Five days after Bulgarian President Georgi Purvanov returned from his two-day state visit to Moscow, Russian natural gas giant Gazprom sent a letter to Bulgaria requesting changes to the construction of the South Stream natural gas pipeline. It asked the Bulgarian side to include its current pipeline network in the South Stream pipeline project that is yet to be constructed. Initial plans saw the construction of a separate pipeline through Bulgaria, but then Gazprom said that instead of building its own pipeline, it wanted to use Bulgaria’s.

If this happens, Bulgaria will find it very difficult, if not impossible, to transfer natural gas to Macedonia, Greece and Turkey simply because the country’s pipeline would not be able to process the required quantities. It would also mean that Bulgaria will be unable to use the pipeline stretch to Turkey and Greece for an alternative emergency reverse supply of natural gas.

It is the only alternative Bulgaria currently has to the pipeline coming from Russia via Ukraine, Moldova and Romania. This reverse supply was used in the final days of the January 2009 Russia-Ukraine natural gas dispute, when Bulgaria was cut off from any gas supplies for two weeks. The prompt reaction of Economy and Energy Minister Petar Dimitrov showed that Bulgaria was not ready to accept Gazprom’s offer.

He pronounced it unacceptable to the Bulgarian side and said that Bulgaria would continue to insist on South Stream having a separate pipeline built.
Gazprom is still to give its answer, and its letter was just the latest of moves initiated by both countries in search of better conditions for gas deliveries.

Natural gas supplies were a key point on Purvanov’s agenda in Moscow where he raised two issues. The first was about financial compensation for Bulgarian business; the second was about getting rid of the three companies serving as intermediaries between Bulgaria’s Bulgargas and Gazprom.

On the first issue, he got the polite response from his Russian counterpart Dmitry Medvedev that Bulgaria had to press its claims against Ukraine, not Russia. It’s true that Bulgaria has contracts with the three intermediaries, not with Gazprom, although Gazprom is a shareholder in three of them. Only one is a wholly owned subsidiary; private shareholders hold a 50 per cent share in the other two. Having a direct contract with Gazprom was raised as a national priority in the aftermath of the Russia-Ukraine gas dispute and Bulgaria’s demands for financial compensation, although Bulgaria has always worked with intermediary companies when it comes to Russian natural gas supplies.

It has also been Gazprom’s way of doing business with other countries and that’s why, until now, all Bulgaria’s calls for getting rid of intermediaries have met with Russian resistance.

In Moscow, however, Purvanov surprised Bulgarian media by saying that Bulgaria was willing to let Gazprom use its network. It was even more surprising that Gazprom said that it could change its stance on getting rid of the intermediaries. Neither Purvanov nor Gazprom linked the two issues, but it was surprising how things changed. Purvanov even got assurance from Medvedev that this could happen.

Of the three intermediary companies, Purvanov mentioned only Overgas Inc, the company supplying 70 per cent of the gas to Bulgaria. Shareholders in Overgas Inc are Gazprom and Overgas, headed by Bulgarian Sasho Donchev. Purvanov was quoted by Bulgarian news agency BTA as saying that "Gazprom has more than enough ways to take over Overgas’ stake in Overgas Inc and take over the latter’s control over Bulgaria’s pipeline networks".

Then came Gazprom’s February 11 letter to Dimitrov about including Bulgaria’s pipeline network in the South Stream project. This, undoubtedly, would save the Russians several million euro and decrease the burden of the project, estimated by Gazprom to cost 25 billion euro.