Bulgaria Inches Closer to Russia

08.28.18
EU2018BG
World News /28 Aug 2018
08.28.18

Bulgaria Inches Closer to Russia

Four years after their plan to transport Russian gas via the South Stream pipeline collapsed, the Bulgarian government is angling yet again to shuttle Gazprom’s immense reserves from Turkey to Europe and has just expanded its Trans Balkan pipeline with this purpose in mind. But the EU is worried that one of its newest members is unprepared to undertake such a project and won’t disburse the gas fairly. More significantly, it frets that Sofia, which held the EU Council Presidency for the first half of 2018, is moving away from Brussels and back towards its former Soviet overlord.

Bulgaria’s new hope to get a piece of Russia’s lucrative gas sales lies with Turk Stream, an €11.4 billion project to send Russian gas to Europe through Turkey, bypassing Ukraine. The first line of the project, already complete, serves local consumers; the second will send over 15 billion cubic metres of gas on to southeast and central Europe. Russia already sends gas to Turkey via Bulgaria, but the line runs through Ukraine—if Moscow cuts Kiev out of the loop next year as it’s hoping to do, Bulgaria risks losing around €100 million a year in transit fees. It’s hoping to replace these with Turk Stream 2, and is lobbying Gazprom and Turkish officials to run the line through Bulgaria’s Black Sea port of Varna rather than through Greece.

Prime Minister Boyko Borissov has expressed confidence that Moscow will give the green light to the rerouting– as long as Bulgaria can find a reliable means to send the gas on to the rest of Europe. Sofia has already talked with Brussels about splitting the gas between trade and transit, sending some of the supply straight on to central Europe and selling the rest at a gas hub at Varna – partially funded by EU moneyagainst at least two rival sources, likely from Greece and Azerbaijan. Because Brussels wants to ensure the European gas market is “diversified and competitive,” it has tentatively agreed to support the gas hub.

Yet some officials point out that Bulgaria still fails to meet the EU’s conditions for being a gas trading hub, and its recent record on energy is far from impeccable. Sofia has yet to fully implement EU energy directives by opening up its cross-border pipelines with Greece and Serbia, and the country has faced criticism for diverting billions in potentially non-compatible state aid to coal-fired power plants.

Against this backdrop, critics fear Bulgaria will simply abandon the trading hub project and send all the Turk Stream gas straight to Europe in order to collect the huge transit fees. After all, this was the plan when South Stream was still in the cards. Worryingly, EU sources say that as long as Bulgaria follows the bloc’s internal energy market rules, there’s little they can do to stop this.

Gazproblem

One of the main reasons Brussels wants to ensure diversified energy supplies is the hold Gazprom has over Eastern Europe. The EU waged a seven-year antitrust battle to curb Gazprom’s price dominance in Russia’s former satellites, and Moscow’s aggressive recent history makes officials particularly jittery about outages. The EU openly states that its energy supply strategy was framed by “concerns surrounding the delivery of Russian gas via Ukraine.”

Yet Gazprom remains the sole exporter of gas to Bulgaria. For the EU, which is currently helping the Baltic States decouple themselves from the old Soviet power grid, Sofia’s plan to increase its reliance on Russian energy is an obvious setback – and could be interpreted as a rejection of the very policy designed to protect it.

This all comes just weeks after Bulgarian President Rumen Radev personally backed resuming construction of a second nuclear power plant in Belene, a project started in the late 1980’s, frozen in the 90’s, restarted in the 2000’s and put on hold in 2012 amidst mounting EU pressure to loosen ties with Moscow. Bulgaria’s former energy minister Traicho Traikov has suggested the plant will hemorrhage money and block new technologies, yet Radev insists Belene, which Russian state nuclear company Rosatom has already expressed interest in, “has a future.”

This is part of a wider charm offensive by Radev, who has ignored the international storm surrounding election-meddling and spy-poisoning to strengthen Sofia’s relationship with the Kremlin. Bulgaria was Moscow’s most loyal satellite during the Cold War era but has since strived to assert its independence, ejecting three Russian diplomats at the turn of the millennium and joining NATO. Radev was elected in 2016 on a pledge to rebuild bridges with Moscow, a promise he’s lived up to so far. If the EU wants to maintain sanctions on Putin, he appears indifferent.

Radev has at least pledged continued loyalty to Bulgaria’s NATO allies, and the parliament has approved plans to replace the rusting Soviet MiGs with new planes from Western allies. In a worrying sign of the treatment accorded to Western investors, however, Sofia took the unprecedented step of referring to Brussels the power purchase agreements used to buy energy from two US companies, ContourGlobal and AES. Bulgarian officials insist this decision is about liberalising its energy market, yet when you set it against the choice to restart construction on Belene, it’s easy to see why critics fret about Sofia’s priorities.

Having given Bulgaria the Council Presidency and talked up its Schengen accession, there is little more the EU can do to guide Bulgaria away from Moscow. Perhaps it could try the stick rather than the carrot, getting tough on Sofia over its illegal subsidies and pointing out that EU membership comes with certain obligations.

But at the end of the day, the EU remains constrained by its own rules. If Bulgaria follows the bloc’s own legislation, the EU may be forced to stand back and watch as Radev and Borissov push a Russo-centric energy policy. After months of maintaining a coherent front against Putin, Brussels’ bureaucrats might reflect that their copious rulebook can hinder unity as much as help it.

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