Bulgarian Government Disavows Three Russian Energy Projects

Bulgarian government statements on June 11-12 have conclusively disavowed Russia’s projects to build the South Stream gas pipeline, Burgas-Alexandropolis oil pipeline, and Belene nuclear power plant, on Bulgaria’s territory.

These announcements can not be surprising. The government, led by Prime Minister Boyko Borisov and his GERB party, had suspended Bulgaria’s implementation of the three projects on its territory immediately after taking office in July 2009, pending detailed re-examination of each. The suspension reflected a three-pronged policy: curtailing Russian influence in Bulgaria, cracking down on corruption generally (including Russian shadow business in Bulgaria’s energy sector), and providing for Bulgaria’s energy security, after Russia had proven an unreliable supplier with the January 2009 gas cutoff to Ukraine (blamed post-factum on Ukraine by Gazprom’s West-European allies).

The timing of Sofia’s June 11-12 announcements underscores their significance. Whether coincidentally or not, it undercuts Moscow’s June 7- June 10 public-relations efforts to resuscitate the moribund Burgas-Alexandropolis and South Stream projects.

On June 12, Bulgarian Deputy Minister of Foreign Affairs Marin Raikov declared that the EU-backed Nabucco gas transportation project constitutes “Bulgaria’s top priority,” whereas “South Stream raises many questions.” Bulgaria has chosen Nabucco and the EU-planned Southern Corridor as “model public-private sector partnerships [and] will work to conclude all procedures by the end of this year for starting construction work. Integrating Bulgaria’s energy policy with that of the EU is the trade-mark of this government and tops the country’s agenda,” Raykov told an international energy conference in Sofia (BGNES, June 12).

Bulgaria, like Hungary, has upgraded Nabucco to first national priority, while downgrading South Stream (to suspended status in Bulgaria’s case, and third-place on the list of Hungary’s priorities). In both countries, Socialist governments under Moscow-friendly leaders had lined up behind South Stream, followed by center-right governments who re-aligned with the Nabucco project. Raikov’s statement underscores that choice in unprecedently stark terms.

On June 11 and 12, Premier Borisov also used unprecedently strong language ruling out the construction of the Burgas- Alexandropolis oil transit pipeline on Bulgaria’s territory. The Russian companies Transneft, Rosneft, and Gazpromneft hold a combined stake of 51 percent, Bulgaria 24.5 percent, and Greek interests another 24.5 in the project company. Borisov listed the project’s disadvantages to Bulgaria: unacceptably long period of ammortization on investment, low transit revenue, and potential threat to Bulgaria’s tourist economy on the Black Sea littoral near Burgas, where Russian tankers would unload oil into the planned transit pipeline on a daily basis. The residents of coastal towns have opposed the project overwhelmingly in referendums, after the Socialist government had signed on this project. (SofiaEcho, Novinite, BGNES, June 11, 12).

Borisov made this statement in response to a query from the Greek ambassador, during a meeting with the EU countries’ ambassadors in Sofia. The insolvent Greek Socialist government, bailed out by the EU and threatened with exclusion from the Eurozone, hopes to finance the South Stream and Burgas-Alexandropolis pipelines with Russian money on Greek territory.

The Bulgarian government has not yet completed the environmental impact and financial assessments on this oil transit project. It is clear, however, that the transit revenue would only amount to a fraction of the annual income generated by international tourism on the Bulgarian littoral. Thus, the ecological risks are not seen as disproportionate to any economic rationale of the Burgas-Alexandropolis project. Russia is interested in building this pipeline in order to maximize Russia’s intake of Kazakhstani oil, for shipment via Novorissiysk and Burgas to Alexandropolis on the Greek Aegean coast. This interest is not a Bulgarian one, however.

International media have interpreted Borisov’s statements as signifying an official decision by Bulgaria to withdraw from the three projects. The statements are in fact a critique and implicit verdict without appeal. But Borisov and Energy Minister Traicho Traikov immediately clarified that the government had not taken an official decision to withdraw. Traikov’s wording made clear that Sofia could not be blamed for these projects’ drawbacks (BTA, June 11, 12).

Borisov described the Belene nuclear power plant project, led by Russia’s Atomstroyexport, as a mere “hole in the ground,” where no work is being performed. The project lacks funding from a strategic investor. The pre-2009 cost estimate was Euro 4 billion, but the current Bulgarian government estimates it conservatively at Euro 10 billion. Moscow has offered to lend Euro 4 billion, then Euro 2 billion to Bulgaria to cover the latter’s share of the funding. But even the Bulgarian Socialist government, which had initiated this project alongside Russia, balked at the risk of accepting Russian credits on such a scale. According to Borisov, the government is not going to divert funds from infrastructure investments, or education, to finance Belene (Novinite, SofiaEcho, BTA, June 11, 12).

In a first reaction from Moscow, the governmental Rossiyskaya Gazeta (June 12, cited by BGNES) writes that Bulgaria “delivered a heavy blow to Russian energy interests in the Balkans.” And Gazprom’s long-time partner in untransparent business, Rumen Ovcharov, blamed the United States for “pressuring” Bulgaria to disavow these projects (Novinite, June 11).