Will Putin Sign the South Stream Deal with Bulgaria in Person?

Despite Sofia’s anger with Russian demands for enormous compensation for the abandoned Belene nuclear project, Moscow remains silent just weeks before the deal on the South Stream gas pipeline is supposed to be sealed in Bulgaria’s capital. In the meantime, the center-right government of Boyko Borisov has been under domestic pressure for resuming the nuclear power plant project. 

Borisov threatened again to withdraw from the South Stream gas pipeline project, this time, if Russian President Vladimir Putin does not arrive in Sofia for the signing of the final investment agreement on November 9 (Pressa, October 12). When Rosatom’s subsidiary Atomstroyexport demanded one billion euros ($1.3 billion) in compensation for the canceled Belene nuclear power plant (NPP) project in September, Borisov stated that he would only discuss Bulgarian-Russian cooperation with Putin and nobody else (Mediapool.bg, October 14). When the news broke that Atomstroyexport had filed a lawsuit at the International Court of Arbitration in Paris, Borisov called it “a treacherous attack” and warned that if Putin had known about it, he would have a very unpleasant visit to Bulgaria in November (see EDM, September 19). 

But Putin’s visit is not officially confirmed, according to the Bulgarian foreign ministry. The Russian Kommersant newspaper was quick to suggest that if Putin does not show up in Sofia for the initiation of South Steam, the Bulgarian President Rosen Plevneliev would travel to Moscow (Kommersant Online, October 15). The deadline for signing the final investment agreement on South Stream is November 15—a deadline that Moscow firmly pursues in order to start pipeline construction before the EU’s Third Energy Package comes into effect early next year. The new regulations will mandate the access of other suppliers to pipelines built on EU territory by third countries, such as Russia.  

The row between Borisov and Putin is taking place as the government in Sofia is dealing with internal pressure to re-open the Belene project. In July, the Socialist party filed a petition for a referendum on Belene signed by over 770,000 people. After examining the signatures, the government concluded that more than 500,000 signatures were valid, enough for the parliament to approve the request (BNT, July 27, September 28). According to the law, a referendum must be conducted within three months. 

Meanwhile, on September 26, a largely unknown American company expressed interest in investing in the Belene NPP. The prospective investor appeared before the parliament’s economic commission six months after Bulgaria abandoned the project precisely because of the absence of a serious Western investor, along with its high cost. The Delaware-registered Global Power Consortium, consisting of nine American companies whose names remain unknown, offered to finance the entire project without any guarantees from the Bulgarian government or future obligations to purchase the produced electricity. Little information could be found about the consortium representative Samuel Reddy, but it turned out that his partner, Arun Savkur of Quantum Group, was fined 300,000 euros ($390,000) in Italy for an attempt to manipulate the stock market by spreading false information—he claimed to be interested in the privatization of Alitalia in 2007 (Novinite, September 26; Dnevnik, September 30). 

The prospective investors asserted they were in talks with Atomstroyexport, which the Russian company immediately denied (novinite.com, September 26). However, their consultant in Sofia—energy magnate Bogomil Manchev of Risk Engineering, the company that served for years as the main consultant on the Belene NPP—certainly has business interests in continuing the nuclear plant project (Monitor, September 27). 

The Socialist party immediately suggested that the parliament revoke its decision to abandon the project and the government open negotiations with the new US investor. The US Embassy in Sofia cautioned the government to thoroughly check the legitimacy and economic reliability of every potential investor (novinite.com, September 26; Bulgarian National Radio, September 29). 

The Belene NPP was effectively suspended in the fall of 2009 when the previously designated strategic investor, German RWE, pulled out. Subsequently, the French bank Paribas SA withdrew from the project. Without a strategic investor and with insufficient funding, the Bulgarian government had no choice but cancel the project. 

After it became obvious that the potential new investor is a dubious company, the government decided not to reopen negotiations on Belene NPP, but instead to organize a referendum as requested by Socialist party supporters. Some of the political parties in parliament insisted that the referendum be referred to the Constitutional Court, since the Bulgarian Constitution does not allow plebiscites on the country’s financial and budget issues. As the parliamentary parties failed to agree on formulating a question that is less focused on one specific project, but more reflective of national policy, President Plevneliev said he was considering seeking the opinion of the Constitutional Court (Trud, October 12; Bulgarian National Television, October 15). Subsequently, the ruling GERB party announced its decision to change the referendum question by excluding the specific reference to the Belene NPP and instead asking the Bulgarian citizens whether they agree on further development of nuclear energy by building a new nuclear power plan (Dnevnik, October 17). 

In the past month, the Bulgarian government has been slammed with an enormous lawsuit, a pending referendum (the first in the country’s post-communist history), and a dubious investor, while critical gas supply negotiations with Russia are pending. The expected Russian energy delegation at the beginning of November is supposed to initiate the South Stream gas pipeline project and sign long-term agreements on gas supplies. President Putin may well elect not to travel to Bulgaria given the anger with which the Russian lawsuit was met in Sofia. In that eventuality, Borisov could turn his back on South Stream. At the end of the day, the struggle is between a judo black belt (Putin) and a karate black belt (Borisov) and it remains unclear who will win.