The Bulgarian Government’s policy on the relations with Russia regarding natural gas supplies should be viewed in the context of all other large energy projects, which depend on mutual understanding, as well as with paying attention to the macroeconomic effects of the decisions made.

An analysis by independent analytical company, Industry Watch, published on July 3, points to the expected results of the different scenarios of a possible accord between the Bulgarian and the Russian governments. Therefore, several conclusions may be drawn:

The removal of the clause in the gas transit and supply contract with Russia, which currently allows Bulgaria to have the transit paid with deliveries at preferential prices, would increase the cost of the net import of oil and natural gas by between 8.7 and 11.3 per cent for 2006. The effect on the balance of payments would be at least five per cent higher current account deficit, or 0.8 per cent of the gross domestic product (GDP), Industry Watch forecasts.

Should the transit contract be amended in mid-2006, instead of the early 2007, the effect of the increased price of natural gas for the domestic market in Bulgaria for the remaining six months of the year would be felt mostly by the central heating companies (which will register a 14 per cent hike in their total annual cost for 2006) and the chemical industry (where 10-12 per cent increase of the total cost can be expected).

Only the projects for the transit of oil and gas, whose implementation is in direct dependence on the Bulgarian_russian agreements are worth six to seven billion euro. These include the oil pipelines Bourgas-Alexandroupolis (whose implementation is in an advanced phase) and Bourgas-Vlore, as well as the gas pipeline Nabucco. The expected investment only for the territory of Bulgaria is 1.3-1.5 billion euro, or 4-5 per cent of the total investment expected to pour into the Bulgarian economy in the next four years. The Bourgas-Alexandroupolis project alone is expected to generate 2300 jobs.

The effects of the possible changes in the contracts with Gasprom will concentrate in a short-term period, while the results of the investment in the transit of oil and gas will be distributed over a longer period of time.