens ... this important American Hungarian institution," U.S. State Department Deputy Assistant Secretary for European and Eurasian Affairs, Hoyt Yee, said in Budapest.


The law requires foreign universities to maintain a campus in their home countries and secure a bilateral agreement between Hungary and their governments. 


CEU, which is accredited in New York state as well as Hungary, has said both rules were prohibitive as costs would be too steep and Washington had no jurisdiction over it.


Orban has for years criticised Soros, a Hungarian-born Holocaust survivor who has spent billions of dollars campaigning for a liberal open society at odds with the more authoritarian social model the prime minister favours.


Yee, in Budapest primarily to discuss CEU, told Reuters that Hungary remained a key U.S. ally despite the new law, which hurt the university as well as academic freedoms.


The government did not immediately respond to questions seeking comment. Budapest has denied targeting CEU and said it merely wanted to create a level playing field for all foreign universities operating in Hungary.


Orban has also said CEU "cheated" in awarding diplomas valid both in the European Union and the United States, a charge the university flatly denied.


Yee said that, while the nature of the law could be debated, "it is going to be much more difficult for the university to continue operating in Hungary."


Asked whether the move pushed Budapest closer to Moscow, Yee said the departure of the university would be a loss firstly to Hungarians.


"We are of course... quite vigilant about what Russia is doing in the region or more broadly in the Balkans...," he added.


"In terms of the trend in Hungary, we`re still very close allies... I expect that is going to continue."