The Political Crisis in Bulgaria Might Delay South Stream Construction

In the midst of the deepening political crisis in Bulgaria, Gazprom’s Chairman Alexei Miller arrived in Sofia on July 8 to make sure construction of the South Stream natural gas pipeline is not further delayed. The project was already delayed when the center-right government of Boyko Borisov collapsed under public pressure in February and snap elections took place in May. But another wave of public protests against the new Socialist-led government’s ties with oligarchs started in mid-June and has continued for 27 days. Bulgaria’s President Rosen Plevneliev has called for early elections as the most democratic way to resolve the crisis. The government, which refuses to step down, promised Miller to start pipeline construction by the end of the year, but this may not happen if new general elections take place in the fall (BTA, July 5; Trud, BNT, bTV, July 8).

The anti-government protests were triggered by the appointment of controversial businessman and media mogul Delyan Peevski as chair of the State Agency for National Security (DANS). Although his appointment was quickly revoked, the people continued demonstrating with anti-corruption slogans, many of them also condemning the Socialists’ close ties with Moscow (Dnevnik, June 14-16).

The current wave of demonstrations is very different from the angry people who protested against high energy prices and poverty in February. These are protests by the well-educated, younger generation of Bulgarians who want an end to corrupt politics, murky business practices, and lack of rule of law. President Plevneliev expressed support for the protesters and said he no longer had confidence in the government. Remarkably, the police also proclaimed solidarity with the protesters—this has contributed to making demonstrations peaceful so far (Dnevnik, Trud, 24 Chasa, Sega, June 15–16).

However, numerous provocations staged by the ultra-nationalist Ataka party prompted President Plevneliev to warn in his address to the nation on July 5: “Bulgarians are protesting peacefully, which is a clear sign our society is mature… What is most worrying is that there were attempts to artificially provoke ethnic conflicts. This is playing with fire, and the consequences could be disastrous. Have we learned nothing from our neighbors? I firmly condemn those provocations!” (Bulgarian National Television, July 5).

The Ambassadors of Germany and France to Bulgaria, Matthias Hoepfner and Philippe Autie, supported the protesters in a joint statement, stressing that the voice of civil society must be heard and warning that the oligarchic model is incompatible with European Union membership (novinite.com, July 8). Former United States Ambassador to Bulgaria James Pardew told Sega newspaper: “If I were a Bulgarian, I would have been on the street together with the protesters” (Sega, July 10).

Against the backdrop of the daily protests in Sofia, Prime Minister Plamen Oresharski promised Alexei Miller to speed up the construction of South Stream. Energy Minister Dragomir Stoynev reassured the Gazprom chief that the project remains strategic for Bulgaria. Miller for his part pledged that Russian gas would start flowing through the pipeline in December 2015. Gazprom’s chairman also confirmed that the full financing of 3.1 billion euros ($3.99 billion) needed for the Bulgarian part of the pipeline would be entirely provided by the Russian side. “The Bulgarian share of the cost will be repaid from transit fees after the pipeline becomes operational,” Miller added, but did not specify the terms of the loan (Trud, Mediapool.com, Capital Daily, July 8).

The Bulgarian government will evidently rely on hefty transfer fees from the transmission of 63 billion cubic meters (bcm) of natural gas per year to repay the loan. However, it does not seem to take into account predictions that Moscow may not have enough available natural gas for South Stream and the pipeline may carry only 15–20 bcm per year, mainly diverted from Ukraine. If Russia is not able to develop its deposits in Eastern Siberia by the time the pipeline is operational, the Bulgarian government will be forced to pay the loan plus considerable interest rates with its own funds.

Minister Stoynev hinted about the other important problem with South Stream—complying with the EU’s Third Energy Package regulations. He said that it would be important to determine the regulatory regimen of the project as a result of negotiations between the EU and Russia (Mediapool.com, July 8). But Hristo Kazandjiev of Bulgarian Energy Holding (BEH) was much more direct at a press conference in Sofia stressing that Russia insists on accelerating the construction of the South Stream pipeline via Bulgaria but is trying to avoid the question of sharing access to the pipeline. “Russia is seeking derogation from the EU requirement regarding third-party access to South Stream, but at the same time it wants a liberalized Bulgarian market and the right of access to the country’s gas transmission infrastructure,” Kazandjiev explained.

BEH is upset by an official investigation of the European Commission as to whether the Holding and its subsidiaries Bulgargaz and Bulgartransgaz have kept their competitors from gaining access to important gas facilities in Bulgaria. The investigation was launched following a claim by Gazprom’s subsidiary Overgas (BTA, July 9).

Gazprom’s selective approach to EU regulations has raised concerns in Sofia, even in the Socialist-led coalition. Alexei Miller’s show of support for the embattled cabinet may not work this time—even if the government survives the political turmoil, as an EU member Bulgaria will have to follow the Union’s rules.