OVER the past two weeks, there has been speculation in the Bulgarian media concerning the possible Russian domination of Bulgaria’s energy system.
Recent developments have led newspapers and electronic media to speculate about the threat of Bulgaria falling victim to what have been labelled imperial ambitions with fears that the Russian state-owned gas giant Gazprom could become the sole owner of all energy sources in the country.
The speculation was fuelled by Economy and Energy Minister Roumen Ovcharov’s most recent visit to Moscow, who, upon his return, admitted that Bulgaria had no other alternative than Gazprom. It appears that the gas company covets not only the country’s gas distribution system, but has also stretched its hands to the yet-to-be-built second nuclear plant at Belene, and the Bourgas-Alexandroupolis oil pipeline.
The problem first surfaced as part of Russia’s campaign asking for a higher price for the gas it supplies not only to Bulgaria, but also to other countries in Europe. Gazprom sent a letter to the Cabinet in Sofia looking for a revision of the long-term contracts it has with Bulgaria on supplying the country with gas. Since the contracts expire in 2010, the Government stated clearly that it would not bow to the pressure and would not renegotiate the price.
As The Sofia Echo reported on February 3, the price at which Bulgaria buys natural gas from Gazprom will remain unchanged until the contracts between the two sides expire in 2010. Ovcharov made the announcement on February 1 after his meeting with Russia’s minister of industry and energy Viktor Hristenko.
Furthermore, in Hristenko’s words, it was in Russia’s interests to have long-term supply agreements with Bulgaria.
Currently, Gazprom sells natural gas to Bulgaria’s state-owned gas supplier Bulgargaz under two contracts: one for direct delivery and one in exchange for Bulgaria transiting Russian gas to Turkey, Greece and Macedonia. Both contracts expire in 2010.
Gazprom now pays transit fees to Bulgaria in the form of gas at a price set at about $83 for 1000 cubic metres, compared to the $257 Bulgaria pays for supply not covered by the transit contract.
The Russian company wants to renounce the gas-for-transit agreement and receive direct payment for all gas deliveries. Bulgaria fears that in this case, Gazprom would decrease the volume of gas piped via Bulgaria and use an alternative pipeline under the Black Sea, which was quite recently launched under the name Blue Stream.
Bulgaria imports about 2.73 billion cubic metres of natural gas every year from Russia, 90 per cent of the country’s total needs.
Despite winning a small victory in Moscow by maintaining the price of gas, Ovcharov did not sound optimistic.
“As a country, Bulgaria is not big enough to oppose a behemoth like Gazprom when discussing the transit and supply of gas. Obviously, we will have to use all our available resource to balance our interests,” he said.
Ovcharov added that Gazprom was interested in some heating utility companies in Bulgaria, the gas distribution network and the privatisation of Bulgargaz. The question of the ownership of the gas transit pipeline has been raised again in Moscow. Gazprom intended to participate in the Bourgas-Alexandropoulis oil pipeline project, too, Ovcharov said.
Conspiracy theories
The formal reason for Ovcharov’s visit to Moscow was to show the Russians that Bulgaria could not agree to a gas-price hike, as such a move would strike impoverished Bulgarian households. Furthermore, in his statements after returning from the Russian capital, Ovcharov said that Bulgaria needed to negotiate another agreement with Gazprom for after 2010 or the country might be left without secured gas supplies.
Conspiracy theorists immediately said that this was an acknowledgement that Bulgaria was dealing with an unruly monopolist that could easily break off the supplies (as it has done in other cases), alter the agreements and thus have an influence on Bulgaria’s government.
Specialists recalled the situation in which Bulgaria found itself the last time it was governed by the Bulgarian Socialist Party (BSP), which has always tried to show that it holds the upper hand in relations with Russia. In late 1996, Bulgaria was facing the prospect of losing Russian supplies of gas, which became one of the reasons (in combination with the bank crisis and some other events) that brought down the BSP cabinet of Zhan Videnov.
Ten years ago, a special company, Topenergy, was established to arrange Gazprom’s access to the gas distribution network in Bulgaria. Topenergy, which became a bone of contention between Videnov and another former prime minister, Andrei Lukanov (later mysteriously killed), was later shut down.
Conspiracy theorists say that now Bulgaria has finally managed to rid itself Russia’s grip, the socialists, who are constantly swearing oaths of belonging to the ideas of the European Union and NATO, are on their way to forcing the country back to the perils of the past.
These behind-the-curtain ideas are fuelled by the speculation that Gazprom is also involved in both bids that were submitted for the construction of Bulgaria’s second nuclear power plant at Belene. The bids have been submitted by Russia’s Atomstroyexport in partnership with France’s Framatome, and the Czech consortium Skoda Alliance.
It does appear that Gazprom is, to a certain extent, related to both offers. Gazprombank, owned by the gas giant, has stakes in both consortiums. It has the controlling package of shares of 53.85 per cent in Atomstroyexport. The other owners of the company are the nuclear fuel manufacturing plant TVEL and Rosatom. But, the three owners are controlled by the Kremlin.
Gazprom’s bank, however, is also in the competitive bid through Skoda JS, the main participant in the Czech consortium. Skoda JS has 100-per cent ownership of Obedinennye Mashinostroitelnye Zavody (OMZ), a Russian mechanical engineering group, where Gazprom is a shareholder.
Something Ovcharov said exploded the conspiracy theory bomb. He stated that the interest of the Russian side in the nuclear power plant at Belene was reasonable enough, as the WWER 1000 project (chosen for the reactors in Belene) is a Russian one.
“This is why the construction of the nuclear plant without the participation of Russia is extremely difficult technically and rather questionable legally,” Ovcharov said.
The alternatives
Bulgaria has no other alternative but to build a second nuclear plant. The country is obliged European Union accession agreements to close by the end of 2006 a second pair of what the EU believes to be dangerous reactors at the Kozlodui Nuclear Power Plant. As a net exporter of electricity, Bulgaria could not afford to lose money from this profitable business.
Therefore, whoever builds Belene will be welcome. The future of the project will depend more on larger-scale geo-political interests than the bilateral relations of Bulgaria and Russia. The Belene project and its further development will also be highly dependent on the funding that will obviously not come from Russia but from its main rival (in the spirit of conspiracy theories) for world domination - the US.
Concerning the gas supplies question, however, the situation does not look so bright. The alternatives Bulgaria has in this sense look rather foggy and will never be enough to secure the country’s needs.
Resulting from the continuous pressure from Gazprom to review the transit contract signed in 1998, Bulgaria is looking for energy providers other than Russia to secure its supplies, Ovcharov told Parliament on January 27.
In his words, the country is “proactively working” to secure alternative gas deliveries for itself and for the region of South East Europe.
Ovcharov said the main alternative was the 3300-km pipeline project Nabucco, which would link Bulgaria with some countries, other than Russia, with gas fields in Iran and Azerbaijan through Turkey. Another option was importing natural gas from Algeria, he said.
Negotiations are currently underway with eight major European companies that have declared interest in participation in the Nabucco gas pipeline project. Agreement will probably be reached with up to two companies in view of accelerating the implementation of the project, while at the same time the number of participating companies will not become too large.
Partners in this project include gas companies Botas of Turkey, Bulgargaz of Bulgaria, Transgaz of Romania, MOL of Hungary and OMV Gas of Austria, which are all joined in the consortium Nabucco for the construction of this transcontinental gas pipeline from the Caspian region and the Middle East to Central and Western Europe.
On Bulgarian territory, the main infrastructure passes though eight regions and 22 municipalities, crossing seven railway lines, three highways, many other roads and six large rivers, as well as the Danube. The length of the pipeline on Bulgarian territory will be 400 km and investments stand at 450 million euro.
The phases of project implementation provide for its development from 2006 to 2008, construction between 2008 and 2011 and putting it into operation as of 2011.
However, there are many important people that do not believe in the future of Nabucco; the main reason for the disbelief is the mere fact that Iran will be a main provider of gas for the network. Ovcharov is among the disbelievers.
“Iran is not a better supplier than the Russians,” he said.
And still, in the spirit of the same old conspiracy theories, some say that Bulgaria’s current hurdles with Moscow’s renewed imperial endeavours comes at a moment when the country is eagerly anticipating becoming a full member of the EU, only half a year after it joined NATO, and... just several months after a socialist-led government came to power...
